When Amazon launched the Kindle in the US they had very little competition, but the same won't be said if and when the Kindle Store launches in Russia. Over the past week, two different Russian retail giants have each made an investment in a Russian ebook startup.
Ozon.ru, one of Russia's largest web retailer, picked up an investment in the Russian ebookstore LitRes last week. And it was only today that Ulmart, Russia's other largest web retailer, backed a $3 million Series A funding round in the subscription ebook service Bookmate (press release).
LitRes and Bookmate have very different business models, but they each now have the backing of a major retailer, and that is going to make them serious competition to the Kindle when it launches in Russia (my guess) some time in 2015.
LitRes is the more traditional of the pair. It is the leading ebook retailer in Russia and boasts a catalog of over 400,000 Russian language titles in print, digital, and audio from over 100 publishers. It has developed apps for iOS and Android, including an etextbook app and an ereader home screen app, and it has also rebranded a couple ebook readers. It has also developed a reputation as a copyright bully, which might help it sign deals with publishers.
The $5 million that LitRes raised last week was the second round of financing in the past year; they also raised $5 million in October 2013 from investors including the Russian Internet Technology Fund.
Last week's money comes from Ozon.ru, a web retailer with $250 million USD in revenue in 2012. Ozon.ru, which just raised $150 million in capital last month, presented the deal as a way "to further develop its digital content offer, to strengthen LitRes’s leading position on its market, and to consolidate efforts to develop a legal e-book market in Russia."
It's not clear how LitRes will use the new funding, but I do know that they currently have one
two international competitor. iBooks and Google Play Books has have each launched a local ebookstore in Russia. All of this investment comes in anticipation of a burgeoning market. The Russian ebook market is estimated to have reached $15 million last year, less than 1% of the overall Russian book market.
LitRes is also facing lateral competition from Bookmate. This ebook company raised a $3 million Series A funding round from Ulmart, a billion dollar a year retailer which is said to be eying an IPO.
Bookmate offers an ebook subscription service. With a catalog of 400,000 books and deals with over 300 publishers globally, Bookmate boasts a userbase of one and a half million active monthly users in Russia, the Ukraine, and Kazakhstan. That is more than double the 600,000 subscribers they had in February (according to the email they sent me at the time).
Around 7% of Bookmate's users are paying subscribers who fork over $5 a month. Other than the paying customers, it's not clear what their business model is. But the press release does say that "Bookmate connects publishers and authors with new markets and monetization channels by partnering with Mobile Network Operators (MNO’s), Device Manufacturers, online retailers and local government", whatever that means.
Bookmate's expansion plans are explicitly aimed at non-US markets. According to James Glynn, Bookmate's spokesperson: "We aren't trying to be an ebook subscription service for the already crowded US market, (Oyster, Scribd and Entitle are already there and established)...but for the rest of the world," he told me in an email. "We are especially focusing on emerging markets and taking the experience we have learnt from the Russian market to new markets in 2014. It's a proven model that opens up new revenue streams for publishers in emerging markets and it is a great reading experience that encourages users to discover new books."
Bookmate has launched in Turkey and plans to expand into Scandinavia and Latin America by the end of 2014.
In a way, LitRes is the local Russian competitor that Amazon is going to have to worry about while Bookmate is both a local and global competitor that Amazon and Scribd will have to worry about - Nuvem de Livros as well, given Bookmate's plans for Latin America. That Brazilian ebook subscription service may be based in Brazil but it too has announced plans to expand into Latin America in 2014.
image by BBM Explorer