Facebook’s acquisition of Push Pop Press got a lot of attention last week. It overlapped three areas of interest - Ebooks, Facebook and the Mac/UI world, and one of the founders, Mike Matas, used to work for Apple and designed some of the apps on the iPhone.
The obvious (and entirely sensible) explanation was put well by John Gruber, who argued that this was a talent acquisition: Facebook doesn’t care about ebooks but does want to have the UI and engineering talent behind Push Pop as part of its team (maybe to make apps, maybe not).
However, this was met with some lamentation in the tech world (for example,from the normally perspicacious Om Malik), who thought Push Pop had ‘done a Patzer’ - sold out a promising idea before it reached fulfilment.
I disagree entirely. This thing that immediately struck me about the demo above was “THIS WON’T SCALE”.
There are two structural problems with interactive books.
The first is that around two-thirds of value of the publishing market today is for text-only genres - fiction, science, poetry, biography, history etc. Some of these will benefit to some extent from interactivity. But when cheap colour printing came in, these did not all suddenly shift to being printed in colour, and most biographies, literary criticism and novels will not shift to being interactive -there simply isn’t money to do so. A typical serious biography today will sell at most 20k copies: there IS NO MONEY to add video to that.
This means that Push Pop was only targeting a third of the publishing market at best - and only the proportion of that that is covered by tablet owners, and only titles within that with the volume to support the extra work. So, not the $20bn US publishing industry, but at most a third of that and probably rather less.
The second problem is that the value-added here is in the manual labour of creating all the whizzy interactivity. That doesn’t scale. Sure, you can create and sell a platform for making this, but the cost, and hence the revenue potential, is in graphic designers. This space has very low operating leverage.
In other words, Push Pop was looking at selling a platform into an interactive ebook market with maybe $3-4bn of future gross revenue potential, very low margins and very high labour intensity. That suggests, intuitively, that the total revenue potential for interactive ebook solutions might be a couple of hundred million dollars, and maybe rather less. In turn, Push Pop might have been looking at revenue in the mid to low single digit millions and a valuation about the same. Better to take Facebook’s cash?