NEW YORK (CNNfn) - Selling books on the Internet just got more competitive Wednesday as search-engine company Lycos Inc. and bookseller Barnes & Noble announced an electronic commerce pact. The three-year deal between the companies will make Lycos an online partner with Barnes & Noble's Web storefront.
Another competitor, Amazon.com, had previously made deals with search-engine companies Yahoo! and Excite.
The CEO of Amazon.com, Jeffery Bezos, joined anchor Beverly Schuch on CNNfn's "Bizz Buzz", to discuss his company's latest promotion, and the growing electronic bookselling industry.
Here is the transcript from that interview.
SCHUCH: Well, first of all, we want to get to some business stuff, but I know you've got a new promotion out and you managed to snag John Updike for this. How did you get him to do this and what is the promotion?
BEZOS: Well, the promotion is a collaborative of writing effort, so John Updike has begun. He wrote the first paragraph of a murder mystery, called "Murder Makes The Magazine." Then, 44 other writers are going to contribute a paragraph, one paragraph every day on a contest on our Website. And then at the end, John Updike pulls this whole thing together and writes the closing paragraph.
So it's a collaborative story and it's something that could only be done in real time the way it's being done, with a new paragraph added every day on the Internet. So, this demonstrates new technology. And then there are prizes for the winners.
SCHUCH: Is there any chance that this would ever be published?
BEZOS: We haven't figured out what we're going to do with the final story yet, but we're going to try to figure out something interesting to do with it.
SCHUCH: It certainly, I would think, would give some opportunities to new writers out there, to have their name alongside Updike.
BEZOS: Yes, I think that's right. Also, if you read the story, and you can read it online at the Website. I'm very impressed by the quality of the writing. It's actually very interesting, all the paragraphs that people stitch together.
SCHUCH: Now, how does this translate into sales for Amazon.com in this kind of promotion?
BEZOS: Well, part of what we're trying to do. There are a couple of objectives with a promotion like this. One is to bring more people to the Website and some fraction of those people will convert into customers. It also helps with branding.
The second objective with a contest like this is to create a fun environment on the Website that sort of replaces some of the fun components that you can do in a physical bookstore that you can't do online. You know you can never have soft sofas and tasty lattes online, but you can do a lot of fun things online that can't be done in the physical environment too, and that's also part of this.
SCHUCH: And it helps having the name of your company being your Website as well, I would imagine.
BEZOS: Well, that has been part of our marketing strategy from the beginning. To name the company, Amazon.com so that our name is our address in the very similar fashion to say, 1-800-FLOWERS.
SCHUCH: People know exactly where to go to.
BEZOS: Yes, that's right.
SCHUCH: Jeffrey, we have to talk about some news out today that concerns your biggest competitor perhaps, or one of them -- Barnes & Noble and an Internet deal with Lycos now.
You have had, of course, deals so far this year with Yahoo! and Excite, these search engines which will help people find what kind of books they're looking for on the Website. But are you surprised that Barnes & Noble took so long to get there?
BEZOS: No, I'm not really surprised. I think the Lycos deal is very similar to the deals that we did with AOL.com, Excite, and Yahoo!. But no, I mean, people move at different rates and it's not that surprising to me.
SCHUCH: Are you intimidated by this that some people say you're the, you know, it's David and Goliath's story here. You're going up against the big huge booksellers.
BEZOS: Well, I certainly think it's true that Barnes & Noble is a much, much larger company. I mean, they're a company with almost $3 billion in sales. They have 28,000 employees. Amazon.com has 500 employees. On the other hand, we're growing very rapidly. We've done a good job so far of establishing our brand name, and most importantly, we have two years of experience doing transactions online, and in the Internet time, that's a big deal.
SCHUCH: That is. You went public last May at $18 a share. We've got some stock prices here that show you're up around $25 right now. That's a pretty significant increase. You must be pretty content with that.
BEZOS: Well, I am content with that. I should say though that actually, we work pretty hard to focus on the long-term outcome and not the short-term swings in the stock price. Peter Lynch, who said that the short-term, there's very little correlation between a great company and a stock price. Long-term, there's a 100 percent correlation.
SCHUCH: You've certainly had an amazing and enormous impact on publishing and changing the way people buy books, and yet so far, you've seen no profits?
BEZOS: Yes, that's right. We have seen no profits and our strategy is to invest very heavily right now because we believe so much in the future of this business. We think we can build an important and lasting company. Profitability is important to us, but at this stage, we think it's the right strategic decision to invest heavily in marketing and staffing in certain key areas.
SCHUCH: Why, exactly though? You have really virtually no overhead. Why have you seen no profits? When do you expect to have a good quarter?
BEZOS: Well, we don't make predictions about the future of when we might be profitable. Internally, we have projections but we don't disclose those. But it's, even though we have significant cost advantages over physical bookstores, we're also spending significant amounts of money investing in marketing and building our brand name and customer acquisition and so on, and that's one of the factors that holds down profitability.
SCHUCH: You're really being looked at as a kind of a standard now because -- can a little company survive just on the Internet, going up against well-established big companies -- can you?
BEZOS: I think we can. I think, in fact, that the odds favor us because of the experience that we have in our ability. We've constructed a company from scratch that's designed to move at high speed and, if you look in the real world, physical companies that are growing, fast-growing companies are companies that are growing maybe 30 percent a year. In the Internet world, maybe to be a fast-growing company you have to be growing that fast a month. So, in there, there's some sort of time compression factor growth adjusted 12 to 1, or something like that.
So the ability to move quickly is very, very important online, and our experience over the last two years is going to help us there significantly.
SCHUCH: And just quick answer. Can we expect more of these kind of promotions in the future?
BEZOS: You can expect us to do lots of different things that will be valuable for customers and a significant fraction of them, we hope, are going to be a lot of fun.