A Dark Horse Rears Its Head

About five months ago, on May 20th, when talking about the challenges the Internet offers publishing, I said:

The large houses face competition on two fronts: from the Internet giants and from the e-publishing industry.

When I say Internet giants, I'm talking about Google, Amazon.com, Yahoo, eBay and Microsoft. Of the five, I suspect the biggest direct competition will come from either Google or Amazon.com. My money is on Amazon. The biggest dark horse IMHO is eBay.

Quick! Who founded eBay?

Don't know?

You're not the only one. While the founders of Microsoft (Bill Gates and Paul Allen), Google (Larry Page and Sergey Brin), and Amazon (Jeff Bezos) are almost household names, no one knows Pierre Omidyar, the founder of eBay.

Yesterday's Wall Street Journal (WSJ) had an article on Omidyar and his current passion.

Mr. Omidyar is no shouter. At age 40, he has been retired from day-to-day duties at eBay for years, though he remains chairman of the online auction company. He lives in Henderson, Nev., where taxes are lower...Mr. Omidyar may be a low-key engineer, but he likes to defy tradition...

Omidyar's new passion is what the WSJ calls "Participatory Media," which I'd describe as targeted social networking. To this end, he has invested in "a wide array of Web-based communities."

He "has backed Digg Inc., which lets ordinary users play editor and highlight the news stories they find most interesting...helped fund Linden Lab, creators of the wildly popular Second Life simulated world...[and] Federated Media Publishing Inc. [which] sells ads for bloggers, making thousands of them more economically viable."

His current plan is to make investments in other participatory media companies over the next year, "which would more than double that part of [his] portfolio."

Mr. Omidyar and I are on the same page philosophically. I've said on this blog and elsewhere that I think digitization and POD technology will democratize publishing in a way nothing has since the Gutenberg press. Mr. Omidyar tells The Journal: "At a very fundamental level, the Internet gives ordinary people a global voice."

His investment chief, Matt Bannick, offered a quote that I think should be posted in the boardroom of every publishing house: "It's really tough for the incumbents to make decisions that are as decisive as they need to be. They've got models that worked for 50 years. It's really hard to cannibalize yourself..."

Most of the big publishing houses are now digitizing their stock and taking what I would describe as baby steps toward changing their business models. I can think of only one CEO who is really thinking outside of the box: Michael Hyatt of Thomas Nelson Publishing, the world's largest Christian publisher. Read my post on how he "cannibalized" his publishing house here.

IMHO, traditional publishing houses need to get used to the idea that their stranglehold on the industry will be broken when they no longer own the only means to publishing a book and when a viable e-reading device captures the public's fancy the way the iPod did for the music industry. Traditional publishers need to find ways to add more value to their services in order to retain their place in the food chain.