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peter

Is Amazon building a smartphone? I don't know, but if they're not they definitely should be!

So it's looking more and more like Amazon is doing a smartphone. I don't have any inside info, but there have been enough credible reports about it lately that I don't have much doubt that they're working on something. And if they're not building a smartphone they should be. In fact, they'd be crazy not to.

Why? Because Amazon is one of the few companies that has a credible shot at being a major player in mobile, and even if it's going to be tough, the stakes are so high that in many ways it'd be riskier for them to sit on the sidelines. The companies that dominate the smartphone and tablet markets are going to define computing for the next ten to fifteen years -- and make an insane amount of money doing it. At the very least Amazon, which has the number one e-commerce platform, cannot afford to let someone else use their dominance in mobile as a lever through which to displace Amazon's current position.

Wresting marketshare away from the likes of Apple and Samsung won't be easy, but Amazon, which has already seen some decent initial success with its Kindle Fire tablet, at least has the engineering chops, cloud infrastructure, e-commerce platform, and app and content ecosystem to be a contender (which is more than you can say for even some companies that already make smartphones). Plus it's important to remember that the mobile market is still relatively fluid. Think about the companies and platforms that dominated smartphones just a few years ago: Nokia, Symbian, RIM, Palm, Windows Mobile, etc. All of those are either gone, or are struggling mightily for survival, and largely have been replaced by a new set of players.

It's not inconceivable that in a few years the deck will have shuffled once again, with a several other companies and platforms on top. (Certainly in 2006 no one would have predicted that in 2012 everyone would be chasing Apple and Google.) I'm not dumb enough to predict the demise of either iOS or Android, but it wouldn't be at all inconceivable that five or six years from now we look back on 2012 as the highwater mark for either platform. The point is that in tech conditions can change quickly.

Of course, just because the market is fluid doesn't automatically mean Amazon will be able to take advantage of it and successfully launch a phone, but I'd argue they have more to lose from not entering the market than from trying and failing. It'll require them to be creative and I'm still collecting together my thoughts on what they might do to make a dent. Hopefully I'll be able to get something up soon, but in the meantime I'd love to hear what everyone thinks.

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15 replies
TgD

I agree. Amazon has a solid foundation under its feet. They have book and music ecosystems already, and a good foot in the door with the Kindle tablet.

I am sure they have plenty of money to take this risk, and I personally would be interested to see what they could do, even if it fails.
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cmason

I disagree. I don't feel Amazon must build a mobile device to succeed. Certainly, time will tell the success of the current platforms, but Amazon's business is content, and of course commerce. The very success of Amazon, from the beginning, was the ubiquity of Amazon.com, no matter your platform ( Windows, Max, Linux) . Amazon's success was not predicated on them building a PC before, any more that it's future depends on an Amazon device. Being relevant and available on all the current devices is much more important. Onlynif Amazon found themselves locked out of a. Device or platform would I imagine they would need one of their own. Let's hope that day of silo'd devices never comes.

I would argue that such a device would lead to the downfall of Amazon, as it would be a massive distraction. Even the Kindle, and Kindle Fire, are not telco devices. Whispernet is the antithesis of telco, seamless, no charge, and subscription free. A phone would be a massive shift, requiring telco contracts, etc. Yes, Amazon sells mobile phones today, but being a reseller is light years from being a device maker.

Speculation is fun, maybe they should build a TV. Or a car.
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peter

Let's put it another way: if you were running one of the few companies that had a legitimate chance to be a major player in mobile, would you take that chance? Of course you would. The benefits of success far outweigh the downsides of failure.

I don't see any reason why it would risk the downfall of the company. Amazon clearly has the resources to do this, and has been able to branch out into stuff like AWS without it risking their focus on commerce.

