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What's In The E-Book Business For Google?
It's amazing how Google (NASDAQ:GOOG) has mastered the art of one-upmanship. Only a few hours after Borders Group (NYSE:BGP) was named as a possible suitor for Barnes & Noble (NYSE:BKS), Google made the Borders/B&N news less relevant. How so? Because on Monday, Google officially got into the e-book business - the very market Borders Group was seemingly trying to gain a foothold in via Barnes & Noble and its relatively well-cultivated e-book (and e-reader) business.
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Why E-Books?
At first glance, Google's decision doesn't seem to make the same sense for Google that it would for Borders, Barnes & Noble and even the current king of e-books, Amazon.com (NASDAQ:AMZN). Google generated $23 billion in revenue last year and cleared $6.5 billion in profits. The entire e-book industry is only expected to generate about $966 million in sales in 2010, and that's being split up by multiple players.
For Borders Group - which drove $2.8 billion to its top line last year - even a small sliver of the growing e-book pie would make sense. The same goes for Barnes & Noble; it generated 5.8 billion in revenue last fiscal year. Even powerhouse Amazon.com, with its $24.5 billion in sales last year, wouldn't mind a little piece of the action. But Google?
As any veteran investor will tell you, you own stocks for where they're going, and not for where they are now. And as far as where Google could go with the e-book business (and take a bite out of the competition's hide in the process), three numbers tell us all we need to know.
1. $2.81 billion in Annual Sales
It may generate less than $1 billion in sales per year now, but by 2015, Forrester Research expects the e-book business to be worth $2.8 billion per year. That kind of demand will be the product of the anticipated 29.4 million e-readers in consumers' hands by that point.
2. Three Million-Plus Titles
Google's e-book store opened with more than three million titles to choose from. Granted, most of them were public domain books, which means they're free. But, the store also offers "hundreds of thousands" (a description used by Barron's among others) of revenue-bearing titles.
Though it's not clear exactly what "hundreds of thousands" means right now, for reference, Amazon.com currently offers about 630,000 e-book titles, and provides another 1.8 million more public domain books for free. Barnes and Noble currently offers 160,000 for-pay e-book titles, while Apple's iBook store offers about 30,000 non-public-domain books.
Point being, if Google's numbers are on target, the web search icon could now be considered at least tied for the title of world's biggest e-book retailer.
3. Forty-Five Percent Read E-Books on Devices Never Designed to Read E-books
For all the mobility-inspired hype that Apple's (NASDAQ:AAPL) iPad, Amazon's Kindle, Barnes & Noble's Nook and a variety of e-readers from Sony (NYSE:SNE) have fostered, the reality is, most e-books are still read on a plain-old laptop or its close cousin, the netbook.
In a recent poll, 35% of e-book readers said they view the books on a laptop, compared to 32% of e-book buyers who use a Kindle. Another 10% of readers said they read their digital books on a netbook, which for most intents and purposes is more like a laptop and less like a dedicated reader. So, between the numbers for the two non-dedicated devices, it's clear readers are more enamored by the content than the medium itself.
And it's that last little detail that may mean a quick and big success for Google e-book store.
Google's digital content isn't exclusive to one type of e-reader, nor is an app needed to display a certain vendor's e-books on a smartphone or portable device (like reading Amazon's e-books on an iPad via the Kindle application). All that's needed to view e-books bought from Google is a device with a web-browser, which makes its service much easier to work with and much more universal. (To learn more about eBooks and other tech trends, see 4 Industry-Changing Tech Trends)
And you have to assume Google e-books will somehow work seamlessly with Android-powered devices.
The Bottom Line
Score yet another win for Google. The company should be pulling in a big share of the near-$3 billion pie by 2015, if not sooner.
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
IN PICTURES: 6 Simple Steps To $1 Million
Why E-Books?
At first glance, Google's decision doesn't seem to make the same sense for Google that it would for Borders, Barnes & Noble and even the current king of e-books, Amazon.com (NASDAQ:AMZN). Google generated $23 billion in revenue last year and cleared $6.5 billion in profits. The entire e-book industry is only expected to generate about $966 million in sales in 2010, and that's being split up by multiple players.
For Borders Group - which drove $2.8 billion to its top line last year - even a small sliver of the growing e-book pie would make sense. The same goes for Barnes & Noble; it generated 5.8 billion in revenue last fiscal year. Even powerhouse Amazon.com, with its $24.5 billion in sales last year, wouldn't mind a little piece of the action. But Google?
As any veteran investor will tell you, you own stocks for where they're going, and not for where they are now. And as far as where Google could go with the e-book business (and take a bite out of the competition's hide in the process), three numbers tell us all we need to know.
1. $2.81 billion in Annual Sales
It may generate less than $1 billion in sales per year now, but by 2015, Forrester Research expects the e-book business to be worth $2.8 billion per year. That kind of demand will be the product of the anticipated 29.4 million e-readers in consumers' hands by that point.
2. Three Million-Plus Titles
Google's e-book store opened with more than three million titles to choose from. Granted, most of them were public domain books, which means they're free. But, the store also offers "hundreds of thousands" (a description used by Barron's among others) of revenue-bearing titles.
Though it's not clear exactly what "hundreds of thousands" means right now, for reference, Amazon.com currently offers about 630,000 e-book titles, and provides another 1.8 million more public domain books for free. Barnes and Noble currently offers 160,000 for-pay e-book titles, while Apple's iBook store offers about 30,000 non-public-domain books.
3. Forty-Five Percent Read E-Books on Devices Never Designed to Read E-books
For all the mobility-inspired hype that Apple's (NASDAQ:AAPL) iPad, Amazon's Kindle, Barnes & Noble's Nook and a variety of e-readers from Sony (NYSE:SNE) have fostered, the reality is, most e-books are still read on a plain-old laptop or its close cousin, the netbook.
In a recent poll, 35% of e-book readers said they view the books on a laptop, compared to 32% of e-book buyers who use a Kindle. Another 10% of readers said they read their digital books on a netbook, which for most intents and purposes is more like a laptop and less like a dedicated reader. So, between the numbers for the two non-dedicated devices, it's clear readers are more enamored by the content than the medium itself.
And it's that last little detail that may mean a quick and big success for Google e-book store.
Google's digital content isn't exclusive to one type of e-reader, nor is an app needed to display a certain vendor's e-books on a smartphone or portable device (like reading Amazon's e-books on an iPad via the Kindle application). All that's needed to view e-books bought from Google is a device with a web-browser, which makes its service much easier to work with and much more universal. (To learn more about eBooks and other tech trends, see 4 Industry-Changing Tech Trends)
And you have to assume Google e-books will somehow work seamlessly with Android-powered devices.
The Bottom Line
Score yet another win for Google. The company should be pulling in a big share of the near-$3 billion pie by 2015, if not sooner.
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
James Brumley
James Brumley is a freelance writer and registered investment advisor. He began his career as a broker with a major Wall Street firm, where fundamentals and long-term holding periods were core strategies. After that, he switched gears completely, becoming an analyst at a short-term trading newsletter that focused on technical analysis. He now manages client money using the best of both philosophies. His company, Bluegrass Portfolio Management, offers investors an opportunity to reap superior returns with minimized risk.
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