Imagine going to investors with this pitch: You want to create and sell an e-reader. Never mind this "Kindle" thing everyone’s talking about. Oh, and furthermore: Rather than connecting to a universe of downloadable content, your e-readers will come preloaded with a limited number of books. And be locked down, forever, with only those titles.
You’d get laughed out of the room, right?
Yet Mitch Kroll, whose Ohio-based company Findaway makes just such a product—called "Lock," and newly available to schools and libraries this week—is the one having the last laugh. Founded in 2005, just as the iPod was taking off, Findaway carved out a bizarre niche that sits somewhere in between digital and physical content distribution. And though it might seem difficult to believe, the privately held Findaway became profitable by its third year, now has 130 employees, and its revenue is only growing, says Kroll.
The reason you’re having trouble believing this is that you’re thinking like a consumer, but Findaway doesn’t sell its products to consumers. Take Lock, which was first sold to the U.S. Navy, under the branding NeRD (Navy eReader Device). The Navy wanted an e-reader preloaded with books for use on its submarines, where space is too tight for a library, but an Internet connection is nowhere to be found. It also wanted a basically dumb device, one that couldn’t take photos or video, and one with no connective capabilities that could be exploited by a hacker.
A very specific market, if ever there was one, and not one a mass-market company like Amazon would bother thinking about. But Findaway was there with a solution. And it turns out that there’s an array of environments that, for various reasons, happen to be served well by preloaded digital devices—not just e-readers preloaded with books, but devices loaded with a single audiobook or movie.
In what seems practically like a product you'd only find pitched on Saturday Night Live, Findaway actually sells digital devices that contain a single audiobook, and nothing else. These "Playaway" device-audiobook-things even come labeled with the cover of the specific book in question, and libraries actually have made the decision to buy them up, at $35 to $55 a pop, in quantities that make them a viable product for Kroll. "Say someone walks into a library and makes a decision to listen to an audiobook. He has three choices: he can check out a CD, he can download the book to a smartphone or tablet, or he can use the Playaway," says Kroll. "Among those three choices to consume an audiobook, we win many times."
That library patron may not have a smartphone or tablet, or the library may not be equipped with Wi-Fi for downloading. He may not have a device that plays CDs, or he may not feel like popping the discs in and out. He may want to go jogging while listening to the book, but he has an aversion to the long download times it might take to get the book onto his own device. Whatever the set of reasons, there are cases that fall through the cracks of the options that serve most consumers, and Findaway is there with its own quirky (but viable) solution.
"I get that it’s a bit counterintuitive," says Kroll. "All I can say is we’re getting close to having sold 5 million Playaways."
There are other use cases where Findaway products sometimes win, too: environments that tend to be, in Kroll’s words, "multiuser circulating environments." Consider the third-grade classroom where the teacher wants to circulate a certain e-book, and the kids are too young to have devices of their own. There are other groups, too, that Kroll says are served by Findaway’s products, be they audiobooks or e-readers: patients in hospitals, service members in Iraq, test prep teachers who’d rather not hand out bulky texts. Kroll says that certain businesses that want to circulate a lengthy document in a secure way are also interested in Findaway’s devices.
What happens, though, as some of these niche markets dry up? What happens when every library has Wi-Fi, when the generation unfamiliar with smartphones has passed on, and when mobile devices are cheap and ubiquitous enough to be staples among even the less fortunate? Kroll acknowledges the undeniable digital tides, and so he has built another division within his business that amounts to a digital distribution network. Findaway has 55,000 audio books available to download, for instance, which "essentially represents the universe of audiobooks that exist," he says.
This enables Findaway to become the backend audiobook provider for certain book distributors; Findaway has partnered with Follett, for instance, the wholesale distributor of educational materials, as well as with Baker & Taylor, which distributes to public libraries. 3M, which has a cloud library digital lending system, is another partner. Companies like these, which may consider the likes of Amazon to be competition, would rather partner up with a company like Findaway.
Still skeptical? Then you’re still looking at Findaway through the lens of the consumer, which can be difficult to escape. "I’m with you," says Kroll, who in his personal life loves his mobile devices as much as anyone else. "Originally, as a consumer, I don’t quite get it."
No matter—so long as Findaway's unusual target markets do "get it," Kroll should be doing just fine.