This week at The Millions, we’re attempting to gather some of our thoughts about the transformation of book coverage in the digital age. Yesterday, Garth looked at the death of the newspaper book review section. Today, Max considers the revenue problems facing literary websites… and the vices and virtues of one of the solutions. On Friday, Max will hazard some early guesses about the next possible upheaval in the economy of literary journalism: the e-book reader.I.There’s been no bigger story on the book pages in recent weeks than #Amazonfail. The furor itself hardly needs to be rehashed here (briefly: a supposed classification “glitch” caused thousands of books with gay themes to be removed from Amazon’s bestseller lists and search results, making the books very difficult for readers to find), but the episode has entered into our evolving thinking about book coverage in the digital age. As Edan touched on in her #Amazonfail roundup, some might experience cognitive dissonance reading about the Amazon “glitch” on sites like The Millions.To understand this dissonance, you have to first know something about Amazon’s stakeholders. Yesterday, in considering the fate of newspaper book sections we tried to conduct a similar stakeholder analysis of The New York Times Book Review. We argued that readers, writers, publishers, and critics all have a stake in the NYTBR. Depending on whether you agree with our analysis, you may feel that the NYTBR is overserving or underserving one or more of those parties. Luckily for those who find the NYTBR falling short of their needs, there are plenty of easily accessible alternatives.Like the Times, Amazon occupies a unique niche in the literary ecology (though its footprint is more massive than the NYTBR‘s ever was). Also like the Times, Amazon can serve as a sort of proxy for a larger set of players – in this case, for the New Economy businesses that increasingly mediate book coverage. And Amazon shares some of the Times‘ stakeholders: readers (shoppers), writers, and publishers. Critics wouldn’t seem to play a role, except that Amazon has an important “hidden” stakeholder: the thousands of websites across a spectrum of topics and categories that participate in Amazon’s Associates Program. This program pays site owners referral fees when they send readers to Amazon and those readers then make a purchase. As many of our readers know, The Millions is a participant; readers support our site when they start here before shopping at Amazon. Thus the peculiar sense of a feedback loop generated by our coverage of the #Amazonfail story.II.So, how did small, eclectic sites like The Millions become the “hidden stakeholders” in “the world’s largest bookstore?” It’s all part of a now 15-year-old story: Internet content providers looking for a business model. Particularly for smaller sites without an easily classifiable or marketable focus, Amazon’s Associates Program has proven to be a good (and sometimes the only) alternative to an advertising model that simply doesn’t pay off. (And that, lest we forget, is increasingly not paying off for the print analogs to these sites.) Book coverage has become decreasingly viable in print, and it may be that online book coverage can only avoid the same fate via “alternative” revenue sources like Amazon’s program and others like it. For a website that has a tight focus and occupies a lucrative niche, revenue opportunities are comparatively plentiful. A visitor to a photography site probably likes cameras, and cameras are expensive enough that camera companies will be willing to pay good money to advertise to those readers. In a less lucrative niche (like, say, books), there may be far fewer advertising dollars to go around. Meanwhile, for sites with a broader focus, advertisers are often worried about not getting enough bang for their buck. (Why advertise cameras on a general interest site, when you can advertise to photographers?)The advantages that accrue to the hypothetical photography site in the search for advertising dollars extends to programs like Amazon’s. Plenty of enterprising website owners have made a small fortune writing about lucrative niches and earning commissions when their readers click through to Amazon to buy those big ticket items. But an interesting consequence of the Amazon program is that it has also provided a meaningful revenue stream for a diverse array of sites that might otherwise struggle to pay the bills.To take one example: For the eclectic mega-blog Boing Boing, covering diverse subject matter and appealing to readers from all over the map, there is no obvious target demographic. Boing Boing likely can’t command the ad rates that a more focused site of similar size could. But when Boing Boing has occasion to cover books, it links to Amazon, and it picks up some revenue whenever people click through the links and shop. Boing Boing gets enough traffic that Amazon affiliation is merely one of a number of different revenue opportunities open to it. For smaller sites, the opportunities available are few. (Read Levi Asher’s “Modest Success Story” on Litkicks and the ensuing comments for a taste of what the advertising landscape is like for small culture-focused sites.) And so Amazon can provide a business model, or at least an element of one. At its simplest, the model is as follows: get a lot of traffic by writing compelling content and then throw in the occasional Amazon link when applicable. In this way, Amazon’s Associates Program has helped breathe life into thousands of websites. Eclectic, mom-and-pop publications get a shot at making some money in a fairly unobtrusive fashion. And those publications, adapting to the altered terrain, allow Amazon to expand its presence across the Internet.In theory, a variation of this model could be pursued by all manner of sites. With their broad focus and high traffic, newspaper websites are decent but not ideal venues for advertisers. Were it not so likely to give their omsbudsmen coronaries, newspapers might be willing to augment their advertising revenues with “affiliation,” and dire economic times may yet force their hands. Indeed, The Times (UK) includes a link to “buy the book” with every review, and operates its very own online bookstore.III.Despite all of the above, our partnership with Amazon is an ad hoc one, and the interests of Amazon and its Associates aren’t always aligned. We’ve been doing this long enough to know that Amazon isn’t the only game in town. We’ve been asked more than a few times why we don’t link instead to big independent bookstore Powell’s or to the smaller independents now collectively represented by IndieBound – those sites having been deemed more palatable by some.There’s no reason to dismiss those options out of hand, but right now an Amazon affiliation makes the most sense for many sites offering book coverage. There are several reasons for this, and we share them here – maybe to some small degree to justify our choice, but also to offer a roadmap that current or future players might follow in order to compete with the Amazon juggernaut.For starters, viewed purely as a database, Amazon is a remarkable resource. It has innovated tremendously in this area over the years and currently offers by far the best book