Amazon sells 105 eBooks for every 100 real books (hard and soft cover). This tipping of the scales took only 3.5 years, much shorter than I expected. It’s a tremendous victory for marketing and for trees.
With Kindle, Amazon targeted the most passionate reader segment, those who read more than 10 books per year, which is 40% of Americans according to a 2007 AP Ispos poll. When the Washington Post released this data under the sensationalist headline trumpeting “25% of Americans read no books”, the newspaper distracted us from the truth with sensationalism. The US has some ravenous readers.
In 2007, when the Kindle launched, Amazon must have bet on a few key insights. First, there is a large population of voracious readers in the US. Second, those readers are best served by eBooks because of the benefits of purchasing speed, lower cost and weightlessness (how much does 100kB weigh?). Third, these benefits would trigger increase in consumption. On all counts, they were right.
Segmenting the top of the market is a battle tested method for disrupting markets. In the late ’90s, HSBC had nearly 100% retail banking market share in Hong Kong. Citibank pursued and won 30%+ market share in a few years by profiling the top 10% of the market and building products and services exclusively for them. The top echelon of banking customers are the most profitable, so Citibank could offer luxury services that HSBC couldn’t match.
A well-worn example, Apple, did the same. Apple serves the premium portion of the market who value design and experience. After a near fatal management catastrophe, Apple is now the 3rd largest producer of PCs and tablets. LinkedIn pursued the super-networkers, venture capitalists, business development execs, and sales reps, who found tremendous value in managing and farming their network. eBay ultimately served the PowerSeller, the entrepreneurial garage salesman, who now provides 80% of the inventory on the exchange.
Social networks, like Twitter, LinkedIn and Facebook, and market places, like eBay and Craigslist, tend to obey a 1/9/90 rule. 1% contribute most of the content. 9% interact with it and 90% are voyeurs. Understanding the needs, passions, desires and ambitions of the 1% of your target market better than anyone else, especially incumbents, is the first priority for your marketer. It’s essential to victory and a crucial ingredient of disruption.
Image credit: Wired