iPhone’s Stanza Validates E-books and the Kindle

I love it when I hear news like this. Andy Greenberg and James Erik Abels over at Forbes just reported that the “IPhone Steals Lead Over Kindle“.

They’re talking about the Stanza iPhone app. It’s been available free on Apple’s (AAPL) iPhone App Store since July 2008 and has been downloaded more than 395,000 times at an average installation rate of 5,000 copies a day, according its developer, Lexcycle.

So how is it beating out Amazon’s (AMZN) Kindle?

By comparison, Citigroup estimates Amazon will sell around 380,000 Kindles in 2008… In other words, Apple may have inadvertently sold more e-readers than any other company in the nascent digital book market.

That’s fine though. I’m still exceited. To me, this is yet another data point on the validation of the e-book market.

I know, it’s a stretch to claim that Stanza has validated e-books to the mass market. But it does show to me that there is a growing early adopter audience who’s learning a new behavior – reading books on electronic devices. As this audience grows, they’ll provide a good reference base for the early majority.

Validating a New Market

Every time a disruptive technology enters the market, people either:

1. Learn how to use it because it solves a problem satisfactorily and is worth the learning curve
2. Or ignore it because it doesn’t solve squat and/or the barrier for adoption is just too high

In many cases, one company inadvertently helps another by teaching the market the benefits of its solution, thus paving the way for stronger competitors. Take VisiCalc, Lotus 1-2-3, and Microsoft (MSFT) Excel, for instance. Before there was any spreadsheet software, there were pencils and paper. Not all finance professionals saw the need for doing their work on a computer.

But then they saw VisiCalc in action and were hooked. VisiCalc, in effect, had validated the spreadsheet software market.

Soon thereafter, Lotus 1-2-3 stepped in and one-upped VisiCalc. It had more desirable features, such as automatic graph creation and macros. Then Microsoft Excel entered the market and changed everything. Some argue that Excel wasn’t a better product, but Microsoft was a stronger company. Using the distribution power of its operating system, it swallowed up the spreadsheet market.

Being a Strong Competitor

Just because you validate a market doesn’t mean you’re doomed to failure. It’s a case of the first-mover advantage. In some markets, strong companies can validate the market and own it through exploiting a network effect (where the value of your offering increases exponentially with the size of your customer base). Amazon and eBay (EBAY) are popular examples of this.

What’s more important is being a strong competitor. In the spreadsheet software market, Microsoft was that strong competitor. They were able to exploit a second-mover advantage:

A second-mover firm… does not face the marketing task of having to educate the public about the new project because the first mover has already done so. As a result, the second-mover can use its resources to focus on making a superior product or out-marketing the first mover.

In Stanza’s case, I doubt they’re doing any marketing to educate the market. This hasn’t stopped them from creeping onto Amazon’s turf, however. Although they only offer public domain books right now, they’ve been working on some deals with major publishers. I smell a battle.

This is where being a strong competitor will win out. Amazon has the muscle of vast resources, brand name, and most importantly, publisher partnerships.

Is There an E-book Market?

Which brings me back to why I’m so excited about this news. I believe Amazon’s got the right approach, though there’s been some debate about whether or not this market exists. Do readers really want e-books? Or are they already satisfied with regular books?

In my opinion, yes, there is a market. Yes, some do want e-books (I sure do!). And Stanza helps to validate that. While I know it’s not representative of the mass market, its quick adoption shows that it’s not e-books themselves that are holding consumers back, it’s the lack of easy-to-use e-book devices.

Fortunately, I believe Amazon has the strength to pull this off. I have high hopes for them in creating a usable and enjoyable (and hopefully, delightful) e-book reader. They just have to keep on listening to their customers and improving their device. They’ve got the Amazon Store in place, e-books in the inventory, and some early adopters already using it. Now it’s a matter of putting out a cheaper and better device.