Rain Makers, The Forecast

Amazon Kindle Fire: A Serious Contender?

A few weeks ago we wrote about the rumored release of Amazon’s new tablet and why we believe it may stand a chance of taking on Apple’s iPad in the tablet pc space.  None of the others – Motorola, BlackBerry, HP, have been able to launch a truly competitive threat, try as they might.  That’s because none of them seemed to understand the REAL reason that people want to buy tablets.  They all focused on launching a new piece of hardware.  They launched some good hardware, so where did they all go wrong? 

The fact that Apple backs its devices with an ecosystem (the App Store, iTunes) that nobody can compete with is the real reason that no one has been able to touch them.

But Amazon’s Kindle Fire seems to be different, and this week the tech media has been all abuzz with noisy excitement about this new contender. You’ve surely read a lot about this thing already, so I won’t bore you with all the details and rumors.  You can do a web search or check out Techmeme and find it all yourself. 

Think about the tablet as “tabula rasa” – a blank slate with no inherent value until we load it with stuff. All the value comes from the ecosystem around the tablet. The apps themselves (quality and quantity), what they actually do, and the mechanisms through which users acquire them, are far more important than the devices themselves.

Here’s the point – Amazon’s Kindle Fire may be different from the other “failed” tablets because Amazon understands that it’s not really about the hardware at all.  Yes, the hardware has to do what it’s supposed to do and not stink, but beyond that requirement, users don’t really need a lot from their tablet hardware. 

What users do need from their tablet, and what really drives people to buy them, is to understand what they’re supposed to do with the thing, as Sascha Segan of PCMag.com says.  Without apps and access to stuff like streaming services, a tablet is just a really expensive brick. 

Nobody else has been able to offer an ecosystem that would be able to compete with Apple’s.  Until now.  Amazon has built an ecosystem on the web – relationships with users that transcend device. People buy physical goods and digital content, store files in their Amazon cloud storage and use their mobile app. People read and write reviews of their stuff. Some might actually argue that Amazon “invented” online customer reviews. Anyway, it’s an ecosystem. To strengthen their ecosystem further, Amazon is also building its own App Store now, as well.

It’s obvious that Amazon understands this dynamic.  Why?  Because the educated guess is that they’re actually losing money on each Fire that they sell.  We’re not talking pennies, either.  It may be a hit of $50 per device.  Analyst Philip Elmer-DeWitt wrote in his piece of CNN Money that “Amazon appears to be focusing on a product with superior content delivery…” and while he doesn’t see the Fire as similar enough to the iPad to compete directly, he’s already conceded that it’s more competitive “than we anticipated.”

Bingo. 

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