perspectives

Scribd: Changing the Way the World Reads

Scibd_SpectrumPerspective

Our original investment in Ancestry.com (2003) was one of Spectrum Equity’s early forays into subscription businesses that help consumers find and consume content online. Since then we’ve explored countless other categories of online subscription content businesses and partnered with a select few companies including Lynda.com (2013), Headspace (2017) and AllTrails (2018). Today, we are pleased to announce the latest addition to our consumer subscription content franchise, Scribd. Scribd is an unlimited reading subscription service that offers access to the best ebooks, audiobooks, user-generated documents, and more, to over one million subscribers. Scribd possesses the very same elements that have attracted us to many of Spectrum’s other investments – global market, distinctive product offering, efficient customer acquisition, strong growth, and an accomplished management team. Hundreds of millions of people around the world subscribe to content streaming services such as Netflix, Spotify, and Apple Music. Music and video have thrived under streaming models; however, books have stubbornly held fast to an a la carte consumption offering. Scribd has slowly changed that paradigm and today is the leading online subscription service for readers globally.

Scribd’s Origins

Trip Adler, along with Jared Friedman and Tikhon Bernstam, started Scribd in Trip’s dorm room at Harvard in the mid-2000s with the mission of changing the way the world reads. Step one was enabling the first wave of digital content distribution by helping people publish offline content to the web easily and at no cost. Scribd aggregated this user-generated content into a centralized and searchable online library at Scribd.com. That foundational product functionality still exists today, with over one million pieces of content uploaded to Scribd’s library every month and over 100 million visitors from around the world. You may have even recently read a Scribd document away from Scribd.com – sites like TechCrunch frequently use Scribd’s reader to embed PDFs in articles.

In 2011, Scribd began partnering with premium content publishers such as Simon & Schuster, HarperCollins, Macmillan, and Hachette to fight online piracy and ensure that Scribd continued to promote online reading while respecting the rights and revenue streams of content creators. During the era of offline content transitioning online, publishers feared cannibalization by digital channels of profitable, familiar offline distribution channels (bookstores). Over time, Trip and the Scribd team convinced publishers to make a subset of their content available for purchase on Scribd alongside Scribd’s growing user-generated content (UGC) document library. The company introduced the world’s first reading subscription service in 2013.

Working with Premium Content Publishers

Publishers initially saw Scribd as a channel through which non-NYT bestseller list content could be monetized. Any consumption of content from new authors or generally older content (“midlist and backlist” content in publisher parlance) would be incremental revenue. However today, while many publishers are seeing flat or declining sales from most traditional distribution channels, Scribd’s rapidly-growing subscriber base represents a growing digital revenue stream for them. Publishers are leaning increasingly more on Scribd to drive digital revenue, and Scribd is working with those publishers to add more content to its platform rather than trying to disintermediate them by going directly to content creators. Also, over half of Scribd’s subscribers are from outside the U.S., often a difficult-to-access customer segment for publishers.


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Value Proposition to Consumers

Today, Scribd’s library now encompasses over 90 million user-generated documents across diverse topics, over one million ebooks, audiobooks, and more. This unique breadth of content, as well as access to multiple form factors (documents, ebooks, audiobooks, sheet music, podcasts, etc.) and publisher sources (self-published, independents, educational, "Big Five", etc.) provides a consumer offering not found elsewhere. Scribd has also started to bundle other services (including their first-of-its-kind bundle with the New York Times) into its subscription. All of this is available to consumers for a low monthly price, providing distinctive value relative to other ebook and audiobook services. Those other services typically utilize per transaction business models that financially punish users for consuming more content. In contrast, Scribd’s mobile and desktop apps promote discovery across content types, driving readers to consume both premium and long-tail, user-generated relevant content at no incremental cost.

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Business Model and Chapters Ahead

Scribd can afford to provide such value to consumers while remaining a viable business because of its elegant user acquisition model. Each document published to the web by Scribd includes a link back to the full content library on Scribd.com. The 90 million pieces of published user content drive billions of free impressions for Scribd annually, leading to more subscription signups. The money Scribd saves on subscriber acquisition cost goes elsewhere – to product enhancements, to content creators, and in recent years, to a profitable bottom line. This acquisition funnel serves as a barrier to future entrants and allows Scribd to compete with digital book services from much larger internet brands.

In addition, the company’s international subscriber base is growing rapidly. Scribd currently has over half a million subscribers from outside of the U.S. and only recently started to introduce localized experiences for international markets such as Mexico. We feel the international market opportunity is quite large and compelling, and that Scribd’s distinct content and customer acquisition strategy allow it to be uniquely suited to capitalize on this large opportunity.

Looking forward, we’re excited to join Trip and a growing team of talented operators. The company has scaled past one million subscribers with hundreds of publishers – we see the next chapters characterized by the continued building of a leading consumer brand, ongoing global expansion, and many more happy readers.

For more information on Scribd and Spectrum Equity’s growth investment, please read the press release.

Company KPIs were provided by Scribd.

Content contained in this blog post is not intended to and does not constitute investment advice. Your use of the information in this blog post and materials linked is at your own risk. Spectrum Equity does not make any guarantee or other promise as to any results that may be obtained from using this content. No one should make any investment decision without first consulting his or her own financial advisor and conducting his or her own research and due diligence. To the maximum extent permitted by law, Spectrum Equity disclaims any and all liability in the event any information, commentary, analysis, and/or opinions prove to be inaccurate, incomplete or unreliable, or result in any investment or other losses. The specific companies identified above does not represent all of Spectrum’s investments, and no assumptions should be made that any investments identified were or will be profitable. View the complete list of our portfolio companies.