readfy | Overview

New digital media and devices have already changed many industries and their business models dramatically. The MP3 format and the associated iPod turned the world of music upside down. When the iPad became available in 2010, the same fundamental changes began in the book industry.

The large number of e-readers sold and the wide distribution of tablet computers and smartphones have already caused the electronic book market to develop into an important and promising business area.

In Germany alone, approximately 8 million tablets and more than 800,000 e-book readers were sold in 2013. In the U.S., 20 % of the books read by private customers are e-books. The market share of e-books in Germany has increased to more than 10 % in 2013 within a five-year period. According to the trade association Bitkom, 21 % of the population in Germany already read digitally – a trend visible in all age groups.

E-books have become accepted by the general public, which offers a great opportunity for new business models similar to those already established in the music industry for instance. Most customers wonder why e-books are hardly any cheaper than printed books although the costs for production and distribution are significantly lower. A free model successfully offered by music streaming services such as Spotify, Deezer, and others does not yet exist for e-books. In the music market, many paying customers have already been attracted by means of free introductory offers: Many customers first use the free offer and then sign up for ad-free, inexpensive premium subscriptions. We want to use this concept for e-books as well. By means of its service, readfy takes the next logical step in the evolution of digital book offers.

As soon as the mobile app of the readfy platform has been downloaded and installed on the smartphone or tablet, the free reading experience begins.

Users may select e-books from bestseller lists, discover new books while browsing recommendations, or search for specific genres or authors. There are no limitations with regard to the number of books and the reading period. No matter whether you just want to browse through a book or read your favorite book several times in a row – everything is possible. Thus, you can make a voyage of discovery to your heart's content without having to worry about the costs or possible risks.

Moreover, users can create bookmarks, edit comments, and use attractive community features, e.g., discuss and recommend books.

On readfy, Finding New Books Is Easy and Fast

As early as at the time of the product launch on 7 February 2014 (initially in the form of a limited "public beta launch"), readfy offers a sophisticated reader app for Android smartphones and tablets containing a catalog of more than 15,000 books of very different genres by more than 120 publishing houses that can be read for free for the first time on readfy. The public market test of the readfy service was scheduled deliberately in order to learn more about the customer needs and to further refine the business model. The launch of the completely finished readfy platform is planned for the summer of 2014.

Until the end of the year, we will upgrade the entire technological platform so that readfy may then be used on Apple devices in addition to Android systems as well. We will also have increased our offer to approximately 30,000 books by then.

Additional potential exists if the readfy service is made available on e-readers. Currently, however, e-readers only represent the smaller proportion of the reading devices in Germany (18%) and other countries. Therefore, we initially focus on the much more widely used Android and Apple devices, such as tablets and smartphones.

In the course of the planned internationalization, English and Spanish books will follow in 2015, as will the expansion of readfy into other European countries and the U.S. The technical platform necessary for this expansion will be upgraded step by step and operated from a central location in Germany by readfy.

The internationalization is supported by readfy co-partner Gerrit Schumann, who founded Simfy (www.simfy.de) and is now one of the top executives of Deezer (www.deezer.com). Both Simfy and Deezer are among the most successful music streaming services in the world. Consequently, Gerrit Schumann has gained valuable experience establishing the freemium business model in the music industry. Together with the readfy team, he has developed the specific business model of our service, and he has been continuously supporting us in founding and developing the company.

The technical product development is supported by readfy co-partner 1stMOVER (www.1stmover.org), an incubator from Düsseldorf specializing in mobile start-ups. The readfy team is located in the same city and is in contact with other mobile start-ups of 1stMOVER on a daily basis. Last but not least, e-book market experts are also part of the readfy partner team, which is why we, the managing founders, have strong support from three sides in the areas of marketing, development, and book market.

We aim to become one of the international market leaders in free reading and to establish our company as the technological leader in advertising in e-books.

