Amazon

The myth of passive income streams for small businesses

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I regularly cover Amazon scams on my Lean Media blog (see “AI gives new life to Amazon low content book scams“) and create videos detailing some of the specific lures and schemes that dominate YouTube and social media. Sometimes, I get responses from people who have fallen for the tricks … or are desperate to learn about passive income streams that will translate to easy money.

passive income streams amazon KDPA recent viewer of one of my passive income videos reached out to tell me she was at her wit’s end. In her 50s, she was tired of her career and was hoping passive income streams could lead to real income to support her financially. It had dawned on her that the get-rich-quick Amazon schemes, whether using Amazon KDP, Audible, or Amazon FBA were the modern equivalent of fool’s gold. What were her options?

My first piece of advice: Don’t despair.

Howard Anderson, one of my business school professors at MIT Sloan (he later went to Harvard Business School and now teaches at Dartmouth) once told our Entrepreneurship class, “it’s always darkest before the dawn.”

There’s real truth to this simple saying. My first small business, a software startup, failed. My cofounder flaked after getting some equity in the company and cold feet, and left me swinging in the wind.

usps shipment at our Newton small business
An outbound holiday shipment at our Newton small business.

However, that failure led to the creation of the second completely different business which is still going strong 10+ years later. It took a while to scale it up, but this is now a small business based in Newton that provides a salary and other benefits.

My second piece of advice about starting a new venture: Find something that people like and are willing to pay for.

Not just something they say they like. Rather, it needs to be a real product (it can be a prototype or soft launch or demo version) that is resounds so much customers or audiences are willing to take out cash or a credit card and pay for on the spot.

It can be a product, a service, a piece of media, or something else. Effort then should go into trying to scale it up (finding more customers, lowering marketing costs, etc.)

My third piece of advice: It’s also possible to do a venture on the side or support it with activities like consulting. Take advantage of new trends and technology platforms. For instance, if someone has expertise in something related to mortgages, maybe this person can find a bank or finance company that needs remote customer service agents (taking advantage of the work-from-home trend) while the new product or venture is developed on nights and weekends.

Bottom line: Passive income streams promoted on the Internet are bogus. Stay away from “passive income” traps, especially on Amazon. Most are scams to get people to sign up for expensive masterclasses, and provide terrible advice that will lead to wasted time, lost money, and possible account bans. It’s possible to create a legitimate online business, but it takes work, creativity, and patience … not easy money fantasies.

Publishing on Amazon KDP: Use a free ISBN, or pay Bowker?

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Someone asked: “I’m about to publish on Amazon Kindle Direct Publishing … should I just use the free ISBN, or pay for one?” It’s a good question, and one that has real financial considerations, as ISBNs registered with the “official” U.S. ISBN registry are very expensive (see “Bowker ripoff: A 12,500% ISBN markup for new authors“). On the other hand, using Amazon’s free ISBNs come with a cost, too. Here’s my take on how to navigate this question.

First, KDP ebooks (Kindle editions) don’t require ISBNs. Amazon will assign its own numbering system known as an ASIN to the ebook.

But if you are using KDP to print paperback books, you will need an ISBN. As a publisher with long experience dealing with Amazon and Bowker (the U.S. ISBN registration agency) I would say use the free one Amazon provides only if you anticipate this being a one-off book with low sales. This is what happens to almost all self-published titles, no matter how good the book is. Amazon is swamped with self-published books, and most of them will languish in obscurity without superior marketing or promotional efforts.

If, on the other hand, you are a U.S. resident and have serious plans for bookstore distribution, a series, or an imprint, bite the bullet and pay Bowker’s outrageous registration fees for ISBNs. The current price for a single ISBN is $125, rising to $295 for 10 and $575 for 100. As a publisher with multiple titles, it makes sense to purchase 10 or 100 to start.

bowker isbn ripoff pricing

For people or companies with serious publishing aspirations, the Amazon KDP-provided ISBNs will be a liability. Why? Amazon is a dirty word in this business (see “Why Amazon’s Buy Box policy attracts counterfeit books and cheaters“). Bookstores have been decimated by Amazon for 25 years. Many will never order titles from Amazon on principle, even if it is from a famous author on an Amazon imprint. I once listened to Tim Ferriss lament this issue on his podcast – he discovered when he published one of his books on an Amazon imprint that bookstores wouldn’t touch it, for the most part.

As for series and imprints, any serious publishing venture should have free and clear control over their own ISBNs. Amazon-assigned ISBNs will forever be associated with Amazon in databases and may interfere with future legal agreements, including distribution via wholesalers (see “Pros and cons of traditional book distributors“). If series/imprints are part of the publishing plan, it is advisable to register ISBNs via Bowker, despite the rip-off pricing.

