Over the past year, GreatUnpublished has developed a profitable self-publishing business on the Web. And the company hasn't stopped there; it has spun off two new ventures—a digital conversion/POD service and an online bookstore—and a POD wholesale operation is in the works.

When Jeff Schwaner started GreatUnpublished (www.greatunpublished.com) in May 2000, he was a rejected author and former bookseller who saw in POD technology a way to build a solid revenue stream that wouldn't require huge sales to be profitable. In fact, Schwaner believes the lack of outside funding for GU forced the firm to build a realistic business model. The entire unit, with 26 employees located in Charleston, S.C., became profitable in March 2001.

"My experience as a bookseller for 10 years told me that the world wasn't going to start buying e-books right away, but that people would certainly buy books online," explained editor-in-chief Schwaner. "Ninety-nine percent of our books sold are POD."

For a base fee of $99, GU converts an author's book into POD, Palm and encrypted PDF formats. GU sells e-books for $7.99 and POD paperbacks for $15; authors retain all rights while receiving royalties of 70% for e-books (100% for the first three months) and 30% for POD books. And when a customer buys a POD title, GU offers her the PDF e-book version for free.

GU sends out free review copies and thousands of press releases, and sponsors weekly e-book giveaways to generate interest in its titles. The site claims to sell more than 4,000 books per month and currently has more than 450 titles in a variety of genres, including literary fiction and poetry. Recently, Schwaner made a deal with his old Cornell professor, Robert Morgan, to republish his first book of poetry, Zirconia Poems. "As far as I know, this is the very first example of a New York Times bestseller and Oprah Book Club author utilizing POD to bring his backlist back in print," said Schwaner.

The company's other businesses evolved naturally out of the self-publishing venture. When Schwaner started shopping around for POD services, he found that none of them filled orders fast enough. Schwaner's Digitz.net prints, launched in July 2000, binds and ships POD paperbacks in 48 hours. The company charges an initial title conversion fee on a sliding scale, and a per-book fee based on book length. So far, some 100 publishers have signed up.

From there, Schwaner and his partners, Mitchell Davis and Monty Kohli, developed an online bookstore that works with Digitz.net to sell e-books and POD paperbacks. BookSurge, launched in March 2001, lets any publisher post titles for free; BookSurge takes 25% of the e-book retail price and 25% of POD post-production revenue. The site will partner with Foreword magazine, eBookAd, eBookWeb and the Electronic Publishers Coalition to provide news, reviews, e-zines and other content. EBookAd will also provide files in the non-proprietary hiEbook format, based on the Open E-book Standard. More than 1,100 titles are listed on BookSurge, with about 200 publishers participating.

The newest business, PODxchange, will offer the industry's first wholesale POD database and exchange. Starting this fall, PODxchange will list publishers' titles for direct order by booksellers around the world, at a 40% discount and with no distribution fees.

Some publishers have registered complaints about Digitz regarding the quality and timeliness of its service. Two publishers told PW that book pages were sometimes missing or out of order; problems with text flow, binding and cover art were also reported. Davis told PW the company has worked to address these problems, and blamed them on inexperience, of both the company and its customers. For example, formatting takes longer than expected, but the firm claims that it is now meeting its guarantee of shipping books within 48 hours. "There's no doubt that the quality of our books has improved since we first launched," said Davis.

Currently, the GU-affiliated companies are internally funded, with additional investment from technology visionary Kanwal Rekhi. They are seeking venture capital to expand their infrastructure and editorial staff. "What we're looking for now, from an investor's standpoint, is not so much 'seed money' as much as help re-potting a plant that's already proven it can grow and stay healthy," said Schwaner.