Goodreads CEO Otis Chandler
The Future of Discoverability and Social Reading
NOVEMBER 8, 2012

There are more books available now to more people at a lower cost than any time in history, which only makes the following question harder to answer: What should you read next?

A raft of book-focused start-ups have popped up to attack this problem. Just to name a few: Jellybooks, which allows users to read and share ebook excerpts; Libboo, which activates and incents networks of influencers; Zola, which is a new ebookseller that intends to be a more effective book recommendation engine than Amazon and others (among other things).

There is one book-focused start-up that has arguably had the largest effect on changing how people discover new books: Goodreads. Goodreads is like Facebook but for books. It’s a social network that allows users to track their reading, share recommendations with friends and even form virtual book clubs. It has 12 million registered users—small by social networking standards, but a number that should have publishers salivating considering it’s pure book-reading folks who are eager to share their reading life. Not to mention that it’s nearly doubled in a year and grown by 2 million users since August.

The company has other impressive growth statistics: Outside of an angel round in 2007, it has only raised $2 million in funding—through a series A round in 2009. The company wouldn’t say whether it was cash-positive or not but it’s not currently seeking funding. It has 32 employees and is hiring.

The architect behind Goodreads and the executor of its future is Otis Chandler, the company’s founder and CEO. Perhaps more than anyone else, Chandler will help determine the future of ebook discoverability.

Chandler started his career in the days of the first Internet boom as a software engineer. Before he left to found Goodreads, he was a product manager at Tickle.com, an early social network and part of Monster.com, the jobs site. In 2006, Chandler launched Goodreads from his living room. He graduated in 2000 from Stanford with a degree in mechanical engineering.

We sat down with Chandler and talked about the site’s fantastic growth, how publishers can use Goodreads to make their book sales pop, and why Goodreads isn’t going to become a bookseller . . . yet.

Goodreads has about 12 million users, which is up from 6.5 million at the end of last year, but how many of them are active?

We are doing about 28 million unique visitors to the site a month. Not all users have to sign in to read the reviews and search for books. But we don’t disclose that [active users].

There are two main types of users on Goodreads. The first is the person who wants to use Goodreads to catalog everything they’ve read. Often they have hundreds or thousands of books on their shelf. And, two, there are those users who want to share their thoughts once they’ve finished a book. Some people are coming into our book clubs and more actively discussing books with people as they read them.

That sounds like a lot of activity, but it’s a lot less than some other social networking sites.

What you’re starting to see is the value of niche social networks and niche communities and there are many of these that are actually plugging into other social networks such as Facebook. Goodreads is the largest book app on Facebook and that has been an accelerant of our growth this year. I think we actually plug and play very nicely with a lot of these large social networks.

We’re a community of 100% readers. So all of those 12 million people are readers of books. Many of them are what’s called “influencers” and we’ve been able to show through our marketing efforts working with publishers and authors directly that we can really help books pop by getting them into the right hands. We’ve gotten a lot of accolades helping books like Fifty Shades pop at launch by getting that early buzz going and that can really make a difference.

How big do you think this thing’s going to get in the near term? Will you double again in 2013?

I certainly hope so. We’re trying to be the best place to discover books on the Internet. I’ve seen a study by Pew that says that 36% of people read a book every month, so that puts our possible audience in the U.S. at 80 million. We have lots of room to grow to all the people that might be interested in using Goodreads. And then there’s international, which we’re trying to get to next year as well.

International?

I can’t share any plans with you. But I can tell you that Goodreads is already decently international. We’re 55% in the U.S. and 15% to 20% in other English speaking countries. We’re also somewhat popular in India and Iran and a few Western European countries. Our first step in going international is just continuing to build our database of book titles and metadata in other languages. We’re just beginning to learn about this right now.

Given that our growth in many international countries is much faster than the U.S., we’ll be much more international by the end of 2013.

In the UK, we’re growing twice as fast as in the U.S. right now.

For publishers, what should their main concern with Goodreads be?

We work with publishers all day long. That’s our business model: helping publishers launch their titles on Goodreads. We’ve shown that there are a lot of ways to market books but there are also some best practices. Our giveaway program has been incredibly successful in getting awareness and getting some early reviews. We’ve done about 123,000 books in our giveaway program [so far this year]. And this is a program that’s free to use for publishers. About 50% of the people that are given the book write a review for it.