Why Amazon’s “Buy Box” policy attracts counterfeit books and cheaters

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If you follow publishing news like I do (I own a small publishing company that specializes in how-to guides and technology cheat sheets) you have probably heard about Amazon’s misguided policy change from a few years ago that allowed third-party sellers of books to “own the buy box” on publishers’ book listings. I predicted at that time that it would attract a wave of counterfeit books, which has proven to be true. But I didn’t anticipate another kind of cheater: Third-party book sellers passing off used books as new.

Amazon opened the buy box to booksellers in 2017. It said that it was following the same policy that was used in other parts of its marketplace, which allows third-party sellers to control the buy box on product listings if they offer the product at a lower price than the official source, which is usually the manufacturer or distributor.

Publishers immediately cried foul. This statement from the Independent Book Publishers Association outlines the concerns of independent publishers (disclosure: I was an IBPA board member at the time and gave feedback on early drafts).

The types of books most likely to be pirated

As an Amazon FBA seller of other types of goods (namely, genealogy charts and forms) I knew very well the threat posed by counterfeits. It’s a long-standing problem that has attracted lots of negative press (“Amazon May Have a Counterfeit Problem“, “Leveeing a Flood of Counterfeits on Amazon“, “How counterfeits benefit Amazon“) and impacted my company, which was forced to invest in Amazon’s anti-counterfeit service Transparency.

For an example, one publisher, Bill Pollock of No Starch Press, reported repeated incidents of counterfeit books being sold by Amazon. The first reports surfaced in 2017, and earlier this month it happened again.

I have been impacted by another problem that IBPA predicted: Third-party sellers flogging used books as new. It’s actually a far bigger problem for me than counterfeit books, and I now pay an independent contractor to help me monitor my own listings.

Here’s what I think is happening:

Publishers or Amazon sellers who have products that are easy or cheap to copy and have high list prices have the most to lose with the Amazon buy box policy. There is a real risk of pirates taking over listings with counterfeit, low-quality copies. Potentially, they will have to deal with third-party sellers passing off used goods as new.

My company publishes IN 30 MINUTE guides and cheat sheets. They are relatively low-margin and have a low retail price – $11.99 to $12.99 for most books, $6.99-$7.99 for the cheat sheets. Yes, they could copy the books, and do some cheap digital short runs to get bogus inventory into the system, but because my list prices are already so low I don’t think they could make much. The pirates know this, and tend to go for higher-priced titles (including textbooks) from other publishers. No Starch Press was a repeat victim of this, and I have heard of other cases, too.

Third-party sellers flogging used books as new

As mentioned earlier, I do have issues with other sellers listing used items as new. They are almost always third-party sellers concentrating on the book market, and offer the books as “new” with amazingly low prices to win the buy box or push my listing out of it. They have not purchased the book new through wholesale channels in which I operate (such as Baker & Taylor or Ingram), because the discount is below my wholesale prices — in some cases, below the cost of printing and shipping the book from the printer!

In all cases in which I have ordered one of these “new” books to determine the source, they have turned out to be used. This seller even sent a copy of our shrink-wrapped book about LinkedIn with a USED sticker on it:

Amazon Buy Box used book sold as new

This book was sold as “new” on Amazon, winning the buy box, yet was a used copy by the seller’s own admission!

Third-party book sellers playing games with shipping prices

Here’s another trick third-party sellers use to take publishers out of the buy box: Offering a new book for a ridiculously low price and then charging a ridiculously high shipping fee.

Check out the example below for C. Diff In 30 Minutes. The paperback retails for $14.99, but my listing is no longer am shown in the buy box because a third-party seller from Missouri is offering the book for $3.99. Sounds like a great deal, right?

C Diff Bogus Buy Box 3-99 sample croppedBut clicking “4 new from $3.99” takes people to a page that shows the seller charging an additional $27.99 for non-expedited shipping from Missouri to the Boston area, even though USPS Media Mail costs $2.75 for book that size, USPS First Class around $5, and a two-day Priority Mail flat-rate envelope $7.95.

C Diff Bogus Buy Box 3-99 plus shipping 640pxIt’s also not clear if the book being sold is actually new. At least one customer of the third-party seller reported that a book sold as new was actually used and “looks stolen”:

Amazon stolen book report

When I notified Amazon of this problem, they restored my publisher’s listing to the Buy Box … but the “3.99” version is still listed for sale, even though the actual cost to the customer is more than $30.

