Inkitt Secures $59M Investment for Multimedia Expansion

The Rise of Data-Driven Publishing: Inkitt Secures $59 Million in Funding

Reading rates experienced a surge during the pandemic, and it appears this trend has persisted. Now, Inkitt, a startup operating a widely-used, free platform enabling anyone to write and publish stories, has secured $59 million in funding. Inkitt utilizes data science to analyze these stories, identifying those with potential for expansion into longer works within its separate, paid application, Galatea.

Leveraging Algorithms and Expanding Market Reach

The newly acquired funds will primarily be allocated to the continued development of Inkitt’s algorithms and underlying technology. This is crucial, as the platform’s story curation process – including selecting narratives for expansion and conducting A/B testing of story variations – is entirely driven by these algorithms, rather than human editors.

Inkitt, based in Berlin, also intends to use the capital to expand its team, with a particular focus on increasing its presence in the North American market. Furthermore, the company plans to explore long-term platform extensions.

Beyond Reading: Exploring New Formats and APIs

Potential expansions include incorporating additional formats beyond traditional reading, such as audiobooks, which Inkitt is already beginning to explore. The company also envisions developing APIs and SDKs, allowing other publishers to utilize its tools for testing shorter works and gauging their potential for book-length development.

Significant Growth and Industry Recognition

Inkitt has demonstrated substantial growth in recent years, currently boasting 7 million users and a community of 300,000 writers. This represents a near threefold increase from the 1.6 million readers and 110,000 writers reported in 2019.

The paid Galatea app is also experiencing rapid growth, with a current run rate exceeding $38 million – a more than sixfold increase from $6 million two years prior.

High-Profile Investors Signal Confidence

Inkitt’s progress has attracted attention from prominent figures within the publishing industry, reflected in the composition of this funding round.

Scott Sandell, managing general partner of NEA, co-led the investment alongside German publishing giant Axel Springer. Participation also came from Michael Lynton, chairman of Snap and former CEO of Penguin Books; Stefan von Holtzbrinck, chairman of the Holtzbrinck publishing group (owner of Macmillan); Kleiner Perkins, HV Capital, Redalpine and Speedinvest. Kleiner Perkins previously led Inkitt’s Series A funding.

Success Stories and Author Earnings

Authors on the platform, particularly those whose initial chapters resonate with Inkitt’s algorithms, are achieving significant financial success. Several notable success stories have emerged.

Seemran Sahoo, writing from Odisha, India, has earned $2.7 million to date from her novel, “The Arrangement,” written and published entirely on her smartphone. Sapir Englard, from Israel, initially intended to use proceeds from her Inkitt-originated book, “The Millennium Wolves,” to fund her education at Berklee College of Music. However, she has since earned $8 million from the novel.

Galatea Writers Outperforming Traditional Publishing

While these represent exceptional cases, Ali Albazaz, Inkitt’s founder and CEO, asserts that the majority of authors selected for Galatea significantly outperform their peers in traditional publishing environments.

“The majority of our Galatea writers made more than $100,000 in sales,” he stated.

A Vision for a Multimedia Powerhouse

Although books are central to Inkitt’s current operations, Albazaz envisions a much broader future for the platform. The company is taking initial steps into audiobooks and plans to explore the development of films, television shows, merchandising, games, and even a theme park – aiming to become “The Disney of the twenty-first century.”

This ambitious journey, while consistent with Albazaz’s plans articulated in 2019, is being pursued deliberately. The platform’s original “effects” – immersive sounds and jolts – remain available, but are no longer a central focus.

Navigating Content Opportunities and Industry Dynamics

Albazaz reports receiving between two and four requests weekly from television, movie, and production companies seeking to adapt Galatea/Inkitt books. However, Inkitt is proceeding cautiously, aiming to retain control over the adaptation process and potentially integrate video content directly into the Galatea platform.

Like other self-publishing platforms, such as Wattpad (acquired by Naver for approximately $600 million), Inkitt is creating a new pathway for creative individuals. Numerous platforms already exist for writers, ranging from FanFiction to Amazon.

A Critical Stance on Traditional E-Commerce

Albazaz is openly critical of Amazon, alleging that the e-commerce giant has eroded margins and diminished the reading experience with its Kindle devices. This sentiment motivated the creation of Galatea as an alternative to Amazon for expanding beyond short-form content.

The Algorithm's Perspective: A Case Study

Inkitt’s data science engine assesses reader engagement, focusing on what is likely to “do well” rather than the author’s reputation. This approach sometimes leads to unexpected results.

One unnamed author submitted a chapter for evaluation, and the engine “measured that readers weren’t engaged with the story and would stop reading very quickly.”

The author, and their publisher, were reportedly displeased with this feedback. Despite the assessment, the author published the book as written, achieving sales of 1 million copies – attributed primarily to the author’s established fanbase, rather than the story’s inherent appeal.

Looking Ahead: Sustaining Growth and Market Competition

Inkitt’s long-term success hinges on its ability to sustain growth and leverage it into a larger media presence. This will depend not only on Inkitt’s execution but also on broader market trends.

Companies like Amazon and ByteDance may also explore similar opportunities, given their extensive A/B testing capabilities and data science resources. Amazon, in particular, has yet to fully leverage its data to enhance its self-publishing offerings.

Investor Confidence and Future Potential

Despite potential competition, investors remain optimistic about Inkitt’s prospects.

“Inkitt is well-positioned to become the future of storytelling, having already moved beyond traditional content forms to new formats that are innovative and engaging for millions of readers,” stated Sandell. “A critical shift is taking place in how people consume stories, and Inkitt understands that. We are thrilled to partner closely with Ali and the rest of the Inkitt board to help drive what is sure to be an exciting and exponential phase of growth.”

“Inkitt’s technology is extraordinary, very successful and truly illustrates the future of storytelling,” added Mathias Döpfner, CEO of Axel Springer. “When you consider how many Inkitt authors are achieving great commercial success, you can clearly see how deeply this company has disrupted the way people consume books. We are excited to become part of the further development and work with them as they continue on their journey.”

Update: This article has been clarified to state that Inkitt provided feedback on reader engagement, rather than suggesting alternative plot lines to the unnamed author.