Are eBooks An Advert Free Zone?

Yahoo has filed two US patent applications which are based on delivering adverts to ebooks and even offering a variable price that is dependent on the advert placement. Some will cry, ‘not on my watch and it will never happen,’ but perhaps we need to at least consider the implications further before we dismiss it.

If we step back to the Victorian and Edwardian times, the book was often full of adverts for goods which had no connection to the genre or story. The Pamphleteers of the Victorian age also included many adverts in the ‘Penny Dreadful’ and periodicals. Dicken’s own Pickwick Papers included many adverts that told their own story about the culture, products and trades of the day.

Today the only adverts we see in books are those for other titles by the same other, publisher, or in the series. But as the digital book market approaches respectable figures, will that now change, or will tomorrow’s eBooks always remain advert free? Is the Yahoo move an indication of things to come, or merely a patent filing for the shelf and just in case?

Google first gave us Ad Words and Search Engine Optimisation and we appeared suddenly to discover the holy grail. Companies placed their bets and got suckered into a spiral of marketing investment, which may have given a return when you were top of the list, but you had to pay ‘blind man’s buff’ to get there. Technology has long been able to crunch information and drive targeted marketing from the results. Major retailers and especially supermarkets have become experts at analysing not only what we did buy, but also what we didn’t buy that we should have and even what aisles we didn’t buy from. Some thirty years ago US supermarket Vons were one of the leaders in the coupon driven market of the time.

Technology enables us now to be able to target advertising to; recent purchases or items viewed, demographic groups and profiles, searches, key words within text, even changes within our local weather or breaking local news. The key change is that the analysis and results can be now be generated almost instantly and the same advertisement offer can be dynamically tailored to fit the individual.   

The questions we have to ask are about who owns the customer relationship, the advertising contract, revenues and the information? Amazon and Kobo already offer full-screen adverts when the device is switched off and smaller ones on their menu screens. So who drives the advertising dollar? Would the advertising be driven by the retailer, the publisher, or a technology or service provider?

If advertising were seriously introduced into books, it would potentially work with ebooks, but pbooks would remain largely as they are today. So how would, adverts in ebooks be sold to the reader? Would the revenues generated reduce the cost of the ebook as suggested by Yahoo, or will they cross subsidise the tile irrespective of form? Would the revenues count into the royalties net revenues, or be lost outside of the ‘sales’?

We should also recognise moral rights but who would be able to exert them and would they be universally recognised?

In offering that the advertising will pay more and the reader given a greater discount based on how distracting, or intrusive their adverts are to the reader, Yahoo raise an interesting concept. They also suggest that readers could be offered adverts as hyperlinks within the book's text, in-laid text or even "dynamic content" such as video. They suggest the sponsored book, which could be brought to you by Company X and in that we must remember the industry’s acceptance of the MacDonald deal with WHS that we wrote about a few months ago. They also touch on the sensitive aspect of offering sponsored rewards our gifts in children's books.

Books have been a relatively advertising free zone for many decades, but is this has been more driven by the restrictions and economics of the pbook. In the past it was only possible to economically provide mass market driven adverts, but is that now changing with the ebook and internet? We expect to see adverts in papers, magazines and on web pages, so is it acceptable to see them closely aligned to books? With magazines and newsprint the advertiser can reference circulation listings and know roughly who the audience is and how big it is. With TV and film again the audience is well defined but with books some would suggest we enter the world of the unknown.

So do we expect to see ebook adverts soon?

Tax Avoidance Can Be Morally Taxing

What started off as questions about individual’s offshore investments has swiftly moved onto corporate use of global tax bolt holes in order to avoid tax. Tax-friendly countries aren't new and international companies have been exploiting them for many years. Even the use of Luxemburg by the likes of Google, Yahoo and Amazon has been know for a long time. We wrote about the variance in VAT rates and Luxemburg loophole in late 2011 and its not as if any MP didn't know about it, as it is heavily embroiled in the whole question of VAT and EU tax standardisation. The US Sales tax debate has also been ongoing and has been well documented for years. So why has it been raised now and where is it going?

Following the appearance of Google, Starbucks and Amazon executives before a committee of UK MPs last week, UK BUSINESS Secretary Vince Cable,has now urged authorities to clamp down on the “completely unacceptable” corporate tax avoidance and called for international cooperation over any reforms. To some that is like him suddenly having a revelation when caught with his pants down and it is somewhat ironic that he calls for others to reform when he himself is in fact the ‘UK Business Secretary’.

