82% of Audible Revenues Now From Subscriptions; Audible Emulates HBO

CHALLENGE
When Audible first launched in November 1997, it seemed more like Amazon than anything else. The home page displayed a bunch of book covers that shoppers could buy a downloadable digital-audio version of.

"The site was an Amazon knock-off," admits PR Director Jonathan Korzen.

The problem was Audible's corporate goal wasn't to become an Amazon-clone bookstore.

Instead, they wanted to be like HBO.

VP Marketing Shoshanna Zilberberg explains the vision, "In awareness, books compare to movies. They are big brand names people have warm feelings toward. That's the bread and butter."

But, on top of the audio books, Audible layered offers for ongoing radio content from NPR delivered on-demand, and audio versions of famous newspapers such as the New York Times. Then, last but not least, they began to create their own content, such as an audio series by Robin Williams. "That's our 'Six Feet Under'."

Audible hoped they'd be able to lure in buyers with the book offers and educate them about the joys of digital audio in general. And then upsell them to other types of content, until consumers were ready to view Audible as a monthly must-pay bill just like cable.

CAMPAIGN
As Zilberberg says, "I can't afford to do big brand advertising to raise awareness. This is a completely direct response model." So, Audible used four main tactics to generate fresh traffic flow to the site…

a. An affiliate program, called "Spread the Word" to target evangelical users more than online entrepreneurs. This may have lowered overall results, but helped ensure that messages would go out from people in Audible's demographic (slightly older, highly educated, wealthy, slightly-left-of-center consumers) to each other, instead of showing up on potentially cheesy affiliate marketing sites.

b. Direct response online advertising on carefully hand-chosen media - such as Slate's Doonesbury comic strip and various keywords on PPC search engines.

c. Content partner mentions and links. An obvious win for both sides, as long as the partners were able to put the links in notable positions. (The partnership world is littered with deals where the proposed links were never placed in a good enough spot to generate real traffic.)

d. Technology company marketing tie-ins. At first the challenge was in getting tech companies to add audio download capabilities to their offerings.

For example, Apple didn't think becoming Audible-compatible was a terribly high priority … until Audible started asking Mac fans who complained to them to email Steve Jobs directly. Korzen says, "I don't want to call it blackmail, but it clearly demonstrated user demand to him in a way that was tangible." After a couple of months of emails, Jobs caved in.

Once tech deals are signed, marketing steps in. "I want messages at every touchpoint," notes Zilberberg.

"From an inbox brochure, sometimes on the outside of the box, to their Web site, to emails sent to their current customer database. I want it integrated - that's when it works." (Link below to emails to Apple customers.)

Next, the team pull out all the stops to convert this traffic into subscription buyers, or at the very least one-time audio book buyers who can hopefully be upsold in future.

Zilberberg completely revamped the old Amazon-style site this summer, replacing the ultra-cluttered home page with one overwhelming message: subscribe and take your pick of three gifts - 50% off your first month, an MP3 player, or a free audiobook.

It's still possible to buy single titles, but you have to dig a bit.

She also focused on creating specialized landing pages for each major marketing partner, going well beyond the 101-level of stick-partner-logo-here-on-template:

o Page colors as a whole may reflect the partner's site colors if they are highly distinctive.

o Audible's main site navigation is not visible so it doesn't distract these new visitors from the primary goal of the landing page which is to convert them into subscribers.

o Landing pages also include a link to a snippet of audio that visitors can sample. (It's worth noting, Audible's telephone hold soundtrack is also an audiobook sample.)

o Unless the partner is an Audible content feed, creative focuses on highly recognizable best-selling book covers, each specifically chosen to appeal to that partner's particular audience.

As Zilberberg says, "People always connect to things they have a prior disposition to first. Cover art is our greatest brand asset." And then later, when they've gotten used to your service, you can upsell them on the whole HBO-style original content idea too.

Visitors who chose a lower commitment level - such as just buying one audio book or registering without buying - get emailed a regular stream of offers with permission. Again the offers vary from a particular book title to a flat discount so as to appeal to as many people as possible.

"We experiment with added value to get someone over the hump of ala carte buying to subscriptions." (Link to samples of email campaigns below.)

It's worth noting that Audible does not offer an all encompassing "get everything we offer" subscription. If your appetite goes beyond your monthly allotted portion of content, you have to buy more piece by piece.

Audible hopes this will be more profitable and more appetizing to consumers' pocketbooks than a single giant price for everything.It's a bit like HBO with pay-per-view tacked on top.

So, every month the marketing department sends customers an email newsletter filled with mouthwatering descriptions of everything they can purchase. (Link to sample below.)

RESULTS
250,000 consumers have purchased content from Audible in the company's history - including single sales and subscriptions. While the Company isn't profitable quite yet, its earnings have been rising substantially and costs lowering. (Link to latest income report below.)

Plus, Korzen notes that for the first quarter in 2003, subscriptions accounted for 82% of all revenues. Investors like to hear that because it indicates the Company has an annuity income stream it can count on that costs far less in marketing outlay than one-off sales.

Last but not least, An unexpected market appeared last year when the Acquisitions Director for Kalamazoo MI's public library system called up to ask if he could buy in volume.

Turns out libraries are fed up with handling audiotapes because they take up costly shelf space and borrowers sometimes return sets with missing or broken cassettes which means the entire audiobook must be repurchased.

While the folks at Audible are quick to deny they are competitors to the traditional books-on-tape industry ("We'd be biting the hand that feeds us," says Korzen) it's starting to look like that could change over time - especially since Audible's pricing structure is based on always being 20-90% less than tapes of the same title.

More results data:

- More than half of Audible's new customers now already own an MP3 player they can listen to their purchases on. This makes selling to them so much easier because you don't have to push hardware as much.

- However, Audible's service is complicated enough even for MP3-player-owners to understand at first glance, that the Company has found brief ads don't work. "It's difficult to explain the value in a banner or in 30-words in an email sponsorship," says Zilberberg.

- PPC search campaigns are working in a limited fashion. "I have to be very careful what terms I buy," says Zilberberg. "It drives traffic but doesn't convert from someone interested in John Grisham." Terms that do work include books on tape and audiobooks.

- New subscribers who come from partnership deals get "by far our highest conversion rate after 60 days than any other channel," says Zilberberg.

- The anonymous voice professionals who create various audio newspaper editions every day are starting to become branded stars. For example, when the guy who normally reads out the WSJ every day went on vacation for two weeks, about 40 customers contacted Audible to ask what was up.

"People had developed an attachment to his voice," says Korzen.

That kind of attachment indicates Audible's month-to-month subscription business probably will have a far lower churn rate than industry average.

Useful links related to this story:

o Samples of Audible email campaigns and newsletters, ad well as an Apple campaign on Audible's behalf:
http://www.marketingsherpa.com/aud/ad.html

o The Company's latest financial statement
http://www.audible.com/audible/help_info/press_releases/press_release051203.html

o Home page http://www.audible.com