Advertising on websites and in search engines (particularly Google) is already a multi-billion euro market. With its business concept, readfy opens up the advertising market for e-books, which did not exist previously. For the first time, it is possible to integrate targeted, personalized advertisements in the form of banner ads, full-page ads, or videos into e-books. The technology used for this purpose has already been developed since the summer of 2013.

Attractive Advertising Formats with Familiar and New, Innovative Formats

By means of the readfy advertising platform, it will be possible to place subtle advertisements in the books that are targeted precisely at the interests of the users. Of course, publishing houses and advertising customers are only able to access anonymized customer data for readership and advertising analyses or for advertising campaigns. The customer data are stored on high-security servers in Germany.

Apart from their share in the advertising revenues, publishing houses on readfy also benefit from a better understanding of their readers and of the interests and reading habits of these readers. New, exciting book projects may thus be oriented toward the preferences of the readers, which improves book sales of the publishing houses and their authors. The possibility of enjoying high-quality books for free also helps publishers win new readers who have not used e-books before.

On readfy, we will establish a new and free reading experience as well as a successful business model for publishing houses, authors, and advertising customers. This will create a true win-win situation both for readers and for publishing houses, which is why readfy already offers books by 120 publishers at the time of its launch.

By means of the mobile app of the readfy service, tablet and smartphone users receive free access to ten thousands of books, including international bestsellers, that can only be bought or read as part of a fee-based monthly subscription normally. As soon as the app has been downloaded and installed on the tablet or smartphone, users may select the books that interest them. They also have access to features such as the creation of own favorites lists, the writing of own critiques and comments, and the sharing of own posts with other readfy readers via Facebook and Twitter.

With Readfy, Your Library Becomes Mobile, and You Can Discover the Favorite Books of Others

By means of such features, readfy satisfies the need of many readers of digital books to share their insights, feelings, opinions, and interests with others. Reading turns into a social experience ("social reading"). Other features motivating readers to stay inside the readfy book world are already being planned. readfy users can see what their friends are currently reading (if they activate this feature) and may then discuss the respective books and contents in detail with these friends.

Browsing, Reading, Sharing with Friends – readfy Provides a New Reading Experience

readfy has developed a technology that enables users to read books on their devices without long load times. This also includes an own copy protection (DRM), which ensures that no copyright laws are violated because an entire book could never be passed on. Since readfy provides users with a completely legal way of enjoying reading, they no longer have to illegally download books from file-sharing sites.

At the beginning of our market test on 7 February, we will already offer 15,000 titles by different publishers and of different genres on Android smartphones and tablets. In the summer, we will expand the offer by apps for Apple devices and tablets and by an additional several thousand books – approximately 30,000 until the end of the year, including many international bestsellers. Starting with the next version of the readfy service in fall 2014, customers may also choose whether they wish to pay a monthly fee of € 4.99 for reading with reduced ads or of € 9.99 for ad-free reading and additional premium features instead of free, ad-financed reading.

In the case of the € 4.99 entry rate, users receive a significantly lower number of ads compared to the free readfy service. Unlike other subscription providers, we do not limit the number of books, the loan period, and the number of devices in the case of the entry rate. Thus, users receive full access to the complete offer of readfy. In the case of the premium subscription for € 9.99, there are no ads at all. Moreover, users can read books in the offline mode without being connected to the internet, and additional social reading features are available (e.g., the possibility of founding own online book clubs).

There Will Be Two Premium Subscriptions in Addition to the Free Service

The publishing houses receive a share of the subscription fees for the books or for the individual pages that were actually read. Practically speaking, this means that readfy only has to pay money to the publishers if readfy itself generates revenues. Consequently, it is solely a revenue participation model, which reduces the economic risk for readfy significantly.

Apart from revenue participation, readfy provides publishing houses and authors with entirely new insights into the readers of their books: Which sex, which age group, and which interest group reads which books? Which books are quickly browsed through by whom, which are read partly and which entirely? Based on this knowledge, publishers can start new book projects with authors that target the interest of the readers from the very beginning and that can be marketed more effectively to the appropriate interest groups later. Naturally, these data are only provided in an anonymized way.

