Amazon to charge publishers for promotions

Summary:A new source of revenue for the online bookseller is bound to cause an uproar. Publishers will be asked to pay up to $10,000 per title for a recommendation.

Amazon.com Inc. is finding a new way to get money from book publishers, and once again potentially blurring the boundaries between advertising and editorial judgments.

The Seattle-based Internet retailer recently notified publishers that it will begin to charge them as much as $10,000 per title in exchange for a better shot at having Amazon (amzn) recommend their books in special e-mail promotions sent to customers.

Previously, the e-mail recommendations were free to publishers and were based solely on the judgment of Amazon book editors. With the new fees, Amazon is extending a longtime practice on its Web site of allowing publishers to nominate a book and charging them if Amazon editors agree it is worthy of a recommendation.

Amazon says it will continue to recommend titles via e-mail for which it has received no fee from the publisher -- possibly confusing some customers about what are effectively advertisements and what are titles selected for purely editorial reasons. Those titles would likely include expected best-sellers, books from well-known writers or other titles Amazon's editors believe are good. Though Amazon says it will disclose which titles it received payment for, users will have to click on a hyperlink to the Amazon Web site to see which titles fall into that category. Amazon plans to begin sending the e-mails containing the paid recommendations within the next couple of weeks.

The new fees involve a program Amazon calls Past Buyer Mailings, mass e-mailings that send book recommendations to existing Amazon customers based on their purchasing history on the Web site. Amazon recommends books using various criteria, including suggesting books by authors that customers have already shown an interest in. The company may also recommend similar authors or genres, such as mysteries or autobiography, suited to a customer's tastes.

Amazon emphasizes that all of the book recommendations sent to its customers over e-mail, like many recommendations on its Web site, are selected by teams of editors. But the new arrangement could give Amazon a financial incentive to select titles for which publishers are eager to cough up a large sum to be included in e-mail promotions.

In addition to the new fee levied if publishers' nominations pass muster with Amazon editors, the publishers will be required to buy advertising on one of Amazon's pages, pushing the cost of the total package to as high as $17,000. Amazon says it will regularly reject titles it deems unworthy of promotion.

Amazon spokeswoman Kristin Schaefer described the new e-mail program as an extension of what Amazon has been doing since it began accepting placement fees from publishers in ex change for exposure on Amazon's Web site. "Now we're allowing publishers to have input as to what titles they would like to have included in those e-mails," she said.

Some publishers say Amazon should tread carefully with the new policy. Laurence Kirshbaum, chief executive of AOL Time Warner Inc.'s Time Warner Trade Publishing, says Amazon could hurt its reputation if it doesn't fully disclose that publishers are paying to get their books publicized this way. "If you don't distinguish between editorial and advertorial you could lose credibility," he says.

Amazon raised concerns among customers and media critics in 1999 when it first began charging publishers to increase their chances of receiving a featured slot on Amazon's heavily-trafficked Web site. Initially, it didn't disclose the titles for which publishers had paid promotional fees, saying that all of its recommendations were vetted by Amazon editors. Amazon later began disclosing specific titles backed by payments -- in a section reached by clicking on a hyperlink on its Books home page -- after complaints from customers. Amazon still lists those titles: Among the ones listed Tuesday were "A Painted House" by John Grisham and "Crooked River Burning" by Mark Winegardner.

Amazon executives have said that their disclosure policies are better than those of traditional "bricks-and-mortar" retailers, who also accept payments from publishers in exchange for favorable placement of books in their stores. Publishers typically pay for such placement from so-called cooperative marketing budgets, which represent by far publishers' greatest marketing expense. Every year, publishers give money to retailers -- both online and bricks-and-mortar -- based on the amount of sales they generate. The retailers can use those "co-op" funds to promote titles in various ways -- whether through print advertising, in stores or on the Web -- usually with the publishers' consent.

Sending the message
E-mail has become one of Amazon's most effective marketing tools. The company won't say exactly how many of the Past Buyer Mailings it typically sends out, but it has grown to be a favorite marketing technique among Amazon's publishing partners, with many publishers saying they often see significant spikes in sales following the promotional e-mails.

According to an e-mail sent to publishers, Amazon has told publishers that it will cost between $5,000 and $10,000, depending on the book, for Amazon to promote their titles through e-mail. According to the e-mail sent to publishers, Web-site fees start at $2,000 for promotions on "category" home pages and $12,000 for promotions on the more visited Amazon Books Home Page. Amazon declined to comment on the authenticity of the e-mail or the fees it charges publishers for promotions.

Some publishers say the new fees connected with its e-mail promotions will be tough to stomach. The cost of promoting a title on the Amazon Book Home page and through e-mail -- the most expensive combination -- is about 40% higher than the cost of getting a book placed in a prime location in one of the major chain bookstores, according to one publishing executive. Getting good in-store placement is one of the most effective ways of pushing a book.

Amazon's fees are "way beyond the budget," says John Oakes, publisher at Four Walls Eight Windows Inc., a 30-book-a-year New York publishing house. "It doesn't matter what you are told by Bertelsmann or Simon & Schuster; that is a significant amount of money for any publisher." It's also hard to justify the cost as the e-mail is a one-shot marketing tool, says Oakes, who says he hasn't yet been notified about the change.

The additional charges will likely make life harder for smaller publishers like Oakes with limited amounts of marketing cash. If publishers can't or won't pay to promote smaller titles, the program could hurt Amazon's ability to promote quirky books that sometimes grow into best-sellers but aren't obvious successes.