Used sales are an important option

Don’t get me wrong — it’s fine for sellers who resell used copies listed as used for a profit, and think it’s a good option for students and others who can’t afford a new copy. I also have no issue with a customer or library which received a copy of one our new books not wanting or needing it, and turning around to sell it as new (or returning it).

That said, every time a third-party seller lists a used book as new on Amazon and underprices the publisher, it’s taking money that the real publisher would otherwise get from the sale of an actual new book. It deceives buyers, and it cheats authors and publishers out of revenue and royalties.

What they are doing violates Amazon TOS, too. Despite repeatedly reporting the bogus “new” cases to Amazon, I have not received any indication that Amazon took any action. The seller of the shrink-wrapped example with the “USED” sticker mentioned earlier is still selling books as a third party seller, and has lots of negative reviews:

Amazon seller negative reviews

After observing the mess caused by the Buy Box policy, and the apparent inaction on the part of Amazon to proactively stop the cheaters or punish wrongdoers, it’s clear that publishers are on the losing end of this fight. Pirates and sellers know it, too. Amazon’s message to them:

Win the buy box however you can. We don’t care if the original publisher/creator gets nothing. We won’t police your listings. We probably won’t punish you if you get caught, or we will only give you a light slap on the wrist. Even if many of Amazon’s customers are complaining, you can still stay in business on Amazon.

In terms of sellers of other types of goods winning or losing the buy box, Amazon makes available special services to brand owners (trademark owners with items in the Amazon Brand Registry) to fight counterfeits, including expedited take-down requests and access to paid services such as Amazon Transparency. The number-one point on the Amazon Transparency “learn more” page is “Proactive counterfeit protection.”

Sounds great in theory, but brands have to pay for it! For me, it works out to about 15 cents per item to use this service, not including additional manufacturing and design fees.

In other words, I’m paying for Amazon’s failure to police their own marketplace and prevent pirates and cheats. I’ve told them I won’t be proactively signing up brand SKUs for this service unless Amazon greatly reduces or eliminates the cost.

What has your experience been with Amazon counterfeit books or other goods?

All about Amazon Transparency

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Amazon has rolled out a new program for brand owners, manufacturers, and Amazon Sellers called Amazon Transparency. I’ve explained what Amazon Transparency is and the requirements for getting started over on the Lean Media blog.

In a nutshell, Amazon Transparency is the answer to a very vexing problem: How to crack down on counterfeiters who are using the Amazon Seller program to flood Amazon with counterfeit goods.

My Amazon Transparency blog post touches upon some of the legal aspects involved (First-Sale Doctrine and U.S. trademarks) but also gets into some of the practical requirements for Amazon Transparency, including production, packaging, UPC/GTIN registration, and more.Amazon Transparency

You may also be interested in my Amazon Deep Dive for Publishers.

The Supreme Court shifts and businesses suffer

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For more than 25 years, Internet businesses in the United States have enjoyed a big break: If a customer in another state buys something online, the company doesn’t need to collect state sales tax or file taxes in that state unless they have operations in that state such as a warehouse or branch office.

That is about to change, thanks to the recent South Dakota v. Wayfair ruling from the Supreme Court. This essay by a tax expert explains the situation and the impact pretty clearly. I draw your attention to the concluding paragraph (note: nexus is the ability of a state to require businesses to be responsible for taxes):

Many states have enacted economic nexus rules for income taxes that create a filing responsibility based on the amount of sales in a state. These amounts have generally been set at $500,000 and above. Now, states may seek to lower those thresholds to impact more sellers, and states that have not sought income tax nexus may move forward with new legislation.

I own a small business and use the Internet to sell goods to customers all over the country. The Supreme Court ruling is going to be a big headache. I don’t have a problem with paying taxes, but I do have a problem with dealing with 50+ entities (including states and territories) that have different filing requirements that will likely entail a lot of red tape. I don’t have a full-time accountant or staff that can deal with this stuff, so it falls on me to implement systems and processes to handle state taxes outside of Massachusetts.

I blogged my thoughts on this topic in As a small business owner, this is what I fear post-South Dakota vs. Wayfair, but the end result may mean not selling to customers in states whose red tape is too much of a pain … which hands even more power to big Internet businesses like Amazon.

Acid reflux and heartburn: Going beyond reflux diet books

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An interesting thing happens if you go to Amazon and search for “acid reflux” in the books section. Twelve of the 13 titles on the first page of Amazon’s organic search results are about acid reflux diets. They include everything from Acid Reflux Diet and Cookbook For Dummies to Dropping Acid: The Reflux Diet Cookbook & Cure. The 13th title is not explicitly about acid reflux diets, but rather covers homeopathic treatments (“Natural Alternatives to Nexium, Maalox, Tagamet, Prilosec & Other Acid Blockers: What to Use to Relieve Acid Reflux, Heartburn, and Gastric Ailments“).

