On the Record with Chris MacAskill

Is FatBrain.com a low margin books
e-tailer, a b-to-b information management solutions provider or an emerging digital
publishing machine? Take your pick. The answer to this question still appears unresolved for FatBrain shareholders.

While the company’s roots lie in hawking technical manuals and books to
corporate users, FatBrain has emerged in the past two years as a full-fledged
information management provider. The company’s document solution services
now serve 300 of the Fortune 1000.

Last year, the company also launched eMatter, an innovative digital publishing
initiative, which immediately captured worldwide attention. With interest for
eMatter growing amongst consumers, FatBrain then decided to spin off this side
of its business into a new company called MightyWords back in March.

All of this corporate re-shuffling, combined with the perception that FatBrain is
still a pure e-tailer, has resulted in the market not treating FatBrain’s stock price
kindly to say the least. FatBrain’s shares are down over 80% from its 52-week
high.

We recently sat down with FatBrain CEO Chris MacAskill to better understand his
company’s overall future direction.

ISR: Let’s strip away all the buzzwords and online publishing hype. What is
FatBrain.com really today?

MacAskill: It’s evolving, but it started as a professional bookstore that sells
business-to-business. That is still the core of what it does, but it’s heading in a
very interesting direction. First off, to say a little bit about the professional
bookstore, we go into people like Sun, Cisco, Microsoft and Intel and become
their official bookstores.

ISR: On their corporate intranets, right?

MacAskill: That’s right. So those companies will buy $300,000 worth of books
from us a month. Their own employees buy these books individually, but then
they get centralized billing and reporting. They really love that. As you know the
business model for e-tailers in general is a very difficult model and no one has
completely cracked it yet. I don’t think there’s a profitable e-tailer on the Internet
yet.

ISR: E-tail has definitely been a tough nut to crack so far.

MacAskill: In any case, we’ve been laboring away at this business model for
about three years, [while] knowing the difficulties of making profits with it.

ISR: I think that most people have the impression that you’re still solely an
online bookseller of technical manuals and books. You seem to be moving away
from those roots actually?

MacAskill: Well, that’s where we started. It is still the bulk of our revenues so I
can understand the perception, but the company is migrating from that in a
logical way. So in the future, it’s not going to be anything like that.

ISR: Could you talk a little bit about your Information Exchange solution?

MacAskill: Basically, Information Exchange combines all the strengths of our
company to solve a problem that is a headache at every Fortune 1000 company
that I’m aware of today. Fundamentally, every corporation wants to go digital
with their own documents to save time and cost.

ISR: Right. Definitely.

MacAskill: They all want a centralized repository of those documents that has a
Web user interface. They love using FatBrain, Amazon and barnesandnoble.com.
They don’t like using their own internal document management software that is
complex. They love the Web interface. So we do three things for them. First of
all, we build them a Web site that can be branded for their company, but we run
it. It is the “FatBrain experience.” You get the cover scan, the ability to search
quickly, descriptions of everything and it’s your internal documents. It could be
your annual report, your human resources manual or a research report your
company wrote for internal consumption.

IS

R: Okay. Why did you really decide to spin off your consumer eMatter
publishing initiative into a separate company called MightyWords back in March?

MacAskill: Well, the original big idea behind eMatter was to secure digital
documents and sell them. As it turns out that applications to a much broader
audience than we had expected. It’s not in FatBrain’s charter to service authors
in fiction. FatBrain’s business is professional. It will always be that way. We’re
not going to dilute our business-to-business brand. We had two choices. We
could either spin MightyWords off and cater to that big opportunity and have it
separately managed and financed or we could just bypass the opportunity all
together.

ISR: So this was the best strategy for nurturing this opportunity?

MacAskill: Yes. We just decided that if we carved it out that we had an
opportunity for FatBrain shareholders to have a piece in the upside and for
FatBrain management to not have to be distracted by this.

ISR: I’m going to play the skeptic for a second. What are the true barriers to
entry that are stopping any existing portal or aggregation point from launching
its own direct publishing platform like MightyWords for consumers?

MacAskill: I think there are a number of things. One is that we have digital rights
management technology that gives a good user experience. As the world found
out from the Stephen King sort of debacle…

ISR: Now, FatBrain didn’t take part in that, right?

MacAskill: We didn’t. Our fear is that 500,000 people had a bad user experience
with that. If you go to MightyWords, you’re going to have a good user
experience. You’re not going to have to download a big client. We don’t force
you to read it on the screen. Secondly, most of these portals aggregate content
but they don’t go out and collect these unique content that you can’t get
somewhere else.

ISR: At least so far they haven’t.

MacAskill: Thirdly, I think what you’re going to see is that MightyWords is going
to be striking deals to syndicate its content to other partner sites. Rather then
spend a lot of money to have eyeballs come to MightyWords, we’re going to put
our content where the eyeballs are.

Get the Free Newsletter!

Subscribe to our newsletter.

Subscribe to Daily Tech Insider for top news, trends & analysis

News Around the Web