Amazon's continued secrecy about device sales and demographics will become an ongoing issue unless the company comes clean about who their core audience really is.
Yesterday, Amazon CEO Jeff Bezos told USA Today that he was "stunned" by the volume of Kindle e-book sales. Within the next nine to 12 months, he expects that sales of Kindle e-books will surpass paperback and hardcover sales combined. 140 Kindle e-books are now being sold for every 100 "real" books at Amazon.
That's a major achievement for the online bookseller and retailer. But it doesn't tell us the entire story.
Indeed, the content at Amazon has been flying off the digital shelves. The problem is that the entire story as it is being told by the company doesn't completely add up.
Now, I'm not going to deny Bezos his disclosed ratio of real books to e-books being sold. I'm going to accept them at face value, without question. What I am concerned about as it affects the Kindle hardware platform's viability is WHO is generating those sales figures.
To date, Amazon has never disclosed how many Kindle devices it has sold. And while it has consistently boasted of huge volumes of content sales, it has never disclosed what the demographics are of Kindle users and the content that generates those sales. We don't even know what percentage of iPad users are buying Kindle books versus the device owners.
And there's a whole bunch of other things we don't know, which includes the comparison of gross revenue from hardcovers versus e-books at Amazon, and what the statistical breakdown is between self-published and publishing house material, and what genres of material are doing the best.
However, in my mind, the biggest indicator as to the true health of the Kindle hardware platform would be the total percentage of Kindle devices in the wild which are generating most of the content sales. And we have absolutely no idea what that number is.
From my experience, I know that the Pareto Principle is frequently a factor in not only business problem determination but also one which comes up in economics frequently as well. So I think it is certainly plausible that somewhere around 20 percent of Kindle users are generating 80 percent of the platform's sales.
Why would this determine if the hardware platform has a good prognosis or not? Because if Wall Street and Amazon's investors actually knew this, and understood how dwindling margins on the hardware affect profit, then as a hardware platform Kindle has very little to look forward to no matter how well the content sales business is doing.
Why do I think the Pareto Principle comes into play here? Well, as someone who knows a bunch of bookish people who own Kindles and other eReader devices, I know that they are "super reader" types that can consume upwards of 20 books a month. However I also know that these people are probably in the minority.
Many people who have bought Kindles probably bought it initially for the coolness factor, and lot of them are only occasional or light readers have probably shoved their eReader into a shelf somewhere, such as that of own ZDNet Education Columnist, Chris Dawson's.
We know that America, as a nation, is not really big on recreational reading. Ask any educator or librarian and they'll tell gladly tell you the hard and cold facts about the sad state of recreational reading among Gen X and Gen Y. Most hardcore readers are 40 years old and older. Way older. And even among that group, they are a minority.
If only 1 to 2 million active Kindles are in the wild -- and by virtually every analyst's estimate, there are now easily two times more iPads than 33 months worth of Kindles in just the first three to four months of iPad sales -- then it would be safe to assume that if every single Kindle owner bought one book per quarter, then at least 1.5 million books would be sold every quarter.
That's not a realistic number since we know that there's probably a "core" group of Kindle owners that is generating most of the sales, but humor me for a minute.
If 1.5 million registered Kindles exist in the wild and we apply the Pareto Principle, then 300,000 Kindles are generating 80 percent of the platform's sales. That doesn't look particularly good for a revenue growth model if eventually the margins on the devices falls to zero.
Amazon cannot continue to make money on Kindle if such a small percentage of their users are generating most of the sales. It means as a content distribution model it makes a great deal of sense for them to get their software out to iPads and Android Tablets, but to depend on such a small group of device owners to generate most of their their sales? I dunno.
If I'm wrong -- and I really hope I am in this case -- then we've got nothing to worry about from Kindle as a device platform. If a broad distribution of Kindle owners are really generating huge volumes of sales, and things aren't as lopsided as I am proposing, then Amazon, show us the Kindle demographics. But if the company continues to be secretive about these things, then we can only assume that there is a big reason why they aren't telling us, and we have to assume the worst.
Does the Pareto Principle apply to Kindle e-book sales and is Amazon afraid to reveal its demographics and sales volumes for a reason? Talk Back and Let Me Know.