When a book launches, you don’t want it to look like nothing’s going on. It’s like opening a restaurant. If you hear about a new restaurant and walk by and it’s empty, you probably will keep on walking. When you look in and see there are people in there talking and having fun, you might check it out. When you launch your book, you want there to be people talking about it and that’s what the giveaway tool does for you.

We have a lot of other tools publishers can use, such as our author program and targeted advertising. This is useful because we know what people read. When publishers go to market a title, we can put the title in the hand of people who have read comparable titles.

Can you give me an example of a successful campaign?

We just did another case study that’s not published yet or released yet about the book Slammed by Colleen Hoover.

It came out in January and for three months nothing happened on Goodreads at all. Then the author came in and did two giveaways and got some buzz going for it. It just helped get a little bit of awareness for the book. About 800 to 825 people are willing to enter a giveaway on average, so you get a lot of people to be aware of it. She also joined as an author so she can start building a fan base, interacting with fans. It takes a commitment from an author but can be effective if used right.

After the giveaway kicked off, you saw a lot of people searching for it, and that’s a good proxy for word-of-mouth. That early word of mouth was generated by several book bloggers who were power readers on Goodreads but also maintain external blogs. If you look at their comments on Goodreads, they were both hand-selling the book.

Then a really cool thing happened: After it built up a lot of word-of-mouth virality, it got listed on our recommendation engine. And this caused the book to take off. Once we figured out who the kind of reader is who likes that book and we got enough critical mass for that, we were able to start recommending it to all different kinds of readers who read similar titles in that genre [new adult contemporary]. It really just illustrates how important it is to get word-of-mouth and buzz going as early as possible. At some point, it got published by Simon & Schuster, and that helped it sell more. And now we’re working with Simon & Schuster to do some deep-targeted advertising and help accelerate growth. Colleen Hoover has been active on Goodreads and it’s continuing the marketing.

[Goodreads currently has 54,000 authors in its author program.]

Do you think the book rode the coat-tails of Fifty Shades of Grey?

It did ride the back of other successful books in the genre.

[Fifty Shades of Grey was the fifth most shared book on the Goodreads app for Facebook between Aug. 1 and Oct. 31, the company told me.]

What are the future plans for Goodreads? Any new features we should be aware of?

Everything we’re doing is working on better discovery, better tools to help readers find new books. One thing we just launched and are starting to test is if you run a bunch of promotions for a book before its publication, you can add it to “to read” which is our main engagement metric for a book. When the day of launch comes around, you want to spike sales. So we’re emailing everybody that’s put it on “to read” on the day of launch saying “hey this book is on sale today, here are some links of where to go buy it.” We’re seeing really good click-through rates on that email.

Is affiliate revenue a big part of your mix?

Wherever you like to read or buy your books, we try to make it easy to help you acquire the book in any of those places.

We do get an affiliate fee. Both affiliate and advertising are significant parts of our revenue.

As you grow, are you looking to challenge Amazon as the “homepage” for any particular book?

We do rank very well in search engines and I think the reason for that is that members are often using Goodreads as the way to share a book. They’re doing that through Facebook, Twitter, on blogs. And all those shares count as inbound links that help us rank in search engines. Lots of users are using Goodreads as the online homepage for a book.

The feedback that we hear over and over again from our members is that Goodreads is the place to go to get a really honest feeling of what people think of a book.

Will Goodreads ever become a bookseller? It would seem to me that any bookselling start-up, like Zola or Bookish, would kill to have Goodreads as a backbone to its discovery and community-building efforts.

Not right now. We’re 100% focused on discovery. You guys have run a conference about discovery so you’re well aware how big a problem that is in the industry. We’re entirely focused on getting a person excited enough about a book so that they go home and read it. A recommendation from a friend is all you might need—if it’s a good friend. Or a few recommendations if it’s not a good friend. I think there’s plenty of challenges left to do in that.

What are you reading and on what platform?

I just started a book called MindSet by Carol Dweck (Random House). I read about it in Stanford Magazine and then read the reviews on Goodreads to make sure it sounded good, which is really the way I always double-check a book I find somewhere. This book sounded amazing. I’m a new parent and it’s useful when raising a child and useful in the business world because it’s about motivating people to be good and love what they do. I’m reading it on the Kindle app on my iPad.