Publishers worry that the high cost of the e-mail program compared with other marketing expenses could drastically cut into their co-op budgets and hurt their ability to promote other books, especially low-selling literary titles. "It's robbing Peter to pay Paul," says one publishing executive. Amazon.com Inc. is finding a new way to get money from book publishers, and once again potentially blurring the boundaries between advertising and editorial judgments.

The Seattle-based Internet retailer recently notified publishers that it will begin to charge them as much as $10,000 per title in exchange for a better shot at having Amazon (amzn) recommend their books in special e-mail promotions sent to customers.

Previously, the e-mail recommendations were free to publishers and were based solely on the judgment of Amazon book editors. With the new fees, Amazon is extending a longtime practice on its Web site of allowing publishers to nominate a book and charging them if Amazon editors agree it is worthy of a recommendation.

Amazon says it will continue to recommend titles via e-mail for which it has received no fee from the publisher -- possibly confusing some customers about what are effectively advertisements and what are titles selected for purely editorial reasons. Those titles would likely include expected best-sellers, books from well-known writers or other titles Amazon's editors believe are good. Though Amazon says it will disclose which titles it received payment for, users will have to click on a hyperlink to the Amazon Web site to see which titles fall into that category. Amazon plans to begin sending the e-mails containing the paid recommendations within the next couple of weeks.

The new fees involve a program Amazon calls Past Buyer Mailings, mass e-mailings that send book recommendations to existing Amazon customers based on their purchasing history on the Web site. Amazon recommends books using various criteria, including suggesting books by authors that customers have already shown an interest in. The company may also recommend similar authors or genres, such as mysteries or autobiography, suited to a customer's tastes.

Amazon emphasizes that all of the book recommendations sent to its customers over e-mail, like many recommendations on its Web site, are selected by teams of editors. But the new arrangement could give Amazon a financial incentive to select titles for which publishers are eager to cough up a large sum to be included in e-mail promotions.

In addition to the new fee levied if publishers' nominations pass muster with Amazon editors, the publishers will be required to buy advertising on one of Amazon's pages, pushing the cost of the total package to as high as $17,000. Amazon says it will regularly reject titles it deems unworthy of promotion.

Amazon spokeswoman Kristin Schaefer described the new e-mail program as an extension of what Amazon has been doing since it began accepting placement fees from publishers in ex change for exposure on Amazon's Web site. "Now we're allowing publishers to have input as to what titles they would like to have included in those e-mails," she said.

Some publishers say Amazon should tread carefully with the new policy. Laurence Kirshbaum, chief executive of AOL Time Warner Inc.'s Time Warner Trade Publishing, says Amazon could hurt its reputation if it doesn't fully disclose that publishers are paying to get their books publicized this way. "If you don't distinguish between editorial and advertorial you could lose credibility," he says.

Amazon raised concerns among customers and media critics in 1999 when it first began charging publishers to increase their chances of receiving a featured slot on Amazon's heavily-trafficked Web site. Initially, it didn't disclose the titles for which publishers had paid promotional fees, saying that all of its recommendations were vetted by Amazon editors. Amazon later began disclosing specific titles backed by payments -- in a section reached by clicking on a hyperlink on its Books home page -- after complaints from customers. Amazon still lists those titles: Among the ones listed Tuesday were "A Painted House" by John Grisham and "Crooked River Burning" by Mark Winegardner.

Amazon executives have said that their disclosure policies are better than those of traditional "bricks-and-mortar" retailers, who also accept payments from publishers in exchange for favorable placement of books in their stores. Publishers typically pay for such placement from so-called cooperative marketing budgets, which represent by far publishers' greatest marketing expense. Every year, publishers give money to retailers -- both online and bricks-and-mortar -- based on the amount of sales they generate. The retailers can use those "co-op" funds to promote titles in various ways -- whether through print advertising, in stores or on the Web -- usually with the publishers' consent.

Sending the message
E-mail has become one of Amazon's most effective marketing tools. The company won't say exactly how many of the Past Buyer Mailings it typically sends out, but it has grown to be a favorite marketing technique among Amazon's publishing partners, with many publishers saying they often see significant spikes in sales following the promotional e-mails.

According to an e-mail sent to publishers, Amazon has told publishers that it will cost between $5,000 and $10,000, depending on the book, for Amazon to promote their titles through e-mail. According to the e-mail sent to publishers, Web-site fees start at $2,000 for promotions on "category" home pages and $12,000 for promotions on the more visited Amazon Books Home Page. Amazon declined to comment on the authenticity of the e-mail or the fees it charges publishers for promotions.

Some publishers say the new fees connected with its e-mail promotions will be tough to stomach. The cost of promoting a title on the Amazon Book Home page and through e-mail -- the most expensive combination -- is about 40% higher than the cost of getting a book placed in a prime location in one of the major chain bookstores, according to one publishing executive. Getting good in-store placement is one of the most effective ways of pushing a book.

Amazon's fees are "way beyond the budget," says John Oakes, publisher at Four Walls Eight Windows Inc., a 30-book-a-year New York publishing house. "It doesn't matter what you are told by Bertelsmann or Simon & Schuster; that is a significant amount of money for any publisher." It's also hard to justify the cost as the e-mail is a one-shot marketing tool, says Oakes, who says he hasn't yet been notified about the change.

The additional charges will likely make life harder for smaller publishers like Oakes with limited amounts of marketing cash. If publishers can't or won't pay to promote smaller titles, the program could hurt Amazon's ability to promote quirky books that sometimes grow into best-sellers but aren't obvious successes.

Publishers worry that the high cost of the e-mail program compared with other marketing expenses could drastically cut into their co-op budgets and hurt their ability to promote other books, especially low-selling literary titles. "It's robbing Peter to pay Paul," says one publishing executive.

Topics: Amazon

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