Amazon's smartphone: One reason why it could be a contender (and it's not the 3D)

Amazon's smartphone: One reason why it could be a contender (and it's not the 3D)

Summary: ZDNet's Monday Morning Opener: Can Amazon's smartphone break through in a congested market?

TOPICS: Mobility

A steady succession of leaks has given a fairly good indication of what Amazon is going to reveal at an event later this week: a smartphone with some kind of 3D technology and a novel form of gesture control and navigation.

But, if the forthcoming smartphone follows the model that Amazon pioneered with the Kindle ebook reader and then applied to its Kindle Fire tablets, the hardware (however nice it is) is really only a wrapper for a new channel to selling Amazon services.

With the Kindle Fire, for example, Amazon forked Android to add its own features such as the impressive 'mayday' button (which summons Amazon's live onscreen technical support). Forking Android also allows Amazon to bend the OS to its own ecosystem — its app store, video, and of course shopping businesses.

Amazon's strategy isn't about making money out of the hardware itself; that's not the point. The point is to lock the customer in to its shopping and content ecosystem. And that ecosystem continues to grow steadily. Last week, Amazon added a music streaming service to Amazon Prime — a service that would fit in very nicely if you were about to launch a new smartphone.

It's almost certain Amazon is going to stick with the same playbook here: solid hardware at a good price, a phone that works best when plugged into an Amazon Prime subscription.

The question remains, though — can Amazon make itself a force to be reckoned with in the mobile market?

While its strategy with the Kindle Fire makes sense, it hasn't been a runaway success so far. IDC thinks around one million Amazon tablets shipped in the first quarter of this year, giving it a two percent share of total shipments in a slowing market. In the same quarter, Apple shipped 16 million tablets, and Samsung 11 million.

As our review pointed out at the time, some find the all-encompassing Amazon ecosystem reassuring. For others, it is somewhat claustrophobic. How well Amazon has persuaded those Fire owners to take up Amazon Prime is impossible to tell from the outside, making it hard to judge the device's real success — and whether the smartphone will go the same way.

Right now, smartphones are a much bigger opportunity than tablets, especially phablets which are more comfortable for watching video than smaller-screened smartphones. IDC predicts that 245 million tablets will be shipped this year, compared to 1.2 billion smartphones. The mobile handset market is also more fluid and more open than the tablet market — as shown by the gradual improvement in Windows Phone's market share recently — so Amazon may find it easier to make a breakthrough.

Coming in at a more than competitive price will be essential to the device's prospects, just as it has been with the Kindle Fire. And here another point in Amazon's favour is that it's now entirely possible to build a low-cost but high-spec smartphone as long as you don't need every (mostly unused) hardware novelty packed in.

With the Kindle Fire, Amazon aimed for the sort of buyer who is more interested in whether they can get books by their favourite author or watch their favourite TV show than those who might care about the intricacies of which particular operating system their handset runs.

But it's also worth noting that for all the excitement 3D has been tried before with limited success in other phones. Later this week, we'll find out if Amazon has made a truly remarkable breakthrough. Still, while 3D is cute (and Amazon's teaser video is a lot of fun) its not the only thing that Amazon has on its side here.

That Amazon is finally deciding to enter the market shows how commoditised the smartphone market has become. Perhaps for smartphone buyers underwhelmed by the gradual iterations seen in the most recent iPhones and Galaxy S flagships, a little 3D magic might be enough for them to look again.

Previously on Monday Morning Opener

Topic: Mobility

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  • I'm not sure you'r right ...

    I was happy to buy an Amazon tablet as a first tablet - it enabled me to try the new world of tablets at a subsidized price, knowing that I'd be getting the usual Amazon value for money. I reckoned after a few months, I'd be in a position to choose a 'proper' tablet.

    But within 3 months, I was finding the tablet restrictive and frustrating - I bought a Nexus 7, and I've never looked back. I do not regret the Amazon at all - but I wouldn't do it again.

