5 Reasons Why Amazon Is Calling Audible

It's all over but the tendering. (Nasdaq: AMZN  ) completed the first round of its tender offer this morning, snapping up an 87% stake in digital spoken word specialist Audible (Nasdaq: ADBL  ) .

The rest will come at the same $11.50 a share in cash. Now that Amazon owns the lion's share of the company, it's merely a formality.

What will Amazon do with Audible? There's no harm in speculating. Audible is attractive on its own. It closed out 2007 by growing revenue by 34%. It posted a small profit during the year, even if it was the result of a one-time state tax benefit.

Buying Audible is about more than just the incremental business. Amazon wouldn't be making a play here if it didn't see Audible filling other needs. Here are a few of the ways that Audible's purchase will help out the leading online retailer.

1. BYOB means "bring your own bookworms"
There are 457,000 AudibleListener members and growing, including 324,000 Gold and Platinum subscribers. If you're passionate enough about literary content to pay monthly for this access -- whether you're always on the go, visually impaired, or both -- Amazon would love to have you.

Even if many of the existing Audible users are probably regular Amazon shoppers, given their dot-com fluency, it certainly doesn't hurt to have so many digital bookworms delivered on your doorstep, especially after Amazon's acquisition of audiobooks specialist Brilliance Audio last year.

With Audible's nearly half-million vetted buyers of digital content, Amazon is moving into the neighborhood it wants to be a bigger part of.

2. Mr. Green in the library with the Kindle stick
Amazon rolled out the Kindle four months ago. It is clearly positioned as an electronic reader. It's too bulky to compete with the portable devices that AudibleListeners prefer. However, we still don't know what future versions of the Kindle will look like.

One can only hope that future Kindle models will be smaller, yet pack more features like greater storage capacity, better audio, and a touch screen. This would provide a pretty neat future where Audible and electronic books converge. Imagine reading a book on the subway, then tapping a word twice and letting the audio version of the book take over as you walk off.

Now that Amazon has a vested interest in Audible's success, you can bet that Kindle integration is in the plans.

3. Amazon recommends recommendations
AudibleListeners may cringe at bumping up against Amazon's marketing arm, but companies like Amazon and Netflix (Nasdaq: NFLX  ) that pride themselves on offering up recommendations based on customer patterns know what they are likely to buy next.

Whether Amazon is able to market hard goods -- or additional digitally delivered goods -- will be a delicate balance. AudibleListener subscribers are going to be suspicious at first. However, once they let their guards down long enough to know that Amazon can be a concierge, a confidant, and a merchant, it will make it that much easier to make subscribers even more profitable to Amazon than they ever could have been to Audible.

4. Taking a bite out of the Apple
Audible has always been on good terms with both Amazon and Apple (Nasdaq: AAPL  ) . They have always been the most likely players to trample on Audible's turf, given Amazon's market dominance in physical books and Apple's mastery of digital music delivery. Audible's greatest achievement has to be that it was able to partner with both companies to keep its potential enemies close.

When it stood alone, Audible never had to choose sides. However, now that both Apple and Amazon are doing a lot of the same things -- selling digital music and video and even renting movies -- sharing Audible was unlikely to be permanent.

Now Amazon gets to have Audible all to itself for the battle that is bound to get messy.

5. The details are in the e-tail
Online retail is getting competitive. Amazon has been able to make the most of it, actually gaining market share and accelerating revenue growth in recent quarters. Scaling its model and keeping it sticky with its Prime loyalty shopping program has been great, but what will Amazon do for an encore?

Real-world juggernauts like Wal-Mart (NYSE: WMT  ) are getting smarter about their dot-com storefronts.

Here is where Audible can help. Amazon will now be able to control the gateway of Audible promotions. I would be shocked if in the 2008 holiday season, Amazon doesn't pitch portable media players sold on its site without some form of extended free trial of Audible as a carrot.

Keep in mind that we're not just talking about MP3 players being put out by companies like SanDisk (Nasdaq: SNDK  ) that are Audible-worthy. Another big seller through Amazon is GPS systems, and market leader Garmin (Nasdaq: GRMN  ) is also serving up Audible content.

Yes, Audible fits nearly everywhere you turn in Amazon's quest to grow. The only real shocker is why Amazon didn't get around to snapping up Audible sooner.

For more from Amazon:

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