If we look at the companies under the current spotlight we see Starbucks, which is thought to have paid just £8.6m in corporation tax since 1999, despite last year sales of £400m. Their movement of liabilities across their total business is what most would expect, but the result is now morally unacceptable to others who may not share the same ability and believe that they are being unduly penalised. The coffee cup is no better for Caffe Nero, whose parent company is based in that heavily populated and coffee shop haven, the Isle of Man. Last year they made a profit of nearly £40 million, but paid no corporation tax in the UK. Caffe Nero is not breaking the law, but are “taking advantage of the rules in place in relation to ‘capital allowances, deferred losses and interest payments’.

Another tax avoidance which has now been addressed allowed broadcaster BSkyB to mix VAT and non VAT services within the same subscription. They had been saving an estimated £30 to £40 million a year in VAT by charging satellite customers £2.20 a month for the Sky magazine, which was zero-rated for VAT. This allowed them to avoid VAT of around £3 to £4 per subscriber, which given Sky's 10 million subscribers provides revenues not to be ignored. In 2005 UK courts had ruled that cable companies were allowed to deduct VAT on "cable guide" magazines, if the customers received a product from a separate company and at a fair price. However in 2005 Sky relaunched BSkyB Publications and took production of Sky magazine in-house and also began distributing Sky Sports and Movies magazines. BSkyB Publications' accounts claimed that the majority of the income from the magazine was recycled back to Sky TV. They described it as payments for "customer data" and "support services". In 2010, the Treasury announced among a number of anti-tax avoidance measures, legislation against VAT "supply-splitting" and in 2011 BSkyB announced it would be ceasing publication of Sky Movies and Sports magazines and downsizing Sky magazine.

The question is whether the authorities will go back to BSkyB and reclaim the monies apparently due?

Apple and Google are based in Ireland and enjoy their low corporation tax benefit. Google uses Ireland for revenues that end up being costed to Bermuda where its intellectual property is registered. We then come to Amazon who like its smaller rival Kobo, have their European headquarters in Luxembourg. It begs the question if any big multinational has their European financial base in the UK? 

The Guardian claims that Amazon generated sales of more than £3.3bn via its UK website last year but paid no corporation tax on any of the profits from that income and the Security and Exchange Commission show that in the past three years, although Amazon generated sales of over £7.6bn in the UK, they paid no corporation tax on these.

However the Amazon issue is not just about the corporation tax but also about is the uneven playing field and market advantage that the 3% VAT rate of Luxemburg gives it against the 20% rate of the UK. The challenge does not just effect the UK , but any country in the EU that has a VAT rate higher than Luxemburg. Amazon effectively does not pass on this windfall benefit to the publishers, who have to cover the whole 20% VAT in their pricing negotiations with Amazon and effectively pockets 17%. This obviously gives them a clear margin benefit over their UK domestic rivals who have to pay the 20%. The EU is moving, albeit slowly, to close down this loophole but it is more than just a tax loophole but how Amazon buys and sells and makes 17% without getting out of bed!

Amazon also has challenges with its highly successful third-party Marketplace, where the VAT status of its resellers can lead to misleading prices. Depending on the reseller's VAT status, products sold on Marketplace can be listed either with or without the tax added. Some resellers don't supply the VAT receipts, that prohibits these small businesses from claiming VAT. This doesn't impact small ticket items, but can heavily impact a small company buying expensive PCs and other VAT-able goods. The current situation means non-VAT registered companies can make their items look more attractive by keeping prices below larger competitors and in effect create a false market.

However, tax avoidance is now becoming a high risk activity as the media draws the spotlight on the issues and the companies involved now face damaging their public reputations. For government ministers and civil servants to act surprised at the revelations and point fingers at each other, is perhaps indicative of the often ungoverned society we often now find ourselves. We often find ourselves in a world where the likes of twitter and Facebook can draw more attention to issues and we wait until that logic and moral tipping point. The stance and comments from the likes of John Lewis’s MD, Andy Street, and the UK Booksellers Association’s tax and lobbying messages start to raise awareness to the issues. The press has certainly raised the issue of tax avoidance, but perhaps the only real moral test is if the consumer says ‘no’ to the likes of Amazon, Caffe Nero, Starbucks. Imagine a one month ‘say no’ campaign and the impact and message that would send to shareholders of the companies.

