Smashwords Year in Review, Plans for 2011

Welcome to my annual Smashwords year in review where I report our progress and plans for the new year.

2010 was a breakout year for us. It was also a breakout year for our indie ebook authors and publishers.

Exactly two years ago we were publishing 140 books from 90 authors. We thought that was fantastic for our first year in business.

Last year at this time we hit 6,000 books from 2,600 authors and publishers. We were thrilled.

Today we're listing 28,800 books from over 12,000 authors and publishers. We released 3,200 new ebooks in the last 30 days alone. We're pinching ourselves now, not just because of how far we and our authors have come, but because we know we've barely scratched the surface of the possible.

Six years ago Smashwords was a jumble of simple ideas scribbled on a sketchpad. Today it's a reality.

My original idea was simple: Create a free ebook publishing platform that would allow any author, anywhere in the world, to instantly publish an ebook at no cost. Authors, I believed, should have the right to publish whatever they want, and readers should have the freedom to decide what's worth reading.

From the beginning, just about every conceivable odd was stacked against us. When we launched, ebooks accounted for about 1/2 of 1% of the overall book market; self-publishing was considered the option of last resort for failed authors who couldn't find an agent or publisher; and self-published books weren't selling. All the ingredients for a successful business, right? I thought so. I had a hunch all of this would change because it needed to change.

I believed traditional publishers were squandering the future of books. After decades of consolidation, big publishers began sucking the soul out of publishing. They began judging the merits of a book through the myopic prism of perceived commercial potential - a recipe for dumbing down publishing with more milquetoast celebrity books. Wanna buy a book from Justin Bieber, Snooki or the Kardashians?

The shift to this commercial filter meant that authors who otherwise deserved publication were denied the opportunity, therefore depriving readers of their ability to enjoy these books. If you value books, and if you believe as I believe that books are essential to the very future of mankind, then it's time to rise up and do something about it. I've always had this higher purpose in mind with Smashwords. If you look at our logo, the fist symbolizes the indie author revolution.

We're also building a business as we try to change things for the better. In my 20+ years of technology entrepreneurship, I've always been drawn to startups that have the power to effect positive social change. This was certainly the case with my last startup, Bestcalls.com, where I helped level the playing field for small stock market investors.

Smashwords, to me, is the startup of a lifetime. Every day I'm excited to be part of it. Smashwords will only ever be as great as the authors and publishers we enable. Considering the vast reservoir of creative talent we have yet to help unleash upon the world, I'm confident our best days are ahead of us.

Back to the business. What a difference a couple of years make. Today, ebooks account for nearly 10% of trade book sales. This number will probably double in 2011, and as I predicted over at GalleyCat earlier this week, I think on a unit volume basis, ebooks will account for one third or more of all book consumption come December 2011. I never imagined this would happen so fast, and it's possible I'm underestimating the growth this market will experience in the coming year.

After 31 months of advocating the indie ebook gospel, I still wake up every morning invigorated by our possibilities and potential. We attack every day with the tenacity of a newborn startup. Like I said last year, and I'll say it again, we're just getting started.

Some of the highlights of the year in addition to the numbers I shared above:

Distribution highlights:

• Smashwords is now one of the largest distributors by title count of indie ebooks to retailers such as Apple, Barnes & Noble, Sony, and Kobo
• I'm very pleased with the support these retailers have shown our indie authors and publishers. Retailers are starting to earn real profits from our indie ebooks. This is cause for celebration for all indie authors and publishers, because it means access to more distribution in the future.
  
• In April Smashwords became one of a small handful of global aggregators serving the Apple iBookstore. On launch day of the iPad, we had over 2,000 books in the Apple iBookstore. When Apple launched the iBookstore in Australia, we had nearly 10,000 books in the store.
• In December we successfully transitioned all of our retailers to agency pricing. This means authors and publishers set the price at retail, and earn 60% of the list price.
• Preliminary sales reports from Apple and B&N indicate that sales tripled in the couple of days following Christmas. It will be interesting to see how these numbers moderate over the coming weeks.
  

Traffic to Smashwords.com:

• In the past year, people visited Smashwords from 227 countries
• 59.6% of visits came from the U.S.; 40.4% came from outside the U.S.
  
• Top 5 countries (U.S., U.K., Canada, India, Australia) accounted for 80% of visits
  
• Top 20 countries accounted for 90%
• Top 40 countries accounted for 95%
• Millions of people visited Smashwords.com this year for the first time
  
• Smashwords.com receives millions of page views each month, and our traffic continues to grow each and every month.
• Yesterday, December 30, was an all-time record for number of visits to Smashwords.com
  

Business Highlights

• Way back on October 7, 2009, when we reached 150 million words published, I set a crazy goal to reach one billion words by December 31, 2010.
• On October 20, 2010, we reached one billion words nine weeks early.
• Today, December 31, 2010, we've beat the goal by over a quarter billion words.
• We redesigned our web site infrastructure this year to support faster performance and greater reliability. The site's uptime and performance is excellent now, and has been scaling very well as we achieve record traffic each month.
  
• We made multiple enhancements to our Meatgrinder conversion system this year, and as a result the quality of our ebook outputs is better than ever.
  
• A few months ago we reached profitability. Nothing spectacular, and not enough to pay me a salary yet because I'm reinvesting any excess cash back into the business. What this means is the business is now fully self-sustaining and we're adding staff. We're here for good. We accomplished this while also paying some of the highest royalty rates anywhere. Unlike other services that make much of their income by charging authors upfront fees for publishing packages, set-up, conversion, and other services of nebulous value, our services are free and accessible to any author. We believe our interests are aligned with our authors and publishers. The platform we created allows us to take a risk on every author. If we don't sell anything, we don't earn our commission.