    And that's the point. The smartphone market is mature, rather than new; users know it, and don't need a cheap, cheerful and locked-in model to test the water.

    I don't see a big market for this. I'm not remotely interested in being 'locked-in', and I suspect not many will be.
    • "Smart Phone Market Mature"??

      That's exactly what they told Apple back in 2007.
      • No, they didn't.

        And yes, it is.

        Maybe you need to learn what a 'mature market' is - you seem to be a tad devoid of clue.
        • Um, yes they did.

          Enter your wayback machine and check it out. Ballmer even laughed at Apple when they made the iPhone announcement saying cell phones were an established market with big boy players out there already entrenched. Poor widdle Apple was wayyyy in over its head.
        • Um, yea they did.

          From Motorola to Microsoft, Industry "leaders" were laughing at the iPhone thinking Apple wouldn't make a dent given RIM, Symbian and WM that already "saturated" the market.
        • Reading not too hot, lads?

          The occasional idiot - Ballmer, whoever - may have claimed the the 'mobile phone market' was mature; they were wrong, of course,because the iPhone turned it upside down.

          But the iPhone was revoltionary; very different to the 'standard' phone.

          I'm saying the "smartphone market is mature" - read it - that's what I said.

          This phone is NOT going to be revolutionary, even if it comes with a gimmick or two.

          Different world, guys, different world.
      • They did, and they were wrong.

        This time they are saying it again and they are right.

        There were several reasons why many people "thought" the smartphone market was mature, and there were several obvious factors they should have taken into account, and did not, and that's why they got it so wrong.

        1. The many who thought the market was mature, and said so, were simply looking at the fact that the so called "smartphone market" of the day had been in existence for some time and wasn't showing large amounts of growth on a year by year basis. The kind of devices that were available had been around for some time in one somewhat similar form or another and were not showing any evolutionary changes and prices on units were not dropping, so many thought the market was pretty mature and would only grow incrementally.

        2. The iPhone was an absolute evolutionary game changer and it didn't really sink in until it became apparent that a "touch screen" smartphone was in much higher demand than a traditional keyboard phones, made famous by Blackberry. Its one of those things that far too many failed to take into proper account when predicting potential market maturity. The case in retrospect, now seems to be that the market probably was pretty mature for the Blackberry type experience, but it was a brand new and wide open market for the touch screen iPhone type of experience, which as it turns out, touch screen is a form factor in much higher demand in general.

        3. Market watchers who blew it when they said the market was mature never thought a whole lot about some important peripheral issues that Apple was bringing to the smartphone market. A very important one was that with the iPhone, it was suddenly going to be easy to play a whole lot of your own music on it just like any mp3 player, particularly if you had already been using an iPod for that purpose in the past. It was something that really struck some users for sure.

        4. Many market watchers seemed to have no great understanding of how the use of "apps" could and would impact the sale of smartphones. Users caught on fast. Market watchers today point out any perceived shortage of apps for a device as a ghastly selling point and a reason not to buy. Some seem to think a shortage of available apps is anything less than 500,000. Just before the iPhone came out nobody talked about phone apps like they could make or break a device if there were less than half a million at the ready.

        5. As sales of the iPhone increased, it fairly quickly altered the publics general perception about how important it was to have a smartphone and how much was reasonable to spend. I know as a fact that many many families would have no more paid $200+ or more on top of a not so cheap monthly contract for years than fly a kite. Within just a few years I seen endless evidence of parents hooking their early teens up with all sorts and kinds of previously "way too expensive" smartphones and feeling it was suddenly worth it. Many parents previously knew little about texting and thought little about how much a smartphone could contribute to their childs safety and just plain keeping in contact with them.

        All these kinds of things and more had a huge impact on how the smartphone market would develop and expand. Its pretty clear that those who said the market is matured were simply thinking of the current market of pre iPhone days, and they never thought much about the ability of such an evolutionary device to change some major parameters of that market.

        Now, here we are again. Not quite the same old story. But similar.