Perhaps the greatest challenge is to harness the public opinion and convert it into concerted action. A few posters isn’t going to do it. Lots of bad press can often be weathered, but stopping the cash-flow really can send the message home. Perhaps we have to wait until after Christmas and we have bought all our presents from them and drunk their coffee to keep warm!  

Coffee Latte and eBook to Go Please

When Starbucks signed up Paul McCartney and others to release their latest albums through them, it was interesting and some would agrue it made sense. They then went on to their work with iTunes through Hear now. However,‘the latte to go’ company is now teaming up with Yahoo and aim to go one step further by adding free ebooks, movies news and entertainment to its in store Internet offer. It will also offer free access to sites, such as The Wall Street Journal that are currently behind pay walls.

So is the coffee shop becoming a media retailer where previously media retailers have become coffee shops? This move is about redefining who the reseller is and who has the brand and eyeballs to capture sales. Its fair to say that tomorrow anyone anywhere can sell media and ebooks and where we see supermarkets today we could see anybody tomorrow. Who has the biggest captive audience and can they make a viable proposition tomorrow?



The one reality is that the coffee market is getting crowed as more chains compete and fast food chains start to go after the same market. Starbucks WiFi is already attracting some 30 million logins a month, so extending its offer to their captive market makes commercial and loyalty building sense.

Starbucks customers will be able to access the network via their smart phones, computer or tablets, as soon as they connect. A splash page presents the various options which include entertainment, wellness, business, careers, and "my neighbourhood." With partners such as iTunes, New York Times, USA Today, Zagat and advance book copies from publishers such as HarperCollins and Penguin, the aim is to create a compelling community portal. This by itself then becomes a pull to get customers to keep coming back and to build and extend the brand.

Interestingly the content is designed to last as long as a cup of coffee and a muffin. Five to twenty minute content chunks are being sought to consume in house or they can buy the content and download it to go. The content in store can also be book marked such that it remembers where you left off next time you visit.

Starbucks makes additional revenues on taking a share of all sales.

So are coffee shops for socialising or for playing games, reading, watching movies and other more singular pursuits? Its an interesting concept but you may have to have a serious caffeine addition for it to seriously alter your lifestyle.

The Great Book Bank Robbery - The Opposition Grows

The momentum of opposition to the Google Book Settlement is growing as the date for judicial decision draws near. Is it surprising that it has taken so long to treat through the treacle that is the settlement and wake people up to the potential implications. The one thing that is clear is that the settlement has divided the publishing community like no other issue and as predicted the noise levels from both camps is only getting louder.

Today the Wall Street Journal broke the news, 'Tech's Bigs Put Google's Books Deal In Crosshairs', reporting that three technology corporations have joined with some library associations to challenge the settlement. Many nay expect Microsoft, Yahoo and Amazon to oppose the settlement and the Internet Archive has been a consistent objector since the settlement was announced. But the fact that they have apparently all agreed to join together and co-led by Gary Reback, a Silicon Valley lawyer involved in the Department of Justice's antitrust investigation against Microsoft Corp. last decade would indicate that they intend to jointly fight the settlement. Expect some mudslinging from Google against Microsoft and their partners as the fight could get a little muddy.

Slowly the opposition from authors, librarians, European booksellers and publishers and privacy advocates has increased and the U.S. Justice Department and state attorneys general are still continuing their investigation into the settlement.

Others are claimed to be considering joining the group.

Wolfram Alpha to Take on Google?

As rumours surface about Microsoft still being interested in Yahoo and reopening the ‘will they won’t they ‘or on off search engine wedding of last year, we read about another new search engine under development and being hyped as a strong challenger to Google's dominance.

Currently, search engines can carry out searches for terms and phrases in the text, but British computer scientist Stephen Wolfram, has created ‘Mathematica’ which is within ‘Wolfram/Alpha’ a "computational knowledge engine" that is able to compute the answer to any factual question.

Wolfram wrote in an Ablog posting, "With Mathematica, I had a symbolic language to represent anything, as well as the algorithmic power to do any kind of computation. And with NKS, I had a paradigm for understanding how all sorts of complexity could arise from simple rules. Armed with Mathematica and NKS I realised there's another way: explicitly implement methods and models as algorithms, and explicitly curate all data so that it is immediately computable."

Well that was a simple explanation wasn’t it?

The new search engine launches in May and should be capable of understanding what it is you are asking and be able to calculate a precise answer to your query.