And as far as them doing a TV, they will probably do some sort of Apple TV/Roku competitor.
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devron

Peter - I'm excited about the potential also. And one of the reasons I am is because Amazon so far has released hardware that made sense in the market. I think to me it's less about them risking the business and more about risking the brand relevance in hardware. Like them or hate them, we get excited at Amazon announcements generally because they always add something interesting to the space. Releasing a phone (again, unless there's something remarkable about the pricing/contract structure/design/tie ins to Amazon services/ etc.) that isnt successful could jeopardize that a bit.
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peter

I think that's why if they do get into this space they are going to need to come up with a fresh approach to the device-carrier-subscriber model. It may be that they bundle in content with your plan in a way that no one has done yet (like sign up for a two year service agreement and get $10 of free Amazon content every month or whatever) or they figure out how to factor Prime into things in a way that makes it attractive to subscribe.

I do agree with you that if they are going to do things the old way it probably won't work. They're going to need to leverage their strengths to do something new. What makes this interesting is that they do have lots of assets to bring to bear here.
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ColinR

I keep hearing reports on this and while everyone seems quick to mention that they have the clout to do a smartphone but they never seem to question whether or not they SHOULD! Seriously, what can amazon bring to the table that isn't already available? What's wrong with enjoying Amazon's services on every other platform? Frankly, the only service outside of shopping they do a better job of than anyone is ebooks, and part of the reason it's so great is because it's available everywhere.

There are reasons beyond "because they can" for companies like google to build a smartphone platform; they already have a lot of your data, you already use services they have that are useful for a smartphone (gmail, docs, etc.). With Apple, they mattered because they had the hardware engineering and design chops to make a smartphone useable. Is Amazon's smartphone going to make it super easy to spend money on stuff or what?
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peter

You're overlooking Amazon's entire cloud services infrastructure and what it could bring to bear in a smartphone. The Silk browser in the Kindle Fire is just an indication of what could be done there.
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devron

I don't know.... given what they've already given us in the Kindle line, I wonder how they would compete. Would it be on cost? Some unique deal on data? I just don't see 'developing a phone' being as close to their core competencies as selling a Kindle or a Kindle Fire where goal is clear - to sell content.

I don't want to seem negative (because as a phone aficionado, I'd want to know what it would look like also)... but I just don't see the market responding to an 'Amazon phone'.

To me, unless there is some *extremely compelling* unique financial tie-in with their service or some subsidy, there's no point. Again, we're enthusiasts, so the general populous may love it. I just don't see them offering anything enticing except at the very low end of the market.
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njashanmal

It doesn't make sense for Amazon to NOT get into the phone business. It is indeed early days yet and plenty of signs point to it: the experience with the Kindle Fire, the app store, their own apps.

There are various other aspects floating around this that are worth considering:
  1. Will they make an acquisition of a hardware company to bolster their position? HTC could be a possible candidate. It's becoming increasingly clear that (with the exception of Samsung) it is becoming very difficult to be a pure-play hardware firm.
  2. To pick up on Devron's point below. What will their USP be? Price? Data plans? Price is the likely one given that it is their M.O. in general. And they have flirted with advertising supported hardware so it could be very interesting if they incorporate a native ad serving platform to further drive down the price.
  3. I haven't spent much time with the Kindle Fire but my impressions are that it is almost entirely a content consumption devices whereas smartphones are productivity devices and even to some extent content creation devices (photos, videos) and this means Amazon will have to build and manage apps/services that they've had limited experience with in the past - again, if they apply some fresh thinking here the results could be interesting.
As anyone interested in consumer electronics/gadgets one should be enthusiastic about new players entering the market.

Windows Phone has (from a UI/UX) point of view has shown that there's still plenty of ground left uncovered (even if their approach hasn't met with much commercial success) and the iOS and Android paradigms are likely to disrupted at some point in the not too distant future.
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jkibuule

Maybe if cell phones were like tablets and computers where anyone could just waltz in, they might have a successful plan, but the carrier BS that goes on, I don't think so.

