Smashwords Year in Review 2012 - The Power in Publishing is Shifting to Authors

Welcome to my annual Smashwords year in review.

In the last 12 months, tens of thousands of new authors and publishers have joined the Smashwords community.  I welcome you.

A brief introduction to Smashwords is in order.

I founded Smashwords in 2008 to change the way books are published, marketed and sold.  I realized that the traditional publishing industry was broken.  Publishers were unable, unwilling and disinterested to take a chance on every writer. 

Today, Smashwords has grown to become the world’s largest distributor of ebooks from self-published authors and small independent presses.

The idea behind Smashwords was simple:  I wanted to create a free ebook self-publishing platform that would allow me to take a risk on every writer.  I wanted to give every writer the freedom to publish, and every reader the freedom to read what they wanted.
 

Back in 2007, we designed our logo with this revolutionary ideal in mind.  The up-thrusting fist holding the book represented our desire to transfer the power of publishing to writers and readers.  Today, we still refer to it as our “Power to the people” logo.

The revolution is now in full swing.  Indie authors know ebook self-publishing is the future of publishing.  Ebook retailers know this as well.  Traditional publishers, however, have been slow to grasp the transformative impact the self-publishing revolution is having on the industry. 

We’re entering a golden age of publishing.  The ebook self-publishing revolution will lead to a more great books being published than ever before.  More books will touch the souls of more readers, because indie ebooks make books accessible, affordable and discoverable to more people.  These books, in all their diverse and controversial glory, are cultural treasures.

Our authors know that every writer – every one of us – is special, and those who doubt this truth will become the dinosaurs of tomorrow.  You can’t truly honor the culture of books without honoring the writers who create them.  You can’t truly honor the value of books if you measure their value by perceived commercial merit alone.  You either value the human potential of all writers, or none at all.

Every day, I’m thankful that so many writers, readers and retailers have supported the cause of self-published ebooks.  Every day, I’m tickled pink that so many authors, publishers and retailers have partnered with Smashwords, because without your trust and support, we wouldn’t be here.

Unlike self-publishing services that earn their income by selling over-priced services to authors, Smashwords doesn’t sell services.  The money flows to the author.  We earn our commission only if we help sell books.  We think our approach aligns our interests with the interests of our authors and publishers.

Since most books don’t sell well, and we rely entirely on commissions, it’s incredibly difficult to build a profitable business doing what we do.  We figured out how to do it.

Smashwords highlights for 2012

2012 was another incredible year for the Smashwords authors, publishers, literary agents, retailers, libraries, and customers we serve.

Here are some of our key milestones for 2012:  

• Catalog growth:  We're ending the year with more 190,500 books at Smashwords.  98,000 new titles were added to the Smashwords catalog this year.  This is up from 92,500 at the end of 2011, and up from 28,800 at the end of 2010, 6,000 in 2009, and 140 our first year in 2008.

• More authors/publishers/literary agents choosing Smashwords:  Smashwords today supports 58,000 authors and small publishers around the world, up from 34,000 at the end of 2011, 12,100 in 2010, 2,400 in 2009, and 90 in 2008.
   
• Profitability: Smashwords has been profitable for 27 straight months, and our profitability is growing as our business grows.  We’ve done this without bringing in outside venture capital, which means we’re free to pursue our unconventional business model without the interference of outside investors.  Profitability is important, because it means we’re here for the long haul.  It means we have the resources to reinvest in our business for the benefit of the authors, publishers, retailers, libraries, and readers we serve.  Nowhere is this investment more apparent than in our staffing numbers (next item).
   
• Employee Count:  We’re ending 2012 with 19 employees, up from 13 in 2011, and 3 in 2010. This year we continued to invest heavily in customer service and software development. 
   
• Faster-Faster-Faster:  Thanks to investments in technology and staffing, we’re providing faster conversions, faster Premium Catalog approvals, faster response times to support inquiries, faster distributions to Apple, Kobo and Barnes & Noble, and faster sales reporting.  We will improve further on all counts in 2013.
   