Will it succeed or fail? Will mircoyahoo ever learn that two heads are better than one? Will other search pretenders such as the ex Google engineers Cuil live up to their hype? The only thing that is certain is that someone will develop a winner but whether it can make it is down to the market not the technology.

Watch TV and MySpace Together

MySpace has developed the Widget Channel, which enables users to keep abreast of MySpace's social-networking activity, such as e-mail and photo browsing while watching TV. The widget sits at the bottom of the TV screen and is set of development tools developed jointly with Intel and Yahoo. The aim of the Widget Channel is to develop mini-applications that complement TV viewing with Internet information.
Users can receive instant updates of friends' activities directly on their TV screen and will also let them view their friends' profiles.

The MySpace Widget will be available on Internet-connected consumer electronics, such as set-top boxes, Blu-ray players and TVs and are designed to work with Intel's Intel Media Processor CE3100 system-on-a-chip platform for consumer electronics devices.

Google Want to Go First Class

The Wall Street Journal reports that Google has approached major service providers with the proposal to create a preferred fast service for their content. Google's proposed arrangement with network providers, would site Google servers within the service provider’s network.

To date the principle of network neutrality has been applied enabling all traffic the same service, so what has changed and is this a wise move? The concept of network neutrality originated with the phone business where they were prohibited from giving any public phone call preference in how quickly it was connected.

Service providers see a surge in demand driven by online video and other resource hungry applications and are now looking at how they can boost revenue and upgrade their networks. The major US phone companies have announced they intended to create new fast lanes on the Internet and charge content companies a toll to use it. They claimed Internet companies had been getting a free ride.

Charging for first class is one option and network neutrality which was once so fervently defended by the likes of Google, Microsoft and Yahoo seems to have quietly slipped of their agendas. Both Microsoft and Yahoo have withdrawn from a coalition formed two years ago to protect network neutrality. They now line up with others such as Amazon and like those who expect first class travel do not want to queue with the rest.

If Google and the other omnivores succeed in negotiating preferential service then we would enter into a new paradigm – internet class wars and the principles of equal rights for all will have been quietly bought treatment, the Internet could become a place where wealthy companies get fast out. So the consumer will get clear differential of service and response based on that paid for. New entrants will be effectively strangled at birth and strong established players such as those mentioned will buy a free rein.

Interestingly Barack Obama has pledged a commitment to network neutrality. "The Internet is perhaps the most open network in history, and we have to keep it that way," he told Google employees a year ago. "I will take a back seat to no one in my commitment to network neutrality." "Once providers start to give privilege to some Web sites and applications over others, then the smaller voices get squeezed out and then we all lose."

However Lawrence Lessig, who is tipped to head the Federal Communications Commission, which regulates the telecommunications industry, is for a tiered approached to service. "There are good reasons to be able to prioritize traffic. If everyone had to pay the same rates for postal service, than you wouldn't be able to differentiate between sending a greeting card to your grandma versus sending an overnight letter to your lawyer."

Finally it may not be just the obvious major content players who would win but also the service providers who will also be able to enjoy a ‘free ride’ or upgrade to first class.

Microsoft Wants to Buy Yahoo

The omnivore wars have taken a different twist with Microsoft tabling a $44.6 billion cash and share bid to buy Yahoo. The bid if successful would represent one of the biggest takeovers in American corporate history and the largest technology takeover. This latest move apparently follows an earlier friendly deal that was rejected.

Yahoo shares unsurprisingly jumped 56% some $10.71 in response.

Earlier this week Yahoo! announced 1,000 job cuts and the battles for the online search and advertising market share mean that companies need to merge to compete for market share with the dominant Google.

Adobe and Yahoo Plan Trojan Horses

The one last corner of the online world that had yet to be filled with banner advertising has finally succumbed.
Trojan Horses are all over the web. You open a page and up pops a advert, you turn to another and a banner ad scrolls across the top, you enter a search and the results ae presented in Google and are often little more than ads. Now comes the news of a new Trojan Horse from Adobe. They have worked out how to allow adverts to appear down the sides of PDF documents.

The impact could be significant and could have a negative as well as a positive impact on PDF use. After all it was the one document you thought you could trust be what it said it was.