Amazingly, there are no books on that first page of search results that talk about modern medical treatments that tens or even hundreds of millions of people across the globe seek out every year. With the release of Acid Reflux & Heartburn In 30 Minutes: A guide to acid reflux, heartburn, and GERD for patients and families earlier this month, my publishing company hopes to change this state of affairs, by giving readers an authoritative yet easy-to-understand source of information about reflux, heartburn, and gastroesophageal reflux disease (GERD).

The author is none other than my father, J. Thomas Lamont, M.D., a gastroenterologist and Harvard Medical School professor who wrote a similar book about Clostridium difficile (an infectuous disease commonly known as C. diff) five years ago. That book has since helped thousands of people, and currently has an average rating of 4.5 out of 5 stars on Amazon, with dozens of reviews describing how the book helped inform and reassure (Examples: “It gave me a lot of information to better enable me to ask the right questions to my doctor” or “nice to find by an experienced MD amid all the gut health hype on the Internet”). Reflux is even more widespread than C. diff, and is another area that he specializes in.

After I noticed that most acid reflux books in the books marketplace deal with diets as opposed to causes and treatments, I agreed that an IN 30 MINUTES book about acid reflux made sense. He submitted a first draft last April, and less than one year later, Acid Reflux & Heartburn In 30 Minutes was ready.

Early reviews have been positive. One reader said:

I wish this had been published years ago. Dr. Lamont has done an outstanding job of refining the tedious medical terminology down to a layman’s level. This is one of the primary advantages of this publication – plain English discussions about GERD and heartburn (HB) in general.

One area that we really tried to get right were illustrations that show the stomach and esophagus, what happens when GERD strikes, and how certain treatments (including surgeries to treat severe reflux) can be applied. I worked closely with the author and an experienced graphic designer, who made some really helpful diagrams, such as this one, showing how reflux occurs:

How reflux occurs, excerpted from Acid Reflux & Heartburn In 30 Minutes. See also our acid reflux FAQ

One thing that’s important to stress: This acid reflux book is not a DIY medical guide. Certain tests and treatments require professional evaluation and medicines available only by prescription, so the information in the book is provided to help patients understand what their doctors are recommending and why.

To learn more about the book, check out the companion website, which also includes an acid reflux FAQ as well as a glossary of acid reflux terms.

 

 

 

 

Amazon Advertising has a metrics problem

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Over on the Lean Media blog, I’ve written a post titled Why you can’t trust ACoS metrics in Amazon Advertising (and two alternatives). Amazon Advertising (formerly Amazon Marketing Services) is the powerful self-serve advertising platform that vendors can use to advertise their wares next to Amazon search results, on Amazon product pages, and even on the lock screens for Kindle e-readers. Because Amazon Advertising is so important for publishers, it’s a major part of my Amazon Deep Dive for Publishers video course.

One problem with Amazon Advertising is the metrics have some big gaps. In the blog post I specifically noted the problem with “ACoS” (Average Cost of Sales) and even made a video that demonstrates how a seemingly innocuous ACoS rate may be hiding a money losing campaign. Other problems include poor reporting capabilities, including no easy way to compare a campaign’s performance from one period to the next. By comparison, Google AdWords certainly has its own problems with misleading small businesses about the locations of people clicking ads and click fraud, but at least it’s possible to do a deep-dive into AdWords metrics to compare campaigns and time periods.

What’s the solution to misleading ACoS metrics? As described on the Lean Media blog, I created two other indicators, ACoN (Average Cost of Net) and ACoP (Average Cost of Profit). The problem with these metrics, however, is they have to be manually created. Here’s a sample from the actual Google Sheets page that I use for the task:

AMS Tracker for ACoN and ACoP screenshot
The spreadsheet I use to create alternate Amazon Advertising metrics (ACoN and ACoP)

Amazon could actually create one of the metrics with the data that it has. Average Cost of Net refers to net revenue remitted to vendors, so if the company swapped out “Sales” (gross sales on Amazon) with projected net revenues to the vendor, that would give a much better idea of performance.

Learn more about Amazon Advertising in my Amazon Deep Dive for Publishers video course.

Pros and cons of traditional book distributors

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Getting books onto bookshelves with traditional book distributors

Amazon has been disrupting the book industry for more than two decades. Sometimes the public hears the complaints as disputes boil into the open, but much of the restructuring of the industry is taking place quietly, without much public angst. In the post, I will discuss one of the casualties of the new world order for publishing, book distributors.