• Libraries:  We signed new distribution deals with library aggregators such as Baker & Taylor Axis360, 3M Cloud Library and one other major aggregator not yet announced.  We added support for custom library pricing, and we introduced Library Direct to support libraries that operate their own ebook checkout systems under the Douglas County Model.
   
• Ebook Distribution Systems:  We began a complete re-architecture of our ebook distribution systems to enable faster, more accurate ebook distributions and metadata updates. 
   
• Smashwords Profiled in Forbes Magazine:  This was a big deal for us.  For the first time ever, we revealed to the world our revenues (Forbes requires that startups they profile reveal numbers).  Later in the year, we received coverage in the New York Times and Time Magazine.  The indie ebook revolution is starting to go mainstream, though I think we're all still flying below the radar.  That'll change in 2013.
   
• Improved categorization:  We completed adding support for thousands of BISAC categories to help our author's books land on the correct virtual shelf.
   
• Merchandising collaboration with retail partners:  We ramped up our merchandising collaboration with retailers, especially Apple, which has been incredibly proactive and creative in working with us to create new opportunities to connect Smashwords books with millions of their customers (See Apple’s Breakout Books promo).  We continued to build tools to help our retailers identify books worthy of promotional love, because these tools help Smashwords authors sell more books and help retailers satisfy more of their customers, which is their primary objective.
   
• Retailers earning millions of dollars from the sale of Smashwords books:  Our retail partners have made incredible investments to help list, maintain, promote, merchandise, and sell our books to their customers.  I’m pleased to say their investments are paying off.  We want our retail partners to do well with our books, because the value they provide to our authors and publishers far exceeds the sales commission they earn. 
   
• We released the Secrets to Ebook Publishing Success:  In March, I released this free ebook, which identifies the 28 best practices of the most commercially successful Smashwords authors.  It's the lastest in a series of free ebooks I've written that promote professional publishing best practices.  Along with The Smashwords Style Guide (how to publish an ebook) and the Smashwords Book Marketing Guide (how to promote any book and build author platform), my three books combined have now been downloaded over 250,000 times.  Thousands of our authors and publishers have since put these practices to work. 
• Amazon:  Our relationship with Amazon has been frustrating.  Even though Smashwords authors have the freedom to bypass Smashwords and work directly with many of our retail partners, about 80% of our authors choose to distribute through Smashwords.  They appreciate the time-saving convenience and simplicity of centrally managing their books and metadata from the Smashwords Dashboard.  Unlike every other major retailer, Amazon has not yet provided us the ability to do large, automated distributions and metadata updates.  As a result, our authors who would prefer to reach Amazon through Smashwords are forced to upload direct to Amazon.  Although I remain hopeful Amazon will one day see fit to treat us as a partner rather than a competitor to be crushed, killed and destroyed, I’m not holding my breath.  We’ve built a healthy, profitable and fast-growing business without their help, and we’ve done this despite their attempts to harm us and our retail partners.  Unlike traditional publishers which would probably go bankrupt if they stopped distributing to Amazon, we face no such noose.  In the meantime, we focus our energy on helping our true retail partners succeed in the marketplace.
• We protected your right to publish legal content:  When PayPal tried to ban certain categories of “objectional” books, we pushed back, and led a broad coalition of authors and pro-books advocates to overturn PayPal’s proposed policies.  PayPal and the credit card companies decided to do the right thing.  It was a victory for all authors, and demonstrated the growing power of the indie author movement, especially when we stick together and work toward a common cause.  At Smashwords, we’re always advocating for the rights of our authors.  Much of this advocacy happens quietly behind the scenes, outside the glare of press releases and media spotlight.  We’re all in this together.
• Smashwords Direct: Today, we released Smashwords Direct, a new publishing option at Smashwords that allows authors and publishers to upload professionally designed .epub files for distribution through the Smashwords network.  The service complements our Meatgrinder conversion engine by enabling us to support ebooks with more complex formatting requirements.

Industry Highlights:
When we started Smashwords five years ago, self publishing was viewed as the option of last resort, and 99.95 of writers aspired to publish through traditional publishers.  The stigma of self publishing that was so prevalent five years ago has given way to new credibility, as Smashwords authors top all the bestseller lists and set the example for the next generation of writers.

