The news of Amazon.com, Inc. (NASDAQ:AMZN)’s purchase of Goodreads had investors scrambling to figure out exactly what this means. For non-book lovers, the site may be news to them, but those of us who love to read have known about it for a while.
Amazon goes social
In recent months, Amazon, like many other entertainment-based sites, has made the attempt to move into the social space. At checkout, customers are invited to share news of their purchases with their social media followers. Each book also features an invitation to share on Facebook, Pinterest, and Twitter. Still, Amazon.com, Inc. (NASDAQ:AMZN)’s format is more e-tail than social media and the site likely knows it.
Goodreads is a thriving site, boasting 15 million members as of February 2013. Amazon, meanwhile, reported $61 billion in sales in 2012–a number that is likely offset by the company’s operating expenses. In fact, Amazon’s success is said to come more from dedicated investors than the buying public.
The emergence of tablets and, especially, e-reading devices like the Kindle, has changed the face of reading. Goodreads may prompt more users to click that “download” button directly from a reader device, increasing Amazon’s profits and strengthening the company’s business model.
This could be the good news Amazon.com, Inc. (NASDAQ:AMZN) investors have been waiting for, and an answer to the profit issue. Jeff Bezos himself has acknowledged the profit potential in e-book sales on the site, and working with Goodreads will help encourage customers to purchase more books.
Checking in
Media-based companies are increasingly noting the value of social media as a way to reach customers. “Checking in,” the practice of using location-based services to notify social media followers of every place you visit has become more popular than ever. Today, social media members want to find unique ways of sharing what they are currently doing.
Services like Viggle have found new ways to encourage this. The site, which achieved a total membership of 1.62 million members in its first year of business, formed a partnership with DIRECTV (NASDAQ:DTV) to reward viewers who checked in while watching DirecTV programming. The partnership was a big win for DirecTV, who benefits from the publicity every time a show is shared.
The partnership is paying off, too. Last year DirecTV gained approximately 3.8 million net subscribers.
This type of partnership is similar to the one Amazon.com, Inc. (NASDAQ:AMZN) and Goodreads will share, with both sites promoting each other and sending customers each other’s way. If DIRECTV (NASDAQ:DTV)’s increase in subscribers is any sign, Amazon may see an increase in dedicated book lovers, possibly resulting in a strong 2013 earnings year.
Netflix wants in
Not one to be left out, Netflix, Inc. (NASDAQ:NFLX) recently added social sharing to its service. The company, which announced an $8 million profit in the last quarter of 2012, described “Netflix Social” as a way to connect with friends for recommendations or simply to learn what others are watching.
Netflix’s membership is expected to continue to grow thanks, in part, to original content the company is producing. The company needs to begin to experience consistent profits to thrive, though, and social media can help promote these shows.
The social aspect of the Amazon-Goodreads partnership will hopefully have a similar impact. When a Goodreads member announces a book he or she is reading, that draws more attention to the book, encouraging a purchase and bringing more cash Amazon.com, Inc. (NASDAQ:AMZN)’s way. Goodread members are constantly building their “bookshelves,” letting other members know what they are reading–by adding this “check in” ability directly to Amazon, the company may lure even more customers over to buy books through Amazon, again only strengthening the company’s earning potential for 2013.
Perhaps Amazon, like Netflix, Inc. (NASDAQ:NFLX) and DirecTV, has realized the value of giving customers an easy way to interact with others. While both Goodreads and Amazon aren’t yet releasing all the details about the deal, Goodreads mentioned that the move will allow for easier interaction with Goodreads on Kindle devices. By being able to see recommendations from friends and family directly on their devices, Kindle owners may be encouraged to buy more books, helping increase Amazon.com, Inc. (NASDAQ:AMZN)’s annual profits–in essence, putting cash directly in investor’s pockets.
The article Amazon Tackles Social Space With Goodreads Acquisition originally appeared on Fool.com and is written by Stephanie Faris.
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