Distributors are an unseen force in many industries. They are responsible for bringing products to retailers. In the grocery and liquor industries, distributors are the companies whose trucks pull up to the loading dock in the back early in the morning to drop off a wide variety of goods that shop managers have ordered. In the book industry, distributors are the companies that arrange for certain titles to be available in Barnes & Noble, airport bookstores, and independent bookstores. Other services are available, too – there’s a good overview from the Independent Book Publishers Association (IBPA) titled “Working with Distributors.”

It’s important to note that distributors don’t represent everybody. They choose which producers they want to include in their catalogs, and take a cut from any sales that occur. They also demand exclusivity – if you sign a deal with a distributor, that’s the only outlet for your product in a particular geographic area. Obviously, if you have a distributor, you can get onto shelves in retail outlets, which increases your chance for retail sales. If you don’t have traditional distribution, you’re probably out of luck, unless you can work out a deal on your own with a shop or chain of stores.

In the book industry, distributors used to wield a great amount of power. Nearly every publisher had a book traditional distribution deal, or had a sales force to sell directly to the big book retailers. Amazon pulled the rug out from under that model, allowing publishers to offer books for sale directly to consumers. Retailers were hurt, and distributors were decimated. The book distributors who are left are now far more picky about the publishers they work with.

Do you need a distributor for your books?

At one time, I thought I needed a traditional book distribution deal for my company. This was not only to get access to new retail markets, it also seemed like a mark of industry respectability, which is important to growing companies. I did the dance with several distributors, but they didn’t work out. One bailed when it decided it didn’t like the way I managed ebook ISBNs. I pulled out of another offer when I realized the terms wouldn’t work out unless each title sold thousands of copies (many do, but some don’t). A third company completely ignored some of my requests for information, and just shoved a contract in front of my face to sign.

Ultimately, as I thought things through, it became clear to me that I didn’t need book distributors as much as I thought. It wasn’t just the cut they demanded, or the less-than-ideal business relationship. Other factors included:

  1. Once I went with a distributor, I would no longer consider readers to be my customers — it would be the distributor and their clients, the bookstore managers and buying teams.
  2. Distributors demanded a cut of ebook sales, even though they added no value to working with Amazon or other channels.
  3. There were also changes I would be forced to make to accommodate book distributors. My IBPA board colleague Leslie Browning outlines some of them here, including the necessity to have ARCs (advance review copies) ready at least six months before the publication date.

I don’t have a distributor now, and I don’t see it as holding back my business. In fact, I had the best year ever for my company last year, thanks to strong sales via Amazon and other online channels.

It would certainly be great to have my company’s books show up in big-box retailers or airport gift shops or B&N, but the sacrifices I would have to make dealing with book distributors — not to mention dealing with retailers returns — lessen the attraction of traditional book distribution.

 

 

 

 

Monitoring sales of Dropbox In 30 Minutes

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Dropbox In 30 MinutesDropbox In 30 Minutes has now been available for about nine months. For nearly as long, I have been monitoring interest in the Dropbox user guide, by closely watching sales. At first the book was only available as an ebook for the Amazon Kindle, but by the start of 2013 it was available for multiple e-reader, screen, and paper formats, including:

  • PDF (first via e-junkie, now gumroad)
  • Barnes&Noble/Nook
  • Apple/iTunes
  • Kobo
  • Paperback (via print-on-demand distributor CreateSpace)
  • Direct purchases of .mobi and .epub (which bypasses Amazon.com, iTunes, and other corporate ebook stores)

It was fascinating watching the evolution of the readership, especially after the paperback edition of Dropbox In 30 Minutes was released last November. While the Kindle edition has been a strong seller from the start, sales have plateaued. Meanwhile, the paperback rapidly gained  fans and by February 2013 had overtaken the Kindle and all other versions. Note, however, that Amazon is also responsible for all paperback sales — it owns the POD service CreateSpace, so the paperback listing is automatically fed into an Amazon product page (which is now linked with the Kindle product page).

Monitoring a sales slowdown in ebooks

Getting back to the Kindle version hitting a sales plateau: I’ve been thinking a lot about what could be happening. Certainly, there is more competition for readers, both on Amazon itself and online. But there are other possibilities, including falling interest in Dropbox among my target audience. What could cause a once red-hot technology to slow down in popularity? Factors could include competition from giants in the space (for instance, Microsoft Skydrive OneDrive or Google Drive), negative publicity (such as security concerns), or a maxing out of the potential audience. For now, I am discounting the idea that Dropbox is dropping in popularity, and am more focused on the competition — and how to make Dropbox In 30 Minutes and the free online resources such as videos and blog posts even better.