At the same time, we’re seeing a growing stigma develop around traditional publishers, which continue to underserve authors and readers.  Just as traditional publishers were slow to embrace ebooks before they began their breakout in 2009, publishers have also been slow to recognize the transformative impact self-publishing will have on the business of books.  Self-published ebooks still account for the minority of ebook sales, but just as ebooks will one-day eclipse print books, so too will self-publishing eclipse traditional publishing.

In 2012, some Big 6 publishers bumbled their way into the self-publishing business, starting with Pearson/Penguin’s acquisition in July of the granddaddy of vanity presses, Author Solutions (ASI).  In November, oblivious to all the screaming indie authors who called foul about the business practices of ASI, Simon & Schuster introduced its own self-publishing imprint called Archway Publishing, powered by none other than ASI, and proudly offered publishing packages ranging from $1,000 to $25,000.  Twenty-five thousand dollars?  How do they sleep at night?  By adopting the worst practices of the worst vanity presses, publishers telegraphed to the writer community what they really think about authors:  Only a few of you are worth the investment of our time, talent and resources, and the rest of you are worth only the money in your wallet.

It was a cynical move.  A move that will damage the already diminishing credibility of large, traditional publishers, even those which haven’t made such a bone-headed move. 

In my 2011 Smashwords Year-in-Review post last year, I wrote:

“I think few people in the traditional publishing industry comprehend how this indie author revolution will transform their business in the next few years. Their world is about to be turned upside down.”

They still don’t get it.  From the perspective of indie authors, it’s starting to not matter.  Publishers risk irrelevanance if they don’t adopt more progressive business policies soon.

The writing is on the wall.  Traditional publishers are earning well-deserved ridicule and stigma at the very time indie authors are shedding their stigma by blazing a better path forward.  What I tell you here isn’t pie-in-sky theory or empty pontification.  The numbers tell the story.

In 2010, it was virtually unheard-of for an indie ebook author to hit the bestseller lists at retailers, let alone the NY Times bestseller list.  In 2011, indies began to hit the bestseller lists on a more regular basis, but it was still rare.  In 2012, indie ebooks were frequently listed among the top 10 bestsellers at major retailers, and multiple indie authors landed books in the bestseller lists maintained by The New York Times, USA Today, The Wall Street Journal, and others.  For example, the week of August 4, 2012, four Smashwords authors hit the NY Times fiction ebooks list in the same week.  Next year we’ll see more, and within a couple years indies will dominate all the bestseller lists and it’ll be seen as business as usual.

Some industry watchers might label my prediction delusional.  Indie authors know it’s real because some of them are experiencing it today, and they’re sharing their results with their fellow indies. 
At Smashwords, where we distribute books to most major retailers, we see the sales numbers.  We see how our books are starting to earn more dollars than many traditionally published books.  This growth is not because Smashwords is wonderful, it’s because all writers are wonderful.  You can’t love books without loving the writers who write them.

What’s driving the rise of indie ebooks?  There are multiple factors, chief among them include:

1. Indie authors are learning to become professional publishers – Indies are pioneering the publishing best practices of tomorrow, as I note in the Secrets to Ebook Publishing Success.  They’re becoming more sophisticated publishers, and they’re starting to publish better books, priced more competitively, written more responsively to reader tastes, and more broadly distributed.
   
2. It’s a game of numbers – Although only a small fraction of indie ebooks grace the bestseller lists, the publishing output of indie authors is unprecedented.  Authors are now releasing over 9,000 books per month on the Smashwords platform.  Thanks to such democratized publishing and distribution, the business of publishing has become available and accessible to all writers, for FREE.  Writers who were previously shut out of publishing – simply because the conventional publishing business was broken and unable to take a risk on every author – are now publishing for free at Smashwords and elsewhere.  Writers who previously gave up on writing are now writing again, because every writer can now confidently begin a book and know that it will be published, one way or another.
   
