Amazon.com announced last week that it would purchase Goodreads, a social network for bookworms. As the "world's largest site for readers and book recommendations," Goodreads can help make Amazon the definitive place to go for book-related information. But does Amazon really need that help? The company is already the biggest provider of book advice, with its top-secret personalized recommendation algorithms, trusted user reviews, and inside-the-cover previews. So what makes Goodreads such an attractive acquisition?
The answer, we believe, lies in the changing nature of advice-getting in the digital age. In recent years, many new sources of customer influence have become available thanks to technology advances, with significant new power to shape how customers think about products, services, and company reputations.
There have always been friends and family we trust, journalists and film critics we find credible, and publications like travel guides or Consumer Reports that we know are reliable. Today, we add to that a great deal more. We have the interactivity of social networks like Facebook and Pinterest, the consensus-building opinion aggregators like Yelp and Rotten Tomatoes, the objectivity of automated recommendation engines like those of Netflix and Pandora, and the comprehensiveness of price-comparison services like Priceline and Google Shopping. Through digital media, even the "old" forms of advice are now more accessible and more potentially viral than ever before. All told, consumers can get a far greater wealth of purchasing advice from their smartphone in an instant than they can from watching ads, listening to salespeople, or even chatting with friends at a dinner party. Our recent research into the subject revealed at least ten unique sources of advice, nearly all of which have been enabled or enhanced by digital media.
Recognizing this new influence landscape, some companies with cash to spend have started advancing a new strategy — one we call "advice consolidation." This approach recognizes that consumers are drawn to different sources of advice for different reasons and at different times, and that the best way to keep customers engaged is to offer a diverse portfolio of guidance.
Consider, for example, Google's 2011 acquisition of Zagat Surveys, one of the most trusted and established names in restaurant reviews. Marissa Mayer, then Google's VP for Local, Maps and Location Services, blogged at the time that she was "incredibly excited to bring the power of Google search and Google Maps to [Zagat's] products and users, and to bring their innovation, trusted reputation and wealth of experience to our users." For Google, this was the perfect advice consolidation play. The search giant not only enhanced the usefulness of its local listings, but by combining the recognized expertise of Zagat with maps, search, and user reviews, it differentiated itself from local opinion aggregators like Yelp (which, incidentally, Google also once tried to acquire).
While Google brought recognized expertise into its portfolio, health information portal WebMD — an online service already renowned for its reliable expertise — moved to diversify and consolidate its advice portfolio in a different but related direction. The company, long known for its informative articles on symptoms, treatments, and other health-related matters, decided in 2010 to give its readers another source of advice: active communities of peers who are looking to find or share information about particular health issues. The result of this effort was WebMD Exchange, where registered users can join expert-led communities, or alternatively create their own public or private support group. Through the communities, members can share their experiences, discuss their personal challenges, and receive direct answers in close to real-time.
Why did WebMD venture into peer communities? Because, as Nan Forte, EVP of consumer services at the time, explained, what readers sought beyond the site's vast collection of articles was "specificity, and finding people like me. People who are starting their own [communities] are very specific: cancer patient who has heart disease and is a single mom. That becomes a community." The personalized support and ongoing interactions on offer in the communities contrasts starkly with the longer expert articles that are the mainstay of the site. And yet, the two types of advice end up complementing each other, and WebMD has integrated links to its public communities throughout the site's core content areas.
This brings us back to Amazon, and the reason why the bookseller has now chosen to incorporate a social network into its broader offerings. Amazon's recommendation engine is clearly effective at introducing customers to a diverse set of books and products; JP Mangalindan at Fortune.com argues that a lot of the company's extraordinary growth "has to do with the way Amazon has integrated recommendations into nearly every part of the purchasing process from product discovery to checkout." But these automated recommendations are still very different than suggestions from a trusted friend.
Meanwhile, Amazon's user reviews are typically helpful for customers choosing whether to make a purchase or not, and the fact that reviewers are crowd-rated lends an impression of trustworthiness and impartiality. But static reviews don't personally respond to questions — in other words, reading the reviews page still isn't comparable to engaging in an active conversation and building relationships with like-minded individuals.
Goodreads therefore bridges an important gap in Amazon's advice portfolio, and will keep customers engaged on a new front in the Amazon universe.
The Goodreads acquisition also highlights one of the difficulties inherent in advice consolidation: convincing consumers that the different sources of advice will remain truly complementary and not complicit when united into the same business. With Amazon's announcement, one writer took to Twitter to exclaim, "Say hello to a world in which Amazon targets you based on your Goodreads reviews. No company should have this power."
Can Goodreads remain an independent and active social network under Amazon? Will Zagat stay a trusted source for expert reviews under Google? Will WebMD's Exchange continue to provide supportive communities if the site's paying sponsors become too directly involved? Advice consolidators will have to walk a narrow line between advocating for both buyers and sellers, but that's the price they'll pay for keeping their customers in the fold.