Before a mostly student audience at the NYU Entrepreneurs Festival held on March 4 and 5, Guy Story, founding CTO of Audible, was interviewed by Bloomberg Businessweek columnist Josh Brunstein. Story discussed with Brunstein the history of innovation at Audible, an online audio book company founded just over 20 years ago by CEO Don Katz. Both Katz and Story left their positions at New Jersey based Bell Labs to pursue their vision for a new and innovative technology for the Internet.
According to Story, Audible was founded to create “the first digital audio player for the internet”. Audible’s value proposition to the consumer included an extensive library of content that could be more cost effectively delivered, while also offering users a more convenient and spontaneous way to access content via a portable player.
“Delivering a large file over a telephone network and then storing it …were utterly ridiculous problems that we had to solve,” explained Story. Those challenges were faced in a small office in Montclair, New Jersey absent the abundance of resources and talented co-workers they had around them at Bell Labs. The Audible team also realized that if they failed, the company would fail, presenting them with a type of risk that they had not faced within the security of the Labs. It was high pressure and long hours of work.
“Innovation is easy, and adoption is hard,” Story said sharing a tenet he had learned from his Bell Labs days that he applied to Audible. He cited Audible’s initial difficult effort to sell audio books online. People called up customer service saying “I am waiting for my cassettes. Where are my cassettes?” They were then instructed to go to the web site’s home page to do a “digital download”, but that term had no meaning to them. It would take time to educate their target customer.
“We knew it was a great idea. It was all about trying to survive and being tactical and opportunistic and to use the current term, pivot as necessary,” Story said. They overcame numerous technology challenges and launched the first portable digital audio player in late 1997 that preceded the first mp3 players—that Story displayed to the audience.
Audible had non-technical challenges, as well, according to Story. They realized they were a small unknown company with a brand new device in new product category which made sales and marketing difficult. But the introduction of the palm pilot and Bill Gates’ public acknowledgement of Audible’s technology as being something “cool” opened up marketing pathways. They abandoned the hardware side and focused on partnering with those making the devices that might prompt faster adoption of the technology. This went on for quite some time until Apple emerged and took their technology for use int the ipod. With the added bonus of Apple driving tremendous traffic to Audible’s web site, the pivot to which Story alluded began to pay off.
“Finding a co-marketing partner is the #1 way to bring a product to market,” Story summed up. It was possibly the most important lesson he learned from his Audible experience.
Prior to this significant milestone with Apple, the Audible team recognized another major challenge associated with consumer adoption. They were concerned about protecting the copyright of the digital content. They feared: “It was going to spread all over the internet, no one would make any money and the whole thing would collapse.” To counter this Audible developed their own digital rights system that Apple also took as well for use in the ipod, iphone and itunes going forward.
Audible’s birth was part of the period in the late 1990’s known as the Internet bubble. It was a time when there was a rush to bring new technology to the market and when valuations of tech startups skyrocketed. Story explained that they were very much part of that scene which included Audible going public even though they had very little revenue and were unprofitable. They made the decision to go public out of their concern that a competitor would emerge and readily gain substantial resources via the hot funding scene happening in the IPO market on Wall Street.
Upon going public they experienced the flush of cash, but also then painful throes when stock prices tumbled and the Internet bubble burst. Bootstrapping which helped them through various stages again became critical and that eventually led to their acquisition by Amazon.
Amazon’s acquisition of Audible appeared to be a convergence of events, as described by Story. CEO Don Katz’s connecting with Jeff Bezos at a conference each year opened initial dialog. Amazon, having been founded originally as a book seller, was working on the Kindle when they approached Audible to fill out their own audio book strategy. That sense of cultural compatibility made the Audible team receptive to acquisition. That possibility also addressed one concern they had of being overwhelmed by a much larger competitor. As CTO Story valued the technology and resources that Amazon, “the biggest ecommerce retailer in the world”, would bring to them.
“You are the best at what you are doing, continue to do that, just do it better”, was Amazon’s message to Audible, according to Story, once the acquisition was completed. Audible retained its own web site and remained in their Newark headquarters that is now being expanded. With that expansion Audible recently announced its intent to contribute to the local ecosystem and invest in the innovators of the future.
