If you want to enter a local market, there are usually 2 ways to handle it. You can try to support the market from afar, or you can sign up a retail partner to manage a local presence. Amazon has generally tended to follow the former approach (though they do have one retail partner in the UK and a number of local Kindle Stores in prime markets).
Kobo has tended to follow the latter option for most of the ebook markets they are active in, and have done so ever since they first expanded beyond Canada (Borders and REDgroup were retail partners in the US and AUS, respectively). They’re pretty much the only ebook platform pursing these kind of partnerships, and for the longest time I was under the impression that Kobo’s presence in brick-and-mortar stores was giving them some kind of advantage over Kindle and iBooks, that the affiliate fee which Kobo pays to the retail partners was more than made up for by the growth in market share.
I’m not sure that’s true.
For the sake of this post, I want to take a look at Kobo’s activity in Australia. It’s a small market, but it is also one of the first markets Kobo entered (May 2010).
Over this past weekend I have been playing around with Google Trends. This is one of Google’s lesser known services, and it lets you dig through the aggregated history of all the terms searched for via Google.
I briefly mentioned it yesterday when I pointed out that the word Nook was a more popular search term than Kobo (worldwide, not just the US), a sure sign that it has a better chance at success should B&N ever expand to more markets.
One of the other interesting parts of Google Trends is that it offers granular data on the country (and sometimes even the state) level, and can show you charts like this one for Australia:
The blue line is the relative popularity of the word Kindle, and the red line represents Kobo. As you can see, the Kindle is getting a lot more attention in Australia than Kobo, even though Kobo is the one with the retail presence.
That trend seems to be repeated in the relative market share. The latest info I can find suggests that in Australia the Kindle is estimated to have 65-75% of the market (Apple has 12-22%, Kobo 10-16%).
I know we shouldn’t read too much into the data, but the Kindle has nearly as much of a lead in estimated market share as they do in mindshare. What is Kobo getting from their retail partners that is worth the cost?
And it is costing Kobo money. All of their retail partners are getting an affiliate fee of some kind, and one of my readers helped his local ABA member store crunch the numbers. Assuming he didn’t forget to carry the one, that store is earning between 6.5% and 11% of the retail price for ebooks which one of their customers buy.
Note that this commission is coming out of Kobo’s 30%, making their margin even smaller, and the commission is on all the Kobo ebooks sold to that bookstore’s customers, not just the ebooks which are actively sold by the bookseller.
So in exchange for a sizable chunk of their income, Kobo has secured a distant third place position in the Australian ebook market.
I think the price may have been too high.
On the other hand, it does get Kobo at least some more attention than they would have had they not signed a local retail partner. A brief check of other national markets, Brazil and South Africa for example, show that Kobo has been getting relatively much more attention in Google searches in Australia than in those other 2 countries (by a factor of 3 to 5).
On the gripping hand Kobo has invested in maintaining a staff in Australia, so whatever gain they make in income might be canceled out in salaries and other expenses.
It’s an interesting puzzle, isn’t it?
I wish I had more exact data, but this isn’t the kind of thing which anyone is willing to talk about (and Kobo’s marketing dept has me on their ignore list, so there is little chance of them talking to me at all).
So at this point all we have is speculation, and that’s not good for much. But it is still fun to speculate.