The term 'gerund' refers to the 'ing' form of the verb and it functions as a noun. It represents both the meaning of the verb as well as a noun in the sentence. A gerund can replace a noun in the sentence and give its meaning.
In the context, the gerund phrase is the " thriving new market". The noun 'thrive' is also used as the verb. Here in the sentence the gerund phrase refers to the prosperous and the growing market of the paperback books where readers seeks cheap and well bounded books.
