I finally got around to reading an article that I’ve been meaning to read for the past couple of weeks. It was an article in Forbes that did the unthinkable: it actually did an educated “guesstomation” on how many e-books Amazon has been selling over the course of the past few years. We all know that Amazon holds this information very close to the vest as a trade secret. The breakdown of how Forbes figured out these calculations was very telling and actually had a very scientific approach to deliver the deducted answer.
Forbes began this article by figuring out how many Kindles and Kindle offshoots have been sold by Amazon since the initial introduction in 2007.
“Amazon launched its Kindle e-reader in late 2007. Assuming a 3-year replacement cycle, we conclude that there may be approximately 30 million Kindle e-readers currently in use.” 1
Once the total number of kindles in use has been arrived at, the average of five e-book purchases and downloads per year was introduced as part of the equation. Now people have 30 million active kindles each with an average download of five per year at an expense rate of $4-$10 per download, you came up with a formula that looks something like this:
30,000,000*5*7 dollars =1,050,000,000*.30= $315,000,000
You might be asking yourself where the 30% came from. That would be the percentage that Amazon gets from every sale as a handling a distribution fee. If you read the article which I have accessed and embedded for this blog post, you will find that the estimated amount Forbes came up with was somewhere between $260 million and $530 million annually since 2007. Since Amazon is a multibillion dollar company, this amount seems paltry but will continue to grow with time. Again, you have to factor in the equation that Amazon is not really using its publishing arm to drive revenue. Amazon is using its publishing arm which is inclusive of selling kindles and selling e-books to drive customer base to other products on the Amazon website.
It’s always been known that Amazon would take a loss just to ensure a larger segment of market-share. It is nice to know that the largest e-book player is making significant sales which are transferring hundreds of millions of dollars into their corporate earnings. It’s always great when you can use deductive reasoning to pull away the drapes to reveal the underlying information range.
Information from the Forbes article was supplied by the Trefis Team.