The thing is, Goodreads always felt like a feature. They failed to build a business, let alone one that should take VC (and hence be required to generate venture-scale returns). And my guess is the only way they could have generated the right returns is to move down the sales funnel, which is a direct threat to Amazon's business. Making the subsequent behavior inevitable.
It feels like there are a couple very nice small (not necessarily lifestyle, but not vc) businesses in that space.
Taking VC put them on a collision course with Amazon because of growth requirements, and the limited ways to build the type of business that requires. Advertising and affiliate fees almost certainly don't create a large enough opportunity (interested if you have counterexamples!), and put them on that crash course with Amazon. As the obvious route to the size of business that merits VC is to attempt to cannibalize AAmazon's business. Probably by being the recommendation engine that starts sales, then starting to sell books themselves instead of being leadgen.
Had they instead chosen not to take VC: they had 35 headcount at the time of acquisition. That load probably requires $7m to $10m/year of revenue, particularly when they have to start doing data deals for all that book data / cover photos. I suspect they couldn't make the business work w/o VC given they ran two years on that $750k angel round. And even if they could, having a near-monopsony relationship with their affiliate fees partner makes them not a real business because they are highly vulnerable to Amazon predation. The same as Mozilla -- when there's just one buyer, that buyer names the price.
edit: put more succinctly: a business that either ran and grew on earned dollars (ie no vc), or a VC-backed business that didn't rely on the company you were attempting to cannibalize to play nice with you.
I agree that VC wasn't a great choice. But I don't see much evidence that they were reliant on investor money; per Crunchbase they only took $2.8m over 6 years of operation. And I don't think Amazon was their only potential source of revenue. Book publishers clearly still spend money on marketing, and Goodreads would be able to do very precise targeting. I also suspect they could have sold well-targeted ads to others, as some book categories strongly indicate monetizable non-book interest.
People are weirdly imprecise with their language in this domain. It’s like when people say a corporation is forced to do something to appease its shareholders, a complete falsehood.