The readfy technology may rapidly determine the sex, age, and interests of a customer based on the books read. This is already possible with a high probability after roughly a dozen books have been read, and it gets more precise with every book that is read. Thus, a precise and anonymized customer profile results after a few months, and customers are not required to enter any data themselves. In this way, we can offer our advertising customers very target-oriented advertisements in the e-books – just as this is done by Google and Facebook for search results and websites.

readfy generates revenues by displaying targeted, personalized advertisements on book pages (banners, full-page ads, videos) and by charging users monthly subscription fees if they prefer less or no advertisements (€ 4.99 or € 9.99 per month respectively). This freemium model (= free + premium) – the combination of attractive free services and fee-based premium features – has already established itself as a successful model in the case of other services and industries. Our partner Gerrit Schumann successfully established this business model in the music streaming services Simfy and Deezer.

Each of the publishing houses receives a fixed share of the ad revenues generated by readers on the readfy platform. This share is always calculated solely by means of the book pages that are actually read. Moreover, the publishing houses receive a fixed share of the monthly revenues from the readfy subscriptions with reduced or no ads.

We intend to generate additional revenues by building marketing partnerships with suitable companies in other industries, for instance with Deutsche Bahn or Deutsche Telekom, which could offer their customers a package consisting of the readfy service and a BahnCard or cell phone contract respectively. In such cases, readfy receives a payment for providing the service from the marketing partners. Similar examples that already exist are the partnership between Spotify and Deutsche Telekom and between Deezer and T-Mobile (Austria).

Additional revenues are expected from the marketing of special advertising spaces in books, whose prominence could be compared to the last commercial before the eight o'clock news. Likewise, it will be possible to advertise new books of publishers in a prominent position within the readfy app.

Moreover, readfy may generate revenue from the licensing of its intelligent advertising technology to other service providers over the long term, e.g., in countries where readfy itself decides not to be available.

There is no direct competitor worldwide that offers free, ad-financed books for mobile devices in the same form as readfy. The good developmental stage of our technology and the marketing activities currently beginning give us an advantage of one or two years over possible imitators. During this time, we have the chance to stay ahead of future competitors permanently by means of a strong brand, our powerful technology, good partners, and considerable expertise.

There are a few newly founded companies worldwide that try to establish a purely subscription-based model for the reading of e-books, e.g., Skoobe in Germany or Oyster in the U.S. For approximately 10-20 euros per month, customers may read a limited or unlimited number of e-books. This model, however, has a high barrier to entry for customers: Even though they pay a fixed monthly fee, the product range does not contain all the books they want to read. Furthermore, the number of books, the reading period, and the number of devices are limited. This barrier does not exist at all in the case of readfy. Users may read all titles in the catalog for free. If customers want to switch to the ad-free premium model for a monthly fee, they may do so at any time but do not have to. 

Reading without Limitations – Even If You Spend the Entire Weekend in Bed

The continuously improved e-book reading and advertising technologies are at the heart of the readfy platform, which controls an appealing and user-friendly e-book app. We are trying to become as successful for advertising in e-books as Google is for advertising on websites. Google identifies user interests by means of search requests; readfy does the same by analyzing the books read by a user.

Our most important partners are mainly publishers, authors, and of course their readers. At the launch of readfy, we are already cooperating with an e-book distribution specialist whose customers include more than 500 publishing houses.

As our technology partner, we have chosen the experienced mobile app specialist Appsrise (www.appsrise.com). The Appsrise team provides us with highly professional support, uses the latest available technologies in development, and supplies us with high-quality products at very good financial conditions. We have ensured the long-term orientation of this partnership by contractually securing the proprietary rights and the rights of exploitation. We intend to further intensify this relationship in the future and have already prepared the readfy platform for a fast internationalization together with our partner. For this purpose, we have built a flexibly upgradeable and tamper-proof platform, which is continuously improved by means of modern methods and can be rapidly adapted to new user requirements.