We should never forget that the customer for phones is the carrier, not the end-user. And I don't see how Amazon is going to be able to get a phone through carrier testing without pre-loading a bunch of apps and delays to updates. And like every other phone out there, people are going to demand the latest update all day long.
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peter

For Amazon to make it work they may have to create an MVNO or figure out some other way to create a different relationship with customers. I do agree it'd be hard, but it's not like other companies haven't figured this out. And recall that back in 2006 people said Apple wouldn't do a phone because of how difficult it was to work with carriers.
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nitehawk

I disagree. Amazon knows how to market to the masses with 'me too' products that are cheaper versions of stuff other people make. The Kindle is revolutionary, but easily copied. The Kindle Fire 2 will be slayed by the Google Nexus 7 and iPad Mini if it comes out. Amazon knows how to make relative crapware in the same way that HP and Dell know how to make craptops (that's crappy desktops and crappy laptops).

Sure they'll make a little bit of money, but this is just the next version of Dell. Getting cheap stuff to people who only want it because it's cheap, not because it's a good product. The idea of the Kindle Fire is far better than the actual product (for someone who owns a smartphone). For kids and non techie people, Amazon will likely make a lot of money, which is actually bad for the industry.

Think about it. If everyone's buying the cheapest thing they can get their hands on: Think of it as tho people are buying the Wii instead of the PS3 and you'll understand. Everybody is stuck on price instead of experience, versatility and functionality. People won't push the boundaries of tablets, they'll simply make a crap product and put all the money into marketing. We've seen this before with laptops not innovating until the 23rd iteration of the MBA.

If Amazon is smart they will beat Apple to the education wholesalers and make a 10 inch version of the kindle for textbooks. The kindle is awesome and should easily replace most physical books, but the form factor isn't right. Many high end schools are going to iPad because of the versatility and form factor. It's an easy win in my book.
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peter

How is it bad that people make cheaper versions of products? You may complain about Dell and HP, but they actually made it affordable for the average person to buy a laptop, and it's silly and elitist to say that Amazon making cheap tablets is somehow a problem.

There's also no logic to your argument that cheaper products make it difficult for others to build and sell premium products. Apple is prima facie evidence that you can build a very successful electronics business by offering premium products at a higher price even while the rest of the market races to the bottom.
I also think lots of people buying the Wii over the PS3 was not at all a bad thing. It just showed that coming up with an affordable and different take on gaming was the best way to expand the universe of people who play games.
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devron

Peter - as much as we can't see how Amazon would fit in the mobile handset space, I'm really anxious to read the post you eluded to above where you'll no doubt detail how it actually could work. (I still don't think it's in their DNA... my experiences with the Amazon App Store wasn't the greatest.) But somewhere between the Jitterbug and the iPhone perhaps lies a more consumer-friendly smartphone experience? Geared towards non-techies? Regardless, can't wait to read your thoughts.
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nitehawk

It speaks to marketing via ads and commercials more than developing the product. Like promoting and making merchandise for a movie instead of developing the proper script, finding the right director, producers, actors, etc.

It's about the experience, not the price and simply having a player in the game. Steve Jobs, the best salesman of this generation has taught us that. Amazon is happy to make a sub par device in a race to the bottom, which is good for people who want cheap stuff. The thing your missing is that until those people see someone using an "elitist" device they don't know what they could actually be doing and instead build a collection of "me too" crapware. Saying I have a Kindle, Kindle Fire, HP/Dell craptop, etc is nice, but it's more better to speak of what you have done with those products, not simply accumulating them for a low price, hoping you'll like whatever it is they can do.

The Wii had by far the best marketing out of all the game consoles, in a time before most people had HDTVs and those who did rarely saw HD content. Sony and Microsoft were ahead of the curve, developing quality experiences with the best graphics while Nintendo was perfectly happy to "sprint" for a little while, make a few great Mario and other 1st party games before ultimately sitting back and just counting cash. Evidence of Nintendo's superior marketing is in nursing homes everywhere. Seniors playing video games certainly is astonishing, but outside of bowling, those seniors have no desire to play anything else, which is sad. That's the situation where everyone loses, when the people who have the most power, the most cash, stop innovating and/or spend money on things no one wants.

Us techies, should be elitist from time to time, because otherwise you just have a collection of gadgets that all basically do the same things. Knowing when to buy, sell and re-purpose our devices is kinda the point behind why I come to this website.

PS I like being able to put things in bold, Thank you for that!
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