pages out there. To borrow an example from the previous post in this series, take a look at Amazon’s page for 2666 and find “search inside the book,” outside reviews, book recommendations, all manner of meta-data, and vibrant discussion among and opinions from readers. Powell’s offers some of these features (including, in some cases, book scans from Google Books), but not quite all. IndieBound has not much at all in the way of book information. When it is suggested that we link to an “indie” when we link to books, the implication is that The Millions is a shopping site and that we can by our linking policy direct people where to shop. But the reality is that The Millions, like many sites that affiliate with Amazon, has an editorial rather than an “advertorial” mission, and one reason we link to Amazon is because it offers the most information about the books we write about, whether we recommend them or deplore them. As long-time blogger Matthew Cheney put it recently, “I want a link to give you the most information and options with the fewest clicks.”There are several more practical factors. Amazon’s tools, reports, and ease of linking are superior to those offered by other stores, and Amazon has a long enough track record that affiliates have little concern that those links may one day stop working properly. Without delving into the boring details, let’s just say that creating the book links for The Millions is not an effortless task, and that the ecosystem of tools that has grown up around the Amazon program lets us spend more time on the stuff our readers care about – namely writing about books. More importantly, other outfits simply don’t have Amazon’s track record in providing an affiliate program. Site owners participating in such programs have to feel comfortable knowing that their links are tracking properly, that the accounting is occurring properly, and that the program won’t change or even disappear. While Amazon isn’t perfect in this regard, it is the affiliation many sites are right now most comfortable using.While indie bookstores are typically seen as being at odds with Amazon, many do business with it. In fact, your favorite used bookstore is almost guaranteed to be selling books using Amazon’s platform. Amazon’s platform, particularly since its purchase of abebooks.com last year, is an essential tool for used booksellers. Authors and publishers may not like how easy it is for Amazon shoppers to click and buy a used copy over a new one, but from the standpoint of bookstores, Amazon gives thousands of local shops a global reach. Money-conscious readers, meanwhile, nearly always have cheaper, used copies to chose from. I don’t buy books all that often from Amazon, but sometimes when I do, I’ll opt for a used copy, and it can be startling to see the book arrive with a bookmark or a card bearing the info of the far flung shop that sold me the book. It’s a tiny personal connection facilitated by the giant Amazon.Both Amazon’s affiliates and used book vendors share the customer conviction that has given Amazon its formidable market share. Over the years, for The Millions and other website projects, I’ve done a great deal of research about different online business models, and, as far as affiliate programs go, the general consensus is that Amazon “converts” at the highest rate – that is, thanks to Amazon’s brand recognition and widespread familiarity with how to use and navigate the site, readers are more likely to buy from it than from other sites. This point is a purely monetary consideration, sure, but it also addresses something else that concerns purveyors of online book coverage. We want to get more books into more peoples’ hands – wherever they buy them from – and linking to Amazon seems likely to do that.While indie bookstores might someday soon surpass Amazon on many of the above points, there is a final element of the Amazon program that will be difficult for the indies to match. When you click from an affiliate site to Amazon and buy something, the affiliate gets a commission (with a few exceptions) no matter what it is. If someone clicks on a link to 2666 and in wending his way through Amazon, ends up buying a $1,700 grill, The Millions gets a commission on that grill. As you can imagine, this doesn’t happen very often. However, the open secret of literature and culture sites that get a modest amount of traffic is that the commissions earned on books alone are not all that impressive (though for sites that earn commissions on a lot of book sales, they can add up). Instead it is the big ticket items that sometimes get bought that help make Amazon’s program more worthwhile than others from a financial standpoint. The grills pay the bills. This is another gray area in an a revenue discussion that is sometimes portrayed in black and white. Amazon sells books at prices that undercut many small players in order to draw people in who will buy big-ticket items with bigger profit margins. For many people, the discussion ends there, but the truth is that the commissions on those big ticket items help subsidize the very same literary and cultural coverage that is having so much trouble finding a workable business model in newspapers and other traditional media. Amazon in some small way, and likely not intentionally, is helping to fund small online publications like The Millions. And there are other well-respected book sites that seem to have come to the same conclusions that we have.IV.In the end, the Amazon question is not one of pricing or sourcing, but one of financial viability. If the future of book coverage is truly online, profit expectations will have to be low (were they ever anything else?), but a world in which writers and editors can be compensated for their labor is a better one for readers. There aren’t many meaningful revenue options for book sites, and some do without entirely, but Amazon offers a model that can go a long way toward supporting a small publication.That said, affiliation raises two problems. One is the potential editorial conflict inherent in affiliate programs in the first place, the notion that the presence of these links will tempt writers and editors into becoming shills rather than dispassionate critics. Despite this, participation in affiliate programs hasn’t been met with much concern. And though these programs are sometimes described as a threat to readers, in an online marketplace with thousands of places to read about books, it’s unlikely that disingenuously positive book reviews written just to sell books would garner much of a following, nor would the effort make anyone very rich.The other, bigger problem with Amazon is one of size and control. Is it a good thing for us to give more power to this behemoth link by link, post by post? This will be the focus of the final installment of this series, as we examine Amazon’s heft and how it has been able to make its own rules in an emerging market – rules that could have big implications for publishing and the future of book coverage online.Part 1: Garth looks at the death of the newspaper book review section.Part 3: Max hazards some early guesses about the next possible upheaval in the economy of literary journalism.[Image credits: Rachel Kramer Bussel, spcbrass, mccun934]