showed a 2 percent profit increase over the same period last year, while a 37 percent increase in online sales was enough to power $200 million in sales, about a fifth of B&N's overall revenue now. Online sales also helped to offset a 3 percent drop in storefront sales, as their retail outlets begin to take on an odd mix of Nook devices and paraphernalia backed by more traditional media.
How long this good news may last, though, is very much up for grabs in light of Amazon's launch of its new Kindle Fire ebook reader. The Fire is a 7-inch color touchscreen tablet which, like B&N's Nook Color, is also based on Google's Android operating system and features downloads for books, magazines, music, selected apps, videos and games tied to Amazon's powerful Web-based ecommerce services. The Kindle Fire also features Amazon's new Silk browsing technology, which enables highly efficient Web content delivery that passes each Web page request through Amazon's own Web infrastructure to optimize its delivery performance. Of course, each time this happens Amazon will learn a little bit more about what people are browsing for - creating new opportunities for recommending content and, perhaps, optimizing ads in a way that will challenge Google in mobile and online ad sales from a new angle.
Kindle Fire pre-launch sales are powerful by all indicators, meaning that unless there's a surprising second act to the Nook Color and B&N's other Nook units, the days of its renaissance via these popular units may be numbered. I wouldn't expect Nooks to disappear any time soon, but you can expect a softening of their growth that will not be likely to offset continuing dwindling of storefront sales. You can call the closing of B&N's enormous Lincoln Center store in New York City earlier this year a fluke due to an exorbitant rent increase, but its location across the street from the defunct flagship store for Tower Records is perhaps a sign of fundamental changes to media sales more than shifting real estate values in upper Manhattan.
The main problem is that Barnes & Noble has nowhere near the online infrastructure, global reach and cost structure that Amazon enjoys, enhanced by a wide array of merchants using Amazon's ecommerce portal who help Amazon to resemble an entire shopping center rather than just a media-centric portal. That's a profile that's just not in B&N's DNA, much less in its bank account. Nook has helped Barnes & Noble to develop a powerful online media presence, but it can't afford to expand it without making some fundamental choices about its future.
The answer to this dilemma may lie with B&N's technology partner Google. Google has its own fish to fry in conquering its markets, some of which overlap with B&N but others of which go far beyond Barnes & Noble's market profile. Most notably, Google is developing a profile in supporting local merchants with its mobile services and platforms, as well as in local education and government markets. At the same time, Google is flanked by Apple, with a long-established chain of elite retail outlets that have helped to spread the Apple mystique, as well as by Microsoft's widespread presence in retail and local tech support. Amazon also poses as many challenges to Google as opportunities, with Amazon's new Fire and Silk technologies posing direct threats to its long-term operations. While the Amazon Appstore features apps compatible with Google's Android operating system, there's nothing to stop Amazon from making a play for an operating system such as WebOS or QNX to fill in the back end of Fire's largely proprietary tablet interface software.
So, ponder this; what if Barnes & Noble were to ditch some of its retail stores as sole proprietor and sell or sublet them to Google, who could then rebrand them as Google Stores? B&N would get a nice cash infusion, which could be used to fuel online retail and platform expansion, and Google could get retail space already populated with its most popular tablet product to date. Of course, the profile of a Google Store would be far different from your typical B&N outlet. It could provide not only Nooks but any and all platforms using Google technologies, including, perhaps, even Kindle Fires. Since B&N has already invested in tech-savvy store staff to support in-store Nook sales, you would have the nucleus of staff to support a wider array of technology sales and demos. Add in mobile phones, Chromebooks, staff to support educating local merchants, educators and corporate I.T. staffs in "the Google way" and all of a sudden you would have a very useful local presence in many local markets that would propel the Google brand in valuable ways.
Now about those books and magazines. Might it even be possible to farm out the selection and merchandizing of those materials to a local bookseller rather than Barnes & Noble? One of the tricky aspects of such a move would be trying to position Google as a "white hat" partner for local booksellers. Perhaps if indies were to have a crack at demonstrating "best practices" for local bookselling, including enhanced print-on-demand services for Google Books and ebooks from other sources, Google could offer local bookstores a model for success that could be replicated elsewhere. Since it's likely that printed books would take up far less space in a Google Store than in your typical Barnes & Noble store, hopefully they'd represent less of a direct competition to their remaining retail units. Of course, those in-store coffee shops would also offer Google an opportunity to test-drive services like Google Wallet and Google Offers - just as Google offers its Nexus line of Android mobile phones to offer a "pure" experience of what Google intends to offer through them.
What to do with all of that retail space that's no longer used to sell board games, chocolates and oh, yes, books? Well, obviously a good chunk would to showcasing devices, including in-home experiences like Google TV and appliances powered by the Android Appliance Developers Tookit. The ADK has the promise of revolutionizing how people related to sensor-powered devices and vice versa, but they will need a "hands on" environment for the average consumer to "get" the potential for these devices in their lives. Unlike Apple Stores, which showcase a very limited range of media-centric devices, Google Stores could wind up being miniature world's fairs, showcasing not just media but demonstrations of how Google-powered technologies can change commerce, homes, lives and institutions.
It's pretty clear that Google needs to take some bold steps to broaden its branding as its search and ad revenues are being challenged by more entry points into creating and discovering Web-enabled content and services. A physical presence used to do things that are truly differentiated from its competitors - and, for that matter, probably from most any other storefront in town - could be a part of that equation, building cachet, trust and hands-on credibility for its brand and its products and services in an environment that invites experimentation, innovation and community interaction. In a world in which brands are trusted relationships, Google needs more flesh on its brands in addition to the trust that it builds through its online media properties - especially as it capabilities via Android appliances reach further into the physical world.
As to what happens to Barnes & Noble from that point on is debatable, but certainly an exit via Google is always a possibility in the long run, though in the short run retaining Barnes & Noble as an independent entity is probably best. B&N could yet make a strong go of it in online sales, and it may be best also to have it around to keep Amazon as a reasonably cooperative partner with Google. The alternative, of course, would be for Google to just grab its own retail spaces, but there are lots of things to be said for grabbing a retail footprint in which one of your core brands already resonates. I'll wager a download or two on a deal between Google and Barnes & Noble along these lines in the next twelve months or so, of not sooner. If not, well, at least it's an idea that might rent some space in your head.