What's coming in 2011:

Competitive front: Fight to survive and thrive. Despite our initial traction in the marketplace, our future is by no means guaranteed. We will continue to pursue our business plan with vigor because there's no room for complacency. We've already seen multiple upstart competitors try to launch Smashwords knockoffs. Good luck to them. They'll soon learn how tough it is to make a buck in this business. Have I mentioned I'm competitive?

Distribution: We love ebook retailers because they're expert at putting our ebooks in the hands of readers. Over the next 12 months we'll continue to add more retailers to the Smashwords distribution network, while working to build broader and deeper relationships with our existing retail partners. We understand that authors and publishers often have the option to go direct to retailer. Our mission is to make it more profitable for authors and retailers to work through us. We think we add a lot of value to the ebook supply chain for authors, publishers and retailers alike. If we don't add value, we don't deserve to be here.

Meatgrinder: As I mentioned above, we made a lot of enhancements to Meatgrinder. We'll continue to iterate and improve it in the months ahead, especially in the area of automated TOC detection. We'll also add more error-correction.

Premium Catalog reviews: For most of the year, we managed to maintain one week or less turnaround times on Premium Catalog reviews, though a few times we got backlogged up to two weeks. We're working on plans that should help accelerate Premium Catalog approval cycle times, so we can help you get your book in the catalog and distributed to retailers faster with less back and forth.

Surprises: We have several surprises planned for 2011. I can't tell you what they are otherwise they wouldn't be surprises.

Stretch Goal: Our goal is to hit 75,000 indie ebooks published at Smashwords by December 31, 2011. This means we need to add 47,000 books in 12 months. That works out to 130 new releases each day or one new book every 11 minutes.

Ongoing Education: While I sometimes criticize some of the practices of big publishers, I continue to have enormous respect for professional publishing and the people in publishing. Although we make it easy to self-publish an ebook (some have said "too easy"), we don't make it easy to produce a book worth reading. That responsibility lies in the hands of the author who must now step up to the plate and become a professional publisher. They must adopt proven best-practices of publishing, such as professional editing, revision and proofing prior to publication, and professional cover design. We'll do our best in the coming year to continue to help authors and publishers improve the practice of publishing so they honor their readers with books worth reading.

Smashwords Direct: Right before Christmas, we began working with a large publisher of public domain books to convert and distribute 10,000+ titles across the Smashwords distribution network (the numbers above don't reflect these direct titles). Since we don't accept PD titles at our Smashwords.com retail site, these titles will only go to retailers. In the year ahead, we'll look for additional opportunities to help other large publishers take advantage of our expanding distribution reach.

Smashwords.com Refresh: We're noodling on multiple ideas to give the site a refresh so we can do a better job of showcasing the higher quality titles, as determined by real customer downloads, purchases and reviews. Ever since we launched in May 2008, it was important to me that every new Smashwords book receive its 15 minutes of fame on the home page as a new release. This gives every book a fair and equal chance to find its first readers, and if the book is truly wonderful, the readers can take it viral from there. The downside of this democratized feature process is that everything new hits the home page, and often the work isn't ready for prime time. It might be missing a cover image, or the author didn't properly format it to the Style Guide. Our current policy of showcasing all the latest releases - even the obviously poor ones - ultimately gives first time visitors a warped perspective of the true talent captured within the Smashwords catalog. Another issue I want to tackle is adult content. We're big supporters of free speech, but we often receive complaints from visitors and authors shocked by some of the erotica images they see on the home page - images they'd never see on the home page of another bookstore. We also have kids who hit the home page for their first visit, and such content isn't appropriate for them either. We're working on ideas in this regard that can strike a fair balance, while still allowing our professional erotica authors and publishers to get their books exposed to more customers who are searching for that content. Stay tuned as we work to strike a good compromise that benefits all parties involved.

Responsible Adult Content Publishing: There have been reports that Amazon has clamped down on incest-related titles, and some authors and publishers worry this is the start of a trend toward increased retailer censorship. At Smashwords, we've always articulated a very clear policy in our Terms of Service regarding acceptable content, and we were probably one of the first to define a clear policy against publishing erotica that includes underage characters, even if those characters are bystanders in the story. If the story is intended to titillate, kids don't belong in it. Simple. We've started encouraging our erotica authors and publishers to clearly state inside their books, if not in the book description, that all characters are 18 years of age or older. I think it's important that responsible erotica authors and publishers self-enforce these reasonable guidelines, otherwise retailers will be forced to think twice about carrying such content. Smashwords was founded with a fierce belief in free speech and no censorship, and our conviction on this issue remains true, but that doesn't mean anything goes.

For those concerned about censorship in the retail channel, I can happily report that I'm aware of fewer than a dozen titles that have been outright rejected by our retailers, and in some of those cases the content violated our Terms of Service anyway. In other cases, the authors were able to make minor modifications to cover images to satisfy retailer requirements. This works out to less than one thousandth of one percent of our titles. I think the small number reflects not only the responsibility shown by erotica authors and publishers to comply with our Terms of Service, but also the benefit of our manual vetting process at Smashwords for Premium Catalog distribution. I know our retailers appreciate we self-police. We're also thankful to Smashwords readers and customers who report potential violations to us, so we can work with the author/publisher to proactively remove or fix the content.

My New Year's Thanks to All

To the 12,000+ authors and publishers who entrusted your precious books to Smashwords over the last 2.5 years, and to those of you who stood by us despite our many inevitable growing pains, and who always believed in our commitment to do right by you, thank you for believing in us. We will continue to run our business with the highest ethical standards and transparency as we always have, and will work to earn and deserve your continued trust every day. Happy New Year!