Google wants to stick adverts in eBooks -

Search engine outfit Google is investigating a plan to slash the cost of eBooks by sticking advertising inside.

For centuries books have mostly managed to escape the clutches of the advertising industry. This is partly because it looked silly, but mostly because books tended to sit on people's shelves long after any advertising campaigns had ended.

With the development of eBooks, where advertising can be continuously updated, books are set to be transformed, if Amazon and Google get their wicked way.

Both have eBook stores which can be used to gather data on readers to provide targeted advertising.

The claim is that if a book is made self-financing the cost, like that of newspapers will fall and users would be happier. Google tells us that with advertising books could be free.

While this should certainly be true, chances are prices will stay the same as publishers continue to rip off eBook readers.

Currently publishers have a model for books which has worked for centuries. If you have a low cost book which is on the stands for £10 then between 50p and £1 will go to the author, £5 will go to the distributor and the rest will go to the publisher. The publisher has most of the upfront costs in making the book and marketing it. However, the cost of production would be about £2 at the most.

Ebooks should have turned that model on its head. The unit cost of production drops to a few pence, as should the cost of distribution. Distribution and storage involves sitting on a server somewhere. IT does not require expensive storage or sales people travelling to isolated book shops.

As a result we should have seen the average cost of an ebook fall by 70 percent and publishers still make a killing. But we didn't. Some books fell in price but the cost of an eBook is only slightly less than that of a mass produced paperback.

Authors did not get any more money from ebooks so the profits and some distribution outfits, such as Amazon, still demand a large cut to distribute ebooks. The winners, however, have been the publishers who now face much lower costs.

Besides being annoying, advertising in books will bring additional costs. Publishers will have to hire sales people or outsource the work. Assuming that the advertising covers that cost then it will need to make significant profits before publishers will consider dropping the retail price.

Publishers then will look at their current unit cost, and profits, and note that people are still prepared to buy their product at that price without advertising. Why move to adverts?

In the majority of cases there would be little point. But in the cases of some best sellers adverts would make a huge amount of dosh. A book written on something obscure will sell about 6,000 so the unit cost of production is high. But a "bestseller" will sell a minimum 500,000 and the unit costs are spread out over a larger number of books. Authors are also forced to take less royalty money in bestseller deals. Advertising staff would be able to stuff more advertising in them. No one is going to want to advertise in an epic poem "The Siege of Granada" but lots will be interested in getting their name associated with the next "Harry Potter".

Google argues that its Adsense technology, which analyses the book for keywords and installs adverts, regardless of the books obscurity, will provide the way around this. Advertisers might not be just interested in "The Siege of Granada" but travel companies flogging tours to the town might like to see their advert included in it as part of a package.

This might be true, but someone who is interested in looking at the subtleties of epic poetry is unlikely to be interested in bucketshop flights to Spain.

What Google and Amazon do not understand is that when it comes to ebooks, publishers do not want to change the model or the price. At the moment everything is working rather well for them. They make more money and hardly have to change at all. They certainly do not need to put readers off by shoving adverts in their products.