Yahoo will scan a PDF document for keywords and then place a banner advert based on those keywords. The adverts would not appear on PDF documents that were printed out, but could be programmed to appear differently each time the file was opened.Yahoo and Adobe will share revenue from the adverts with the publisher of the document.
Book and magazine companies who extensively use the PDF format could be among the heaviest users of the new service and Elsevier and Pearson, are among the first testing the service. The PDF ad model could also provide the mechanism to offer free ebooks paid for by advertising. How this will stack against authors moral rights remains to be seen and may present much litigation.

The advertising world is moving ever closer and how the book trade will respond is going to be interesting to watch.

Social Networks Grow

Social network sites are clearly the in thing and are developing in many ways. Today we read that News Corporation is set to launch a mobile phone version of MySpace. The service will be advert supported free and enable users to transfer messages, comments and update blogs.

Separately, in that other social world of Facebook we hear of potential investors ready to table $300 to $500milion for just 5% of the company! That will give the company a valuation of potentially around $10 billion! Last September, Yahoo offered $900 million in order to acquire Facebook. An offer rejected by Mark Zuckerberg,(pictured) its 23-year-old chief executive Zuckerburg. Today Facebook has more than 40 million members, up from 9 million last year.

This time the investors are no other than Microsoft and Google. Facebook’s valuation could go even higher if the two rivals create a competitive bidding war. It is also rumoured that Facebook is seeking a minimum valuation of $10 billion but it go as high as $13 billion. Not bad for a company which Richard Greenfield, a Pali Research analyst, earlier this year, estimated generated revenues between $60 million to $96 million, with no real profit. Much of that revenue comes from a year-old advertising relationship with Microsoft.

Health Warning as Internet Advertising is Bought-up

In the struggle for advantage in the digital advertising boom the search engines are buying up online advertising companies, sometimes for eye-popping prices. This week Microsoft agreed to buy the online advertising company Aqauantive for $6 billion, which is Microsoft’s largest acquisition ever. This month Google bought DoubleClick, a competitor of Aquantive, for $3.1 billion. , outbidding Microsoft.
Yahoo recently bought the 80 percent of Right Media that it did not already own for $680 million. The company operates an auction marketplace in which advertisers and publishers buy and sell online advertising space in real time. Also this week, AOL bought Third Screen Media, which operates an ad network for mobile phones, and Adtech, an online advertising firm in Germany. AOL was the first Internet portal to buy a major advertising network, Advertising.com, in 2004.

According to eMarketer, online adverts accounted for 5.8 percent of the $285 billion spent on advertising in the United States in 2006 and it estimates that the online share will rise to 10.2 percent by 2010. As dollars move online, the big Internet companies see a chance to capture an ever-larger portion of the advertising dollar.

Google, which leads the online advertising world, is among those trying to make inroads into Microsoft’s traditional software business by offering word processing, spreadsheets and other software free. Quantive, which is based in Seattle, will bring many advertisers to Microsoft.
The technology helps Web publishers earn the most for the ad space available on their sites.

The recent deals are also blurring the lines between the big Internet companies and traditional advertising companies and last week the WPP Group bought 24/7 Real Media, another DoubleClick competitor, for $649 million, to compete better with Internet companies.

As we see business models shifting to advertising based free content these shifts become even more alarming. Imagine if music, videos and even books where available free to download as long as you accepted the advertising feeds. Just like ITV and the other broadcasters it have done for years. What will that do to people who are still trying to sell in the traditional model and what will be the impact on price?

Karaoke on the move?

Song lyrics will some be available for all for free.

Yahoo has announced a service which will include the lyrics to 400,000 songs by 9,000 artists, ranging from the Beatles and Bob Dylan to ABBA and Kylie. Nearly 100 music publishers, including BMG Music Publishing, EMI Music Publishing, Sony/ATV Music Publishing, Universal Music Publishing Group, and Warner/Chappell Music, have signed up to the deal

Music lyric searches are a popular on the internet so the service hopes to cash in on the demand by charging for any advertising accompanying the lyrics. It has been estimated that within 10 years the revenue from licensing lyrics this way would reach $100m a year, boosting the current worldwide music publishing revenues, estimated at $4bn annually.

The logical next step is the guitar cords, and music sheets which have also be long sort out by every aspiring musician. What is interesting is that if book publishers were to do the same with poetry there would be an uproar. Where does relaxation of DRM and free advert models such as these go. They certainly change the rigts , royalty relationship. Perhaps we are moving towards a You Tube world where being seen and heard are the more important first base and payment is far more like achieving a home run and these are hard.

Other sites, such as Google and iTunes, Are expected to follow suit.