Despite numerous uncertainties about the convergence of publishing and new technologies, established book-publishing companies have recently funneled large amounts of capital into new media startups.
Topping the list of publisher financiers is Bertelsmann. The company recently paid an unspecified amount to acquire a controlling stake in Dealpilot.com, a price-comparison search engine formerly known as Acses.com that sparked the online book discounting wars and also allows for currency conversion. (Given Bertelsmann's stake in B&N.com, the acquisition could create a conflict of interest. A price-comparison service can be tweaked to prefer certain sites, and the mere perception of the possibility could jeopardize customers' trust.)
Two weeks ago, a new e-commerce company founded by two Microsoft alumni, imandi.com, announced it had scored $15 million in funding from, among others, the German conglomerate. As a "reverse-market" e-commerce outfit, imandi.com is sort of an amalgam of online auctions (in that it allows users to name the product) and zShops (in its ability to search established retailers). Like both models, money is made from referrals, with no warehousing or shipping done by the site.
The investment from Gutersloh is even more striking when one considers that Bertelsmann, with its interest in bn.com, has now invested in a company that could pose the greatest threat to Amazon's quirky new approach to selling products online.
Bertelsmann, however, was not listed among the latest round of financiers for NuvoMedia. Bertelsmann, along with Barnesandnoble.com, had been an early investor in the Rocket eBook. But other startups have recently tapped into publishers' resources. Vault.com, the online job site that also functions as an electronic and print publisher, revealed recently that its $9-million investment has come, in part, from the Ingram Book Group. Vault.com will use the funds to add staff and increase its marketing efforts, as well as for other corporate purposes.
For sheer quantity, perhaps no company has flexed its capital-raising muscle as impressively as Fatbrain.com. Already a public company, the Silicon Valley startup has just secured $20 million from Vulcan Ventures, run by Microsoft co-founder Paul Allen. Fatbrain, which two weeks ago launched its self-publishing program eMatter, hopes the investment will help it market the platform to an even greater number of authors (nearly 3000 have signed up, most of them of the self-published variety.)
E-startups have also turned to computer companies for funds. Hewlett-Packard has invested $2.5 million in Glassbook, the Acton, Mass., company that will soon launch its own e-book software. Glassbook will use the money for product development and marketing and, indeed, given its lack of revenue, these dollars couldn't come at a more opportune time. But many of these investments, said analysts, raise questions about the rush to fund unproven businesses. Analysts point out that for every successful startup there is a company that fails. Glassbook may have been more prescient than most in grasping the shift from hardware to software, but the entry of Microsoft Reader, an e-book reading software program, could set the company on its heels. On the other hand, speculation that Microsoft will soon unveil plans for an inexpensive reading device have further worried the industry and increased the urgency of locking up funds.