        The market has matured. And its matured in the same way it had matured in the final Blackberry hey days. Unless your talking about some new evolutionary game changing device to come in and bring with it all sorts of new advantages and abilities, even changing the kind of money people are prepared to spend on their devices, if, and its a big if, unless such a game changing device comes along again, the market has indeed matured for the kind of devices we commonly use today in one form or another.

        But yes, of course that can always change. That's why they call devices that create that change game changers.

        None of these leaks about the Amazon smartphone sound anything like a game changer. So the "mature market" effect is probably going to be the result.
        • Well thought out post.

          Don't know why anyone down voted it.
    • Don't underestimate 'lock in' desireability/willingness

      The average consumer (non techie/geeky) actually don't care much about lock in. Consumers care about value for money and ease of use and having access to plenty of content. That's it.
      • Your right about the lock in factor, to a degree.


        This is an important point you make. It shows some important insight into how Mr. Joe Average often thinks. Its absolutely true that most non tekkie people think only marginally at best about "lock in". Many simply think "whats the difference, buy this phone or that and you tend to be locked in at least somewhat to one environment or another". Some don't even have a significant appreciation about the pros and cons of lock in at all.

        While the tekies sit around ZDNet and whine about whats missing in this environment or that, and whats great about this environment or that, huge numbers of average people by smartphones without even knowing or understanding half of what is said about environment lock in.

        While its a fact that as people get to know their smartphones better, what they can and cannot easily do with them, and what others can and cant do, they will often start to think more about what "lock in" has meant for them. On a second or third phone they can often at least start to think of it in broader terms. It dosnt become a real issue for John Smith for example until some time down the line John Smith sees that his buddy Bob Jones has a smartphone that's different than his and does things different than his and some of the way that all works seems to be more to his liking.

        Its also true that what many smartphone buyers do understand is they generally do want content. Can they surf, can they do Facebook, can they stream from Youtube? Ease of use too, how easy is it to text, how easy is email, how easy is it to get at my photos and to take pictures.

        When you buzz around ZDNet and other such places where the tech minded gather, its easy to start thinking that all kinds of people think similarly about the importance of certain things when it comes to technology. Its a common mistake. I remember one young guy I watched on television months ago talking about his life of crime. He spoke about how at his school, and around his neighborhood, and the people he hung out with, even some relatives, and in the songs he listened to and many of the movies he watched that he got the feeling practically everyone was on some kind of drugs or another and that large numbers of people all over were doing crimes of one kind or another.

        It wasn't until he got away from that kind of environment for a while he came to realize that most people were not on drugs and most people are not involved in criminal activity. It was like he suddenly realized that everything he thought about how people thought and behaved in the world was generally wrong. It was only if you found yourself frequently operating in a particular environment with particular people did it only seem to be true.

        One of the hugest errors I see on ZDNet is some pretty catastrophic fails on predictions and ideas about how certain things will turn out because so many people here just think in terms of themselves and others who have at the very least a great appreciation for high tech and IT and often work in the industry.

        Meanwhile, sometimes for Joe Average, the color of the iPhone and the size of the screen are the biggest deciding factors in a purchase. Not the speed of the processor or the total number of apps in the store.

        Or whether they get locked in.
        • Also

          I don't know how widespread this is but I have users who do not install apps on their smartphone at all. Either they are intimidated by the process or they are deathly afraid they'll mess it up. The way the phone is/whatever is on it when they got it is the way it stays.

          Obviously for them there is no lock in.
    • ....Did you just say...

      You'd be willing to support a company known for supporting intrusive government data collection, without a warrant, if it fit your entertainment needs?