   In my 2013 book publishing predictions post, I talked about how future bestsellers are like baby black swans.  They’re extremely rare, and hidden and indistinguishable amid flocks of baby black geese.  Publishers devote enormous energy trying to cull the flock and eliminate the geese, yet at the same time they’re also indiscriminately culling black swans.  Self-publishing changes this.  Self-publishing gives all writers – the geese and rare swans alike – the freedom to publish direct to their readers, today, and be judged.  Readers are the only ones capable of reliably identifying the black swans.  This shouldn’t be a surprise.  Readers have always created bestsellers through their impassioned word-of-mouth.
   
   When we analyze the future of publishing, where authors become more professional, and all books are given a chance in the marketplace, the law of numbers would indicate that it becomes a reasonable and inevitable conclusion that self-publishing will hatch more black swan bestsellers of the future than traditional publishing.  The vaunted editorial gatekeeping function of publishers, long mistakenly believed to be a public service, has become a public disservice.  At the end of the day the smart folks in publishing can only guess at what readers want to read.  Publishers have long been in the business of throwing spaghetti against the wall, and then retroactively taking credit for the few books that become bestsellers.  Now writers can throw their own spaghetti, and when it’s cooked just right, the author can take the deserved credit.
   
3. Retailers welcome indie ebooks – Retailers have been true enablers in the ebook revolution.  Ever since 2009, every major retailer has welcomed self-published ebooks.  These retailers have collectively invested hundreds of millions of dollars to bring readers to their stores, and these readers are purchasing these books.  Retailers and authors alike are earning millions of dollars for their efforts, which makes it a win-win for retailer and author.
   
4. Ebook Self publishing is simply a superior method of publishing – Ebooks cost less to produce, package and distribute than print books.  There’s no inventory, and therefore no returns of unsold inventory.  With a traditional publisher, it often takes 12 months or more before the book is released.  With indie ebooks, the book is published instantly to a worldwide market.  The indie author enjoys greater creative freedom, a closer relationship with their readers, the ability to earn 85-100% net as opposed to the paltry 25% of net paid by publishers, and the ability to price lower - which has the virtuous effect of driving greater sales volume, faster platform-building and greater author profits.  Unlike the static print books of yesteryear, ebooks are living creatures.  Indie authors can leverage Viral Catalysts (see my Secrets ebook for more on these) to make their books more available, more discoverable and more enjoyable.  Unlike print books, most of which quickly go out of print, Indie ebooks need never go out of print.  Ebooks are immortal.
   
5. Reading is moving to screens – Ebooks as a percentage of the overall trade book market will reach about 30% in 2012, up from 19% in 2011, 8% in 2010, 3% in 2009, and 1% in 2008.  Within two years, ebooks will account for over 50% of book sales.  As noted in my 2013 predictions, I predict that the number of books read on screens will exceed the number read on paper in 2013.  If authors want to reach readers, indie ebooks are the fastest, most efficient method of doing so.
   
6. The global opportunity – The ebook retailers expanded their global footprint in 2012, and will expand further in 2013.  This means an author in Columbia can upload their book to Smashwords today and see that book available for sale in the Apple iBookstore in their home country in a matter of days.  And because that book is written in Spanish, it’s also available in the world’s largest Spanish-speaking markets across North, Central and South America (and Spain too!).  Authors can publish locally and reach readers globally.  This kind of global publishing and distribution simply wasn’t feasible under the old print model.
   
7. Stigmas of traditional publishers increasing as self-publishing gains street cred – Many Smashwords authors now publish direct to their readers and don’t even bother to shop their books to agents and publishers.  At multiple writers’ conferences this year, I lost track of the number of times authors approached me and said words to the effect of, “I’ve been waiting for years to get picked up by a publisher.  I’m done waiting.  I’m going to self-publish and get out there now.”

What's Coming to Smashwords in 2013?

At Smashwords we consider our business in constant beta.  Every day we’re tweaking our business processes and technology to make everything we do faster, more reliable, more scalable, more efficient and more competitive.

In 2013 we will continue to invest in people and technology to better serve our authors, publishers, retailers, and libraries.

Here’s a brief sampling of what you can expect from Smashwords in 2013:

• Discovery – We’ll improve our metadata to make our books more discoverable by readers.  One such example is series.  Currently, we don’t offer an elegant method of identifying books in a series.  You’ll see this in 2013.
  
