According to a Bloomberg report that first appeared last night Amazon is going to release a smartphone, probably this year. There are no details about its operating system but one assumes it would be a customized version of Android, like the Kindle Fire tablet. The Bloomberg story also says that the phone will be made by iPhone maker Foxconn in China.
The acquisition by Amazon of 3-D mapping company UpNext last week added fuel to the “Amazon is making a phone” meme. However Amazon smartphone rumors have been circulating since before the release of the Kindle Fire tablet. Danny speculated in his Kindle Fire review that “Amazon might bring out its own phone, to keep me even more closely connected with my content.” That content being Amazon content (books, music, movies).
This content-centric strategy worked very well for the Kindle Fire — together with its $199 price tag – elevating and differentiating the Amazon tablet from others in the market (other than the iPad). The content-forward approach of Kindle Fire also greatly influenced the development of Google’s just released but superior Nexus 7 tablet, which exactly mimics the Amazon content strategy.
In contrast to its tablet success, I’m quite skeptical that Amazon will be able to deliver a high-quality smartphone and price it as aggressively as it did with Kindle Fire. I also don’t believe that Amazon’s content strategy will be as useful in luring smartphone buyers. Beyond this, a traditional Android handset will offer more apps than the Amazon app store.
To succeed with a smartphone, Amazon will not only need to discount but also load up the device with a long battery life and features that attract attention away from Samsung Android devices. In such a case the phone would almost certainly be a loss leader. As with Kindle Fire Amazon would potentially seek to compensate with content and Amazon Prime subscription sales. But content sales are somewhat less likely on a smartphone than they are on Kindle Fire.
Another rumor says that Amazon may announce its next-gen Kindle Fire tablet later this month or early next. Chances are that it won’t be as good as Google’s Nexus 7 ($199). That would force Amazon to further cut prices on the new tablet to regain momentum. (Amazon does have the advantage of a well-established sales channel vs. Google Play.)
While people surely interact with their smartphones more frequently than tablets Amazon, through its various apps, already has relationships with millions of smartphone users in the US. Indeed, it’s the most successful “m-commerce” company hands down (though eBay might dispute that).
Perhaps I’m naive but it’s difficult to see what precisely Amazon gains from a smartphone, unless the device is a runaway hit, which will be very challenging for the e-tailer to pull off. I’m sure, however, that the Amazon bean counters have done the math and see advantages or at least a justification for releasing a smartphone.
Also in the challenges column, Amazon will have to work with carriers (no easy matter) and vie with other device-makers for “shelf space” and attention. The company is also likely to step right into the mess of smartphone-related patent litigation unless it wants to pay some fat licensing fees to Google/Motorola, Nokia and Microsoft. Apple just sues to block devices, not for money.
I’m very curious to see what Amazon develops and how the company positions and prices it. I believe the smartphone market is different than the tablet segment. Here the Amazon brand and an attractive price tag, by themselves, won’t be enough to generate excitement — or sales.