How Does Goodreads Make Money?

From Book Riot:

Much of the book industry relies on Goodreads for a lot of things. From readers and authors, to publishing professionals and journalists, the book-focused platform is all-around functional to anyone who loves books. But looking at its website’s design, it feels stuck in the decade’s past. From when Amazon acquired Goodreads for $150 million in 2013 up to the present, the UX hasn’t seen major style changes. Amazon is probably aware that Goodreads desperately needs a facelift, but it’s not doing anything about it. Does that mean that its subsidiary is not profitable enough to warrant precious resources and funding? How does Goodreads make money anyway?

I reached out to Goodreads to specifically ask them that, even going to their website to do a lot of digging and asking some tech experts to weigh in on the subject.

The bookish social media site doesn’t have an official media kit at the moment, according to a representative. But a media kit dated 2017 reveals that its business model revolves around offering “book discovery packages” that consist of “owned, earned, and paid media.”

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For a social media platform that garners millions of views per month and holds a ton of user data, Goodreads struck gold with advertising. According to Chris Muller, Director of Audience Growth for DoughRoller, Goodreads’s business model is based on the concept of social commerce. “People share book recommendations, reviews, and discuss any books they are reading or want to read in the future, which contributes to the website’s success. This website’s Holy Grail appears to be recommendations from like-minded readers,” he said.

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Among the top revenue streams mentioned are sponsored newsletters and new releases mailers, which Goodreads sends to millions of users every month; advertorial placements, which is also called the author spotlight; personal selection emails, which can target an author’s fans showing a new release; and sponsored homepage polls.

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Goodreads’s Giveaways is definitely one of the popular features of the platform. Although international readers can almost always enter a giveaway, the service itself is only available for U.S. and Canadian authors who want to run print book giveaways. For the Kindle book giveaway, however, those who use Amazon’s self-publishing platform Kindle Direct Publishing can take advantage of the service.

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Whenever a user clicks on the Buy buttons on a Goodreads book page, they would notice that there are affiliate codes attached.

“Goodreads receives a cut of any book sold through partners like Amazon, Barnes & Noble, and Apple Books. But, this revenue is likely not important given the strategic value of Goodreads to Amazon. I think this is shown by the fact that Goodreads has killed off its advertising programs aimed at individual authors and smaller publishers,” said Ben Fox, a tech entrepreneur and currently the founder of Shepherd.com, a Goodreads competitor.

Fox was referring to Goodreads’s self-serve advertising — not its direct advertising service — which it shut down in February 2020. Now, Goodreads promotes Amazon’s self-serve ad product instead, which is obviously on a different site.

“They still sell advertising to large publishers, but it seems likely Amazon is subsidizing Goodreads or giving them a custom affiliate deal that gives them a much larger share of any book sold,” Fox said.

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Goodreads says that it shows interest-based ads on its website. “Interest-based ads are sometimes referred to as personalized or targeted ads. We show interest-based ads to display features, products, and services that might be of interest to you,” it reads on a disclaimer page.

But what do these interest-based ads really look like for a casual user of the platform? According to Goodreads, personal recommendations and other similar features are considered ads. This brings into question the endgame of its recommendations tool — is it really out there to genuinely help a reader find books they might love, or is it just another way to profit off of the user’s activity?

Link to the rest at Book Riot

4 thoughts on “How Does Goodreads Make Money?”

  1. Based on the article, I would conclude that they make money the old-fashioned way, by convincing trad publishers that can spread the word about their books, without having to prove that it results in any sales.

    I say this because the indie authors I know and the sites I visit don’t use GoodReads for anything beyond making sure their books are listed there. I’ve never seen anyone report using their ad services profitably (or even at all), and the few people who pay for their expensive giveaway service report it doesn’t move the needle on sales.

  2. Goodreads has certainly never succeeded in recommending a single book to me that I wanted to read, despite many attempts. Either their algorithm is very bad or it isn’t based on what I want to buy, but on what they want to sell me.

  3. I’ve never bought a book from Goodreads information, so I’m not a customer.

    As an indie publisher, they are poisonous. The unrestrained packs of punitive reviewers make most attempts at creating a social presence there highly risky and ill-advised.

    The general advice, ever since indies started, has been to list your books there, clean up missing or erroneous data (covers, series order, etc.), and otherwise stay strictly hands-off. I’ve never heard of an indie using it as an advertising venue — anyone know any differently?

  4. Many reviewers auto-post their reviews to Twitter (they used to have a Facebook link as well). I’ve had many people say they bought a book when they noticed my tweet. I’d assume most of those folks bought the book on Amazon. I value Goodbooks reviews because they seem free of those fake reviews that find their way on Amazon. So, Amazon likely has the attitude that it doesn’t hurt.

    I personally use it as a books-read tracker and download the list on occasion for reference of when read, my review, etc.

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