• Retailer Merchandising – We’ll continue building tools, processes and relationships that give Smashwords-distributed books increased visibility to the merchandising managers at the major ebook retailers.  By serving our retailers, and helping them identify Smashwords books that are worthy of extra in-store promotion, many of our authors will enjoy merchandising advantages not available to other authors.
  
• More Distribution – We’ll continue to create new distribution opportunities for our authors and publishers.  We believe the more high-quality retailers promoting our books to readers, the better. 
  
• Faster Distribution – In 2011, we shipped books to our retailers once per week.  In 2012 we began shipping multiple times daily to Apple, once-daily to Kobo, and twice-weekly to Barnes & Noble.  In 2013 we will continue to work with our retail partners to allow faster shipments and faster metadata updates.  This will give authors greater control over their distribution.
  
• Faster Reporting – We provided faster sales reporting in 2012, compared to the previous year, but we still have much improvement to make, both in speed and schedule consistency.  We will continue to make incremental progress here in 2013.
  
  
• Faster Premium Catalog Approvals – Six months ago Premium Catalog approvals took up to 13 days from the date of upload.  Today approval times range from 1-5 days.  We will continue to add staff and technology to improve the speed of reviews so your books can reach retailers faster.
  
• Improvements to Smashwords Store – When people tell us the design of the Smashwords store is so circa 2000, we take it as a compliment because we think they’re being generous by at least a decade.  The Smashwords web site user interface is outdated.  We’ve neglected the design and customer experience of the Smashwords store, in favor of investing our limited resources on the distribution side of our business where we generate over 90% of our revenue.
  
  2013 is the year we will give the Smashwords store a facelift, not because we have designs on becoming a large ebook retailer (well, actually, we already are, even though that’s not our focus), but because we think an updated site will help us attract more books and more customers that we can feed to our retail partners.  In 2013, expect to see us start adding links to some of our retail partners, so the millions of visitors to the Smashwords site can enjoy greater freedom to purchase our books and support our authors at their favorite ebook retailers.  Although an individual ebook sale at Smashwords earns the author a higher royalty than a book sold at our retail partners, a book sold at our retailers brings a multiplier advantage, because it drives their “also bought” algorithms.  Put most simply, our retailer partners with their broader customer reach have the ability to turn each sale into more sales than we can at the Smashwords site.
  
• Improvements to Smashwords Direct – As I write this, Smashwords Direct has been operational for about one day.  We’ll make multiple iterative improvements to Smashwords Direct in 2013 because we want to make it as easy as possible for Smashwords to become the ebook distributor of choice for as many authors and publishers around the world as possible.
  
• Expansion of “Mark’s List” – A couple of years ago, we created a simple auto-responder email (email to list@smashwords.com) that contains a list of recommended, low-cost ebook formatters and cover designers.  When you hire off of this list, all your money goes straight to the service provider performing the work.  We don’t receive a commission, advertising fee or kickback of any sort.  This means you gain access to valuable services at the lowest possible cost.  Most of the providers are fellow Smashwords authors.  We’ll expand the list in 2013 to contain more service categories.  The application process will be announced at Smashwords Site Updates as we open up the list to more providers.  There may be some surprises, but I’ll save that for another time.

My thanks to you

I want to express my sincere appreciation to every Smashwords author, publisher, reader, retailer, literary agent, service provider partner, and angel who has supported Smashwords over the last few years.  I want to especially thank authors who continued distributing their books through Smashwords despite the inevitable growing pains experienced by both Smashwords and our retailers.  Those of you who left and are considering returning, I thank you too.  Your support of Smashwords – especially your decision to distribute through Smashwords – is what fuels our ability to serve the greater community of all writers around the world.

Although I’m excited by what we’ve accomplished thanks to your talent and support, I’m even more excited by the future that lies ahead of us.  I still believe we’ve only scratched the surface of what’s possible.  I believe that within five years, the majority of bestselling ebooks will be published by self-published authors, and I want those authors to be Smashwords authors.  Help me realize this, because working together we can create a better future for writers, readers, retailers, libraries, and all those who contribute to the culture of books.

Happy New Year and safe holidays.  Peace to all.