Kobo attracts additional $50 million investment

[SensualPoet]

On the eve of its one year anniversary -- the first Kobo was sold May 1, 2010 in Canada, late June in the US and rest of the world -- Kobo has attracted an additional $50 million investment capital. The press release is here: http://blog.kobobooks.com/kobo-close...ling-position/

It's really quite a remarkable story: in Sep 2009 Kindle went International; Nov 2009 the b&w Nook launched; in Apr 2010 the Apple iPad launched. Kobo had intended to occupy a low price pole for e-readers at $149 and, at the time, the cheapest Nooks and Kindles were $259. But by the time of the US Kobo launch, Kindle and Nook matched the $149 price point and Kindle revved up to launch Kindle 3 at that price in Sep 2010 AND with the fancy new Pearl screen. Sony followed later in the fall with its Pearl editions and, while it did not lower prices as much, it did adjust downward.

Is there room for a "fourth" brand? Clearly, investors think so; this is the second round of additional financing Kobo has attracted in the past year. Kobo has also been pursuing a "global" customer -- it is not US-centric like B&N -- and has created English language stores for Canada, US, UK, AU, NZ and HK and will launch stores for Germany and Spain next month, with France, Italy and the Netherlands this summer. Kobo has also partnered with RIM (Blackberry), Samsung and HTC so that its reading apps are featured on many of their devices sold globally. Kobo's ereader software is also available for iPad and several white label devices from Pandigital and others.

The company runs on a shoestring and is pitted directly against Amazon, Barnes and Noble, Sony and, arguably, Apple ... but has successfully proved its case as a "Kobo platform" approach -- taking a direct page out of Amazon's strategy book: read any content anywhere, anytime, any device. When you look back, the pace of development, and market penetration for Kobo, is breath-taking.

How soon before we think of Kobo as the "third brand"?

Kudos to Kobo!

[nrapallo]

Nice to see a Toronto based company willing to take on the world....

[ATDrake]

Well, good for Kobo!

I'm unlikely to get one of their readers, due to that thing where they don't follow internal links and so footnoted texts are useless.

But I'm perfectly happy to buy books from them when they've got good coupons to offer and don't price stuff disproportionately out-of-whack with the other stores' base list prices.

I think Kobo's strength lies in offering a good selection of titles to the international market at decent prices (no $2 not-the-Whispernet surcharge like Amazon sometimes has) in a format that can be put on a lot of those low-priced ePub-supporting niche readers that may be all that's readily available in certain areas.

[tubemonkey]

The Kobo eReader doesn't have much of a chance in the US at its current price point.

[Fbone]

While the company's enthusiasm is great to see I am a bit concerned about their lack of profitability. It would be more reassuring if Kobo could break even in the North American English market (the world's largest) before branching out to Europe. Unless they feel the overseas market will be more profitable.

At the very least the $50 million will get them through the next year even if the $3 million/month losses continue.

[Kali Yuga]

Apple has over $25 billion in cash on hand; Amazon has over $8 billion. $50 million is chump change to those guys.

While I do agree that competition is good, and hope that Kobo does well, the chances of them lapping B&N is not that high -- especially since their biggest US source, Borders, is gasping its last breath. Even if B&N bombs out somehow, it's entirely plausible that Amazon or Apple will reap the lion's share of the Nook'ers. (Or should that be "Nookies?" )

It'll be a remarkable story.... if and when they turn a profit, let alone achieve a sustainable position in the market place.

[covingtoncat73]

As a new Kobo user who has already bought several books from them, I hope they make it. We can't have Amazon being a monopoly with B&N a somewhat distant second. Plus, I like that Kobo only has one thing, ebooks. Amazon has everything else as well.

[hughes]

Originally Posted by Fbone

It would be more reassuring if Kobo could break even in the North American English market (the world's largest) before branching out to Europe. Unless they feel the overseas market will be more profitable.

A Forbes post on the new Kobo funding says, in fact, that "Kobo is also especially focusing on international markets."

There's got to be something motivating to investors, because, you're right, its current position in the North American market isn't compelling. Besides their international ambitions, perhaps there are new features or models in the pipeline that excited investors. The Forbes piece mentions upcoming real-time and location-based social features.

[RoxyJ]

I love the Kobo, but I bought a Kindle and here's why:
I love the Kobo philosophy, their software, and simplicity of their website (especially the price of the ebooks, and frequent coupon codes). But the hardware is way behind the Kindle, and the price point of the hardware doesn't reflect this. If the Kobo was significantly cheaper, or they put out an ereader that even comes close to the Kindle, I would buy a Kobo ereader.

On the other hand, their main market may be app support for other hardware (ie smart phones, tablets...) and selling ebooks.