      See folks, this is why we have a problem. Too many people sacrifice the important for the sake of .... whatever this is.
    • its not the same market your bickering about

      When Apple were told the market is mature, they were right, but what your clearly all missing is that it was a different market, things have a changed since then, phones did used to be just phones yaknow, they were not smart.
      When dell came out with the first 5" phone, all reviewers slated it as being too big and hard to use and no-one wanted a phone that big, but now the phablet is considered perfectly acceptable and is starting to become the norm with many vendors now having big screen phones, that was another market change.
      Already most smart phones are more tablet than phone, being able to make calls is a very minor feature and the market will change again as phones are phazed out and completed replaced by tablets or some other similar device, because lets be honest who actually makes phone calls anymore, not many people everyone just walks around chatting on facebook, or some other IM or at the very least a SMS.
      Capt Frickin Obvious
      • Apple made the market different.

        When I originally saw everyone claiming the smartphone market was too mature for Apple to succeed, I equated the word "mature" with the word "stagnant." The reason it was "mature/stagnant" is because it was devoid of innovation. Sales growth always stagnates when innovation stagnates. There was no excitement because there was nothing truly new for years. Every "smartphone" was a big clunky brick endowed with what we would now label as fairly basic functionality.

        Yes, you could say "the market changed," but that's arguing semantics. Change doesn't occur in a vacuum. The reason the market "changed" is because Apple finally introduced something exciting and got the market rolling forward again. They pushed the market out of stagnation for a period of time. What you are calling a "market change" is really just a demographic change. The smartphone now appeals to nearly everyone.

        Now, people are saying the market is "mature" again, and I'm still seeing the word "stagnant." The single reason this Amazon phone won't be a game changer is that it's more of the same. It's another iteration of the same stagnant feature set which is flattening smartphone growth rates. A "mature/stagnant" market has flat growth numbers. So yes, the market is sadly "mature" again, but it's still the same market.

        For another example, look at the 3-D printing world. They've been selling 3-D printers for 30 years, yet they are suddenly in the news constantly. Growth was fairly stagnant for decades, and that was definitely considered a "mature" market. Then, open source efforts made the technology more affordable for a much larger audience and growth rates shot through the roof. It's another case of demographic change. The printers have a much wider appeal now, due to the restoration of innovation. That's exactly what Apple did for smartphones.
  • My wife

    Has a Kindle Fire. It was a replacement for an first generation Kindle. I use it from time to time and it is a well designed device. We also have an Amazon Prime account. She buys enough from Amazon that Prime is a good value. We both have the Kindle app on our Samsung phones, and on I have it on my iPad. We have Google Play on the phones and iTunes on our Desktop and Laptop PCs. I can read a Kindle book on any mobile device. It is the same with Netflix. I can access that on any device. Apple is much more restrictive than Amazon. As for Google Play, I have downloaded some free apps, but I don't buy from them.
    I will withhold judgement on an Amazon phone until I see it, but Amazon is well positioned to be competitive from day 1 with their ecosystem.
    • Have You Tried Prime Music?

      Amazon is all about the money. Services that might bait you into subscribing to Prime are what its all about. I installed the new Prime Music app on my wife's Samsung phone an hour ago. When I signed in I used her account email address and password. Guess what? My wife isn't eligible for Prime Music. I am the Amazon Prime Subscriber and she is a "shared household member". They give her the "free" two-day shipping, to suck her into buying more from them... but not Prime Music eligibility. We are reconsidering our Prime membership right now.
      • Prime Music

        So where are you going to shop and get everything that you now can on Amazon Prime? That is the whole point, they offer free shipping, no tax, doorstep delivery, free videos and now audio - tell me who else does all of this? It is a bargain. I love Christmas shopping on Amazon.
  • I'd buy one with decent specs

    Of course that would be after somebody figures out how to install standard android on there.
    • I need Google services

      I have a kindle fire. I eventually replaced it with a real android tablet because a hated the Amazon AppStore. The apps were missing or old and not updated. The inability to install Google services left me with a terrible keyboard and poor browsing and email. I eventually rooted the tablet to put on cyanogen mod, which helped.

      I have to admit that I haven't been tempted with a kindle fire since.
  • DOA

    I've looked at the Kindle, their streaming service, music service, and I'm not impressed with anything they offