Aiki called Rakuten’s purchase of Kobo “phase 1” of its ebook business because of Kobo’s value as an ebook vendor with good connections to publishers. As part of “phase 2,” OverDrive allows libraries and schools to rent ebooks as well, he said. “As president and chief content officer of Kobo, Michael Tamblyn is committed to reshaping the global book business,” Canadian Business reports. “After the company was acquired by Japanese e-commerce firm Rakuten in 2011, Kobo’s offices got a whole lot more international. With the e-reading service’s operations in 15 other countries and its parent company in Tokyo, Tamblyn guesses he spends one-third of his time travelling outside the headquarters in Toronto’s Liberty Village.” Creating a True Global Marketplace With Immersive Experiences
Operating in a very volatile marketplace, online sales and distribution have come to rely on mergers as a way to build capacity and innovation without the expense and uncertainty of in-house R&D. And today’s business environment changes radically and quickly. Pinterest rose to prominence as a place to save and share images. Today, it is seen as a potential search engine discovery environment, due largely to its popularity and ease of use. Only five private, venture-backed companies in the world are valued higher than Pinterest, which is valued at $11 billion. Less than a year ago, that figure was $5 billion.
As a company that launched just 5 years ago, the valuation and funding Pinterest has received are evidence of the incredible “gold rush” that the online discovery and sales sector has attracted. And companies with deep pockets—Amazon, Alibaba, Rakuten, and others—can be expected to continue to acquire more companies and technologies that they believe will help them build a truly global sales and distribution network.
In September 2013, Rakuten launched Rakuten Essential (“a Next Generation Look Book”) as a way to “tightly integrate products with articles on a relevant theme. Readers can browse and share their favorite articles, and click directly to purchase. … As online retail has matured, it is no longer adequate to compete on price alone. As consumers have become savvier, they have become immune to generic product catalogs and increasingly open to the serendipity of discovering something new in new ways online.” This emphasis on user experience is clear from Rakuten.com Shopping’s goal to connect “buyers and sellers in a dynamic marketplace and thinks of shopping as entertainment—complete with sharing and discovery functions, great prices, fun experiences and convenience for 18 million customers. Rakuten.com Shopping provides over 16 million products in 24 categories and includes a network of thousands of small and large business shop owners.” This arm of the company is based in California—a possible benefit as Rakuten plans its offensive in the American marketplace.
Outside the Western world, new markets are quickly emerging too. In Vietnam, for example, more than one-third of the population regularly accesses the internet, 30% of mobile phone users have smartphones, and the market value of ecommerce is predicted to reach $2.8 billion this year. Many of the global leaders—Amazon, eBay, Alibaba, Google, and Rakuten—have staked out a presence there. As The Wall Street Journal reports, “Motivated by intense competition and powered by mounting piles of cash, the Asian companies are showing a willingness to spend big for access to some of the most promising technologies. … The uptick in Asian investments adds to the flood of capital now washing over U.S. tech startups as investors from hedge funds to mutual funds vie for equity in private startups that are waiting longer to hold public offerings. That competition for deals is driving up the valuations of young companies with unproven business models and raising risks for investors.”
In comparison, EBSCO Information Services’ purchase of YBP Library Services from Baker & Taylor for an estimated $100–$150 million is clearly peanuts compared to the amount spent for the OverDrive purchase; however, YBP serves a relatively narrow academic market that doesn’t provide the sort of value (large-scale market integration and service) that these companies are seeking. And book publishers aren’t ripe for acquisition either. The issue today isn’t content but market access.
“In the ever-changing world of all aspects of publishing, because of the distribution model they’ve always used,” consultant Susan Mary Malone writes, “the big publishers got caught with their pants down. Until the last few years, most books were still purchased through brick-and mortar stores. We all know what’s happened to that. Bookstores have folded right and left. Even the monolith of Barnes & Noble shut down 30% of their stores last year. With doubtless more to follow.”
Alibaba, Rakuten, Apple, Google, Amazon, and many others now sit on huge piles of cash and, although most of these multinational companies tend to be as quiet as they possibly can about many of their acquisitions, we can expect to see purchases continuing as ecommerce giants vie for market share for what is sure to be the 21st-century global version of Main Street.
Click on the images on the right-hand side of the article for slides from Rakuten’s announcement of its OverDrive acquisition. (Source: Rakuten, Inc., 2015)
