How does Goodreads make money?

Much of the book industry relies on Goodreads for many things. From readers and authors to publishing professionals and journalists, the book-centric platform is fully functional for anyone who loves books. But looking at his website design, he feels stuck in the decade past. Since Amazon acquired Goodreads for $150 million in 2013 until today, the UX hasn’t seen any major style changes. Amazon is probably aware that Goodreads desperately needs a facelift, but it’s not doing anything about it. Does this mean that its subsidiary is not profitable enough to justify valuable resources and funding? How does Goodreads make money anyway?

I contacted Goodreads to ask them specifically about this, even going to their website to do a lot of research and ask tech experts to comment on the subject.

The bookish social media site does not currently have an official media kit, according to a representative. But a media kit dated 2017 reveals that its business model revolves around offering “book discovery packages” which consist of “owned, earned and paid media”.

Direct advertising opportunities with publishers

On the Goodreads advertising page, authors or publishers can fill out a form asking for a bit of their information, like their budget. Next, Goodreads says it would give them access to advertising products and resources, and it appears to be reaching out to its customers to offer personalized solutions.

For a social media platform that garners millions of views per month and contains a ton of user data, Goodreads has struck gold with advertising. According to Chris Muller, Director of Audience Growth for DoughRoller, Goodreads’ business model is based on the concept of social commerce. “People share book recommendations, reviews, and discuss books they read or want to read in the future, which contributes to the website’s success. The holy grail of this website seems to be recommendations from readers sharing the same ideas,” he said.

In Goodreads’ 2017 Discovery Kit, the Amazon-owned platform listed some of the ways it provides services to publishers and authors, and how it leverages user data that Muller mentioned. And although the information seems outdated, it’s still useful to have a general idea of ​​how Goodreads works.

Among the top revenue sources mentioned are sponsored newsletters and new release mailers, which Goodreads sends to millions of users every month; advertising locations, also known as author spotlights; personal selection emails, which may target fans of an author presenting a new version; and sponsored polls on the homepage.

Gift program

Goodreads giveaways are definitely one of the popular features of the platform. Although international readers can almost always participate in a giveaway, the service itself is only available to US and Canadian authors who wish to organize print book giveaways. For the Kindle book giveaway, however, those using Amazon’s Kindle Direct Publishing self-publishing platform can take advantage of the service.

In this business model, Goodreads offers Standard and Premium plans. The standard plan costs $119, while the premium plan costs $599. Each option has its own benefits, but I find the Standard package pretty decent.

According to Goodreads’ 2017 media kit, 50-60% of winners write a book review.

Affiliate links

Whenever a user clicks on the Buy buttons on a Goodreads book page, they notice that there are affiliate codes attached.

“Goodreads receives a share of any book sold through partners like Amazon, Barnes & Noble and Apple Books. But that revenue probably isn’t significant given Goodreads’ strategic value to Amazon. I think that’s evidenced by the fact that Goodreads has killed its ad programs aimed at individual authors and small publishers,” said Ben Fox, a technology entrepreneur and current founder of Goodreads competitor Shepherd.com.

Fox was referring to Goodreads’ self-serve advertising — not its direct mail service — which it shut down in February 2020. Now, Goodreads promotes Amazon’s self-serve advertising product, which obviously found on another site.

“They still sell advertising to big publishers, but it seems likely that Amazon is either subsidizing Goodreads or offering them a custom affiliate deal that gives them a much larger share of any book sold,” Fox said.

Online advertisements

Goodreads says it displays interest-based ads on its website. “Interest-based ads are sometimes called personalized or targeted ads. We display interest-based advertisements to display features, products and services that may be of interest to you,” reads a disclaimer page.

But what do these interest-based ads really look like to a casual user of the platform? According to Goodreads, personal recommendations and other similar features are considered advertisements. This calls into question the endgame of its recommendations tool – is it really there to genuinely help a reader find books they might like, or is it just another way to benefit from the activity of the ‘user ?

On the other hand, in its media kit, here are the ad units it offered: homepage roadblock; book page/quotes roadblock; and home ROS (run of site) genre and author targeted ads, which is a fancier name for banner ads.

While these types of ads seem too prevalent to some, the good news is that users can opt out of receiving targeted ads, but will still see ads not based on your interests.

How much does Goodreads earn?

Looking at the old media kit, you’d be surprised at how much data the bookish social media site collects and can use to target specific audiences.

Putting Amazon out of the picture, Goodreads is a powerhouse in its own right. Its various platforms collect millions of views, whether on social networks, its website, its applications on different devices, its newsletters, etc. It was such a potential cash cow at the time that Amazon finally took notice.

“Goodreads and its community could have competed with Amazon’s book sales, so they were absorbed before they posed a serious threat. Amazon’s control over online book selling approaches is insurmountable when combining Goodreads’ database of recommendations with Amazon’s extensive databases of reader purchase histories,” Muller said.

As for Fox, who has direct experience running a Goodreads-like site, he gave a rough estimate of what Goodreads earns in a month. “LinkedIn says Goodreads has about 300 employees. A rough rule of thumb is a cost of $150,000 per employee. This would estimate their costs to be $3.75 million per month for their team. How does this relate to ad revenue? Their media kit says they have 55 million monthly unique visitors to the site, if we assume a $25 eCPM rate that would bring in $1.4 million per month,” he said.

If Goodreads is earning that low, according to Fox’s ballpark figure, you might think it’s doomed. If the site is not profitable enough compared to other social networking sites, why is it still operational after all these years? Remember, if something doesn’t work well for Amazon, it ends up killing it. In fact, in 2017 he shut down Quidsi, his e-commerce platform for baby products, after failing to make any money. This year, it plans to close 50 of its physical stores for not “gaining traction”.

“Maybe their affiliate and email income earn them the rest of the way. Either way, I don’t think they’re worried about the money given Amazon’s backing” , Fox said of Goodreads.

For Shakib Nassiri, founder of WAMA Underwear and an expert in the digital space and the e-commerce industry, income is not really the main focus of the book platform, unlike before. “Goodreads’ direct income is not as important as it used to be. Now it’s more of a pipeline to nudge avid readers into buying books on Amazon… It’s an incredibly valuable data bank that Amazon has access to and to be able to send Amazon-specific advertisements. Goodreads probably brings in a decent share of Amazon book sales,” he said.

Given this, while Goodreads doesn’t appear to be bringing much money to the juggernaut that is Amazon, it remains a data goldmine for the enterprise giant as it retains its grip on the tech industry. ‘editing. Goodreads and/or Amazon are probably getting more mileage with tons of user data they’ve collected over the years, and that’s all that matters in the digital age. Just ask Meta.

Lucas E. Kelly