In regard to the marketing of advertisements, we will use all available channels. We intend to integrate advertising networks and ad exchanges (platforms where the supply of and demand for advertising spaces meet) and to sell advertising spaces directly. At the time of the market launch on 7 February, we will be cooperating with Admob (www.admob.com), one of the world's largest advertising networks for mobile devices. In the further course of our business activities, we will supplement the integration of external advertising networks and ad exchanges with our own enhanced ad server technology. Our medium-term goal is to automate the direct sale of advertising spaces to large advertising marketers (e.g., large media agencies).

The sales volume of the global e-book market is predicted to reach approximately 18 billions in 2017. The German volume amounts to approximately € 2.7 billion. At the same time, the global sales volume of advertising on smartphones and tablets is predicted to be € 10 billion in 2017, 10 % of which are due to the German market. The volumes of these markets are impressive – and readfy targets both the e-book market and the mobile advertising market and is at the intersection of these markets with its novel business concept.

Sales Projections for the Global and German E-book and Advertising Market in 2017

Based on similar digital industries and leading companies, it is realistic that readfy will reach a market share of 3-5 % in Germany within five to seven years; in other countries, similar shares may be reached depending on the intensity of the competition. Generally speaking, readfy can thus become one of the largest internet companies in terms of market size and potential sales. This is what we aim for.

The offer of readfy can be understood by everyone and provides an attractive service: "your books, anytime, anywhere, and free of charge." In principle, our offer may even be marketed to a mass audience by means of TV commercials because reading is a relevant and common topic for almost everyone.

Altogether, readfy will gradually conquer a mass market – from avid readers to previous nonreaders, who can use free reading samples or entire books if they are interested and who can share their experience with other readers.

The full-time readfy founder team currently consists of three book enthusiasts:

Felix Bauchspieß is the general manager, has promoted the business model and the product conception from the very beginning, and is responsible for product development, financial matters, and organizational matters. Before Felix founded readfy, he worked in the processing of e-commerce payments at Royal Bank of Scotland and Neteller from 2004 to 2008 and as a business analyst at RWE from 2008 to 2013. While working there, he developed and implemented complex software platforms for energy trading together with software companies. This background is perfect for his job at readfy, where we have developed and are still enhancing the readfy service platform together with a strong technology partner.

Frank Großklaus has gained long experience in online marketing and e-publishing and is responsible for marketing and PR as a partner. Since 1999, Frank has dealt specifically with the subjects of performance marketing (cost optimization in online distribution), search engine optimization (SEO), and search engine marketing (SEM) both for major companies and for agencies. Frank has already used this knowledge in a start-up project of his own once, in which he established a web portal for free e-books and an associated e-book community. In addition, he is a book author himself and owns a publishing house for e-books.

Ryan David Mullins is our expert for business intelligence and literature and, as a partner, he deals with the development of the book catalog and the analysis of the statistical insights that we gain by means of our user surveys and product tests. Ryan is a thinker and an expert with regard to literature, authors, and books; he has connections at universities around the globe. As our "truffle pig" for extraordinary and special books outside the mainstream, he provides the icing on the cake in the readfy book catalog.

Ryan D. Mullins, Felix Bauchspieß, and Frank Großklaus Form the Core Team of readfy

The full-time founder team of readfy, which possesses more than 30 years of work experience in total, is supported by a competent circle of partners. These people provide their support in the areas of business model design, product development, marketing & distribution, internationalization, and financial management:

Gerrit Schumann (Deezer)

In particular with regard to marketing and internationalization, Gerrit Schumann supports readfy as a mentor. He founded the music streaming service Simfy and currently serves as a top executive of the global music service Deezer. Gerrit contributes his experience of developing these services and his expertise in the domain of ad-financed media to readfy.