But I really wish they would put out some better hardware (my dream machine would be the Kindle hardware, with everything else Kobo)

[ficbot]

There are a lot of really interesting things Kobo is doing in the area of local partnerships that I think is unusual and unique in the ebook business right now---remember, there are an awful lot of non-Americans out there for whom Amazon and Sony are less viable choices

For example, I remember when the Giller prize shortlist was announced---this is a big Canadian literary award---and they approached the publishers of all the nominated books and said if you don't have an ebook version yet, we will work with you to create one. And they had the whole short list for sale pretty quickly. The winning book turned out to be from a very small press who hand-bound each paper copy, so when the book won and every bricks and mortar bookstore was out of stock of this hot title, there was Kobo crowing about how you could buy it off their website on the spot. And they had even sent out an email once the winner was announced letting people know who won and providing a link to the book. Very smart!

And it turned out that Canadians wanted to read these Canadian books, because the Mann Booker winner was announced during this whole time period, and the post-Giller Kobo announcement mentioned that all the Kobo shortlist books (by Canadian authors) were out-selling the non-Canadian Booker winner...

I think that i Kobo continues to emphasize local partnerships like this one, they could corner a very nice niche market for themselves.

[SensualPoet]

Those who are expecting a year old business to be turning a profit are missing the point.

So, too, who see Kobo as the "$149 entry-level e-ink ereader" as opposed to Kobo "the platform". Kobo's Android app is, I understand, superior to its e-ink e-reader. What Kobo is building is a reading environment, complete with social media, cross-platform bookmarking, device independence. The Kobo WiFi reader is better than the original Kobo -- faster, connected to your Kobo cloud -- and it arrived six months after the first one. Presumably the next iteration will still meet the "simple" metric, at a low cost, and yet be more capable. The Kobo book store is a core aspect of the Kobo platform and that continues to grow.

The point is very well taken that Amazon, Sony, B&N are much larger enterprises and the fact Kobo has gotten this far, this quickly, is the true testament to Kobo's achievement. Remember: they are focussed on the platform, global audience, and building their business on partnerships rather than going it solo. Will Kobo "lap" any of the other players in 2011? Maybe not. But in 2012? That's feasible.

[ficbot]

Originally Posted by SensualPoet

The point is very well taken that Amazon, Sony, B&N are much larger enterprises

Add 'in America' to the end of that sentence, and I will agree with you But I really think many posters here often forget how very, very many people there are in countries outside the USA I am in Canada and can't but from B&N at all; the Sony store is an absolute wasteland, and Amazon is an option for me, but due to its lack of coupon codes and pricing in American dollars, is consistently more expensive. I used to buy from Fictionwise, but they have pretty much been decimated by the advent of agency pricing. Kobo is, far and way, the best game in town here in Canada. It is just not a comparable situation to that of an American reader.

[tubemonkey]

Originally Posted by covingtoncat73

As Plus, I like that Kobo only has one thing, ebooks. Amazon has everything else as well.

Which is why Amazon is such a strong company.

[tubemonkey]

Originally Posted by RoxyJ

But the hardware is way behind the Kindle, and the price point of the hardware doesn't reflect this. If the Kobo was significantly cheaper, or they put out an ereader that even comes close to the Kindle, I would buy a Kobo ereader.

Didn't Kobo get the memo that Amazon and B&N lowered their prices? The Kobo's price point was very competitive when the others were selling for $259. But now that Kindles are going for $139 (and soon to be $114), Kobo doesn't stand a chance priced at $129~139. Even Borders' current price of $100 isn't all that compelling given the Kobo's poor feature set compared to Kindle and Nook.

Like you said, the Kobo needs competitive hardware or a significant price drop (like maybe to $75).

Of course, none of this matters if they've written off the US market; which is what they seem to have done.

[karunaji]

More competition and more devices and options are good and I wish Kobo all success there. At the same time realistically they have very slim chance to succeed. If they had difficulty gaining market share in the North America, then it is naive to think that they can easily retreat to international markets. Although Kobo has epub format that is more popular outside Americas, international markets are not easy. There are more challenges due to different languages, cultures, market structure, ways of doing business. No one is going to pay more money just for a different book format (mobi vs. epub).

I would characterize the current e-reader market in Europe as two tiered: (1) cheaper Kindle and (2) more expensive and more functional devices (Sony, Pocketbooks, Onyx). Kindle is cheap and ergonomic but loading non-Amazon books may be complicated. On the other hand more expensive devices are providing more features, localized interfaces etc. It is hard to imagine how Kobo can compete with cheaper Kindle unless they offer more functionality. And if they would match their price to Kindle, then they still would have to compete with Amazon. The only chance for Kobo is if they customize their devices to local languages. The irony is that it is not even possible to buy Kobo reader internationally outside US, CA and UK. I had to order mine via a friend in Canada. So much for their international focus.