E-books: Coming On Like Gangbusters

Many bibliophiles love them. Will they become a lucrative new medium for advertisers?

The convenience of downloading e-books to an electronic reading device and the lower cost of such books versus printed versions has e-books flying off of “e-shelves.”

Through May of this year, sales of e-books made up nearly 9% of the total book market, up from less than 3% in the same period last year, according to the Association of American Publishers.

Online retailer Amazon.com is selling more e-books than hardcover editions. In the second quarter of this year, the company sold 143 e-books for every 100 hardbacks; that ratio increased to 180:100 in the month of June.

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Technology advances and price reductions of electronic reading devices such as the Amazon Kindle and Barnes & Noble Nook are helping to spur the growth of e-books. The Kindle, for example, now sells for $139 versus $389 a year ago. Boosting the e-book bonanza is the popular Apple iPad tablet computer, which also allows users to read e-books. And more tablet computers with similar capabilities are coming soon.

Price and convenience are huge selling points. Books with price tags of $25-$30 in bookstores (before discounts) might sell in hardcover for $11.92 at Amazon, but as low as $7.99 in the Kindle version. And an e-book can be downloaded to the e-reader in less than a minute compared with the time needed to visit the local bookstore (or library, for that matter) or wait for delivery from an on-line book retailer that also tacks on shipping charges. There are plenty of e-books to choose from, too -- several hundred thousand volumes at present.

Moreover, electronic reading devices appear to be getting people to read more books. In a recent survey, 40% of respondents said they read more now that they have e-readers with only 2% reporting reading less. The remaining 58% said they read about the same amount as before. E-reader users also reported reading 2.6 books a month, on average, compared with 1.9 books by print book readers.

Looming large as part of the e-book revolution is its potential as an advertising medium.

While book publishers have experimented with ads in printed books, the books are not good vehicles because they lack the necessary volume of sales and the timeliness advertisers seek.

Hardcover books, for example, are often in the works for months -- if not years -- and even the biggest best sellers reach fewer readers than do large metropolitan newspapers or national magazines.

E-books change the equation. By placing advertising in a wide range of e-books, advertisers can overcome the problem of volume. And users of e-readers regularly download new titles, so the advertising can be updated to provide timely messages.

E-readers could offer advertisers a great opportunity to target their ads -- readers of books on golf, for example, may be more receptive to ads for golf clubs.

But the move to advertising in books is sure to raise a ruckus. The solution could be to allow readers to get their books with no ads, or with ads at a reduced price or perhaps even free. In any case, advertising will open up a whole new revenue stream for publishers who adopt the model.

E-books could also make a splash in the huge college textbook market. While hidebound textbook publishers are sure to resist the change, the market appears to be a natural for e-books -- textbooks are very expensive (not to mention heavy to lug around) and the audience is computer literate.

Associate Editor, The Kiplinger Letter