1stMOVER

The Düsseldorf incubator 1stMOVER has been specializing in the foundation of internet start-ups and particularly mobile internet start-ups for several years. The partners contribute their experience of other projects to the technical product development and financial planning of readfy on a daily basis. We can also share much practical knowledge with other 1stMOVER teams (Picture: Dr. Klemens Gaida and Peter Hornik of 1stMOVER).

On 7 February 2014, simultaneously with the start of the crowdinvesting, our market launch in the form of a publicly accessible test mode (public beta launch) will take place, which will lead to the fully commercial market presence of readfy in the summer.

For the public beta test, all interested users (initially up to 5,000) may download the new Android app of the readfy service from www.readfy.com. The mobile app for Android smartphones and tablets and the service platform behind it already contain all features important to our business model.

Our users may select their reading material from a catalog of more than 15,000 books, comment on books, and share their reading experience with other users. The system interfaces for the integration of initially external ad servers have already been implemented as well. Likewise, a self-developed and highly secure e-book copy protection (DRM) will be integrated in the e-book loading technology from the beginning, which prevents users from storing books on their local devices and abusing them for purposes of piracy.

We will use the next few months to receive and analyze feedback from our first users. We are continuously optimizing the Android app and the readfy service platform behind it. Until the summer of 2014, we will finish developing the mobile apps for Apple tablets and iPhones.

The feedback from our users is used for two central aspects:

1. For improving the usability and for adding new features to readfy
2. For personalizing and optimizing the advertisements displayed in e-books

 In the Summer of 2014, the Full-scale Market Launch with Even More Books and Features Will Take Place

The expansion of our book offer in the readfy catalog is as important as the technology in the background. We are in intensive negotiations with many publishers and e-book distributors in the German-speaking world and have already established international contacts as well. So far, we have been able to convince many partners of the general idea of readfy. We intend to expand our readfy book catalog to 30,000 titles by means of international bestsellers until the end of this year.

We will use the capital provided by the Companists and other potential investors for the areas of product development, advertising system development, expansion of the book catalog, and service marketing.

In particular, we want to make the following investments in 2014 and 2015:

1. Product Development

• Further Development of the Service Platform
• Full Version of the Android App
• Apple iOS Versions for iPhone, iPad & iPod Touch
• Device-independent Browser Version (HTML 5)
• Preparation of the readfy Platform for the Internationalization Starting in 2015

2. Advertising System Development

• Connection of Additional External Advertising Platforms to readfy   
• Further Development of the Features for Tracking Reading Behavior
• Further Development of the Algorithms for Analyzing Reading Behavior
• Further Development of the Algorithms for Creating User Profiles
• Development of an Own Advertising Platform for Directly Connecting to Large Media Agencies

3. Expansion of the Catalog of Books

4. Marketing & PR

5. Expansion of the Team

• Additional Interns and First Junior Full-time Employees in the Areas of Product Management and Product Marketing
• Hiring of an Additional Manager for the Internationalization

As Companists, you can have a major impact on the success of readfy. We would be glad if you supported us in the following ways in addition to your investment:

• App Testing: Use readfy yourself on a regular basis and give us feedback! You may download the app at www.readfy.com. The best way to send us your feedback is via our website or via email to testing@readfy.com.
• Word of Mouth: With your help, we want to reach as many potential Companists and readfy users as possible. Spread the campaign, share our updates, talk to friends about it.
• Public Relations Work: You are bloggers, journalists, or know such people? Report on our company or put us in touch with each other (presse@readfy.com).
• Partners for Even More Nice Books on readfy: Do you know any publishers or authors? Feel free to recommend us!

Do not forget: Follow us and like us on Twitter, Facebook, and GooglePlus, stay up-to-date, and discuss the latest developments in the industry with us.

readfy GmbH
Merowingerplatz 1
40225 Düsseldorf
Deutschland

Telefon: +49  211  74951177
E-Mail: info@readfy.com