Kobo Gets Reeled In By Buy.com’s Rakuten

Not quite two weeks after Kobo put its latest e-reader tablet on the market, comes the news that Kobo itself was on the market and sold to Rakuten. A Japanese firm, Rakuten acquired Kobo for $315 million, which includes all the outstanding shares plus the stake of the majority shareholder, Indigo Books & Music.

Expansion Strategy

Snapping up Kobo came on the heels of Rakuten purchasing three online retailers earlier this year, Play.com, Price Minister, and Tradoria. Having already added Buy.com and LinkShare, the second largest affiliate network in the world, Rakuten’s latest moves are aimed at helping with its expansion into Europe. Kobo itself went on the offensive in October when it announced a partnership with the UK-based retailer WHSmith and French retailer Fnac to sell and promote Kobo’s tablets and platform.

The moves by both Rakuten and Kobo signal that neither Amazon nor Barnes & Noble can yet claim total exclusivity with an e-reader platform. However, the sale may also signal rough waters ahead for Kobo.

New Competition, New Challenges

When Indigo first spun off Kobo, it acknowledged that the move was a buffer against declines in traditional book sales. It offered a digital platform and diversity for the company to keep it competitive against Amazon and Barnes & Noble. So in an interview with Indigo CEO, Heather Reisman, it was no surprise that the question was asked why they’re letting the company go. For Indigo, it had become an issue of capital.

Over the next year, this business will need in excess of $100 million to take it to where this industry is going, and we just cannot play in that league for that amount of capital.

By putting Kobo in the hands of Rakuten, the hope is that the needed growth in the coming year can be accomplished and keep Kobo competitive in the e-reader market. And Indigo will walk away with $140-$150 million, a sum potentially earmarked to help Indigo continue its transition as both a physical and digital retailer. Indigo got a pointed reminder earlier this year that the evolution must happen as it watched Borders, an 11 percent owner of Kobo, go bankrupt.

A Pacific Partnership

A big part of Kobo’s attraction is how fast it’s grown in only 24 months. With 5.5 million users in over 100 countries, Kobo has the chance to carve and hold a niche against its larger competitors who aren’t available in every location. Kobo also differentiated itself from its more well-known competitors by integrating social and doing things like creating a book club from your Facebook friends.

Kobo has likely found a strong supporter in Rakuten, also the owner of Buy.com. The Japanese firm doesn’t play around when it comes to ecommerce, and it plans to push Kobo throughout its online networks. With a significant online presence in Brazil, China, Germany, Indonesia, Japan, Taiwan, and Thailand, Rakuten is keenly aware of what it takes to compete. Acquiring a 100 percent of Kobo expands Rakuten its North American presence. Undoubtedly Kobo will soon launch an aggressive campaign with LinkShare that will take aim at taking some of Amazon and Kindle’s market share.

After the deal is approved, likely in early 2012, Kobo will maintain its headquarters in Toronto, Ontario.

About Britt Raybould

Britt Raybould has a passion for telling stories and she specializes in helping companies figure out how to tell their own stories. Through her firm, Write Bold, she shows companies how storytelling can define them, both to their customers and within their industry. When she remembers to, Britt blogs on her personal sites at bold-words.com and brittraybould.com. You can find Britt on Twitter @britter.

Twitter: britter

2 Responses to Kobo Gets Reeled In By Buy.com’s Rakuten

  1. […] mThink makes it a point to ensure that the BLUE BOOK doesn’t turn into a popularity contest. Part of their effort includes using a Blue-Ribbon Panel to review the responses and add industry perspective to put the answers of “affiliates, publishers, advertisers and agencies ” in context. Owned by Japanese-based Rakuten, LinkShare’s ranking only bodes well for future efforts to expand the reach of Rakuten’s latest acquisition, Kobo. […]

  2. […] home territory.It follows two years of aggressive expansion by Rakuten, including the purchase of Kobo, Play.com, and Buy.com Each of these announcements only seems to confirm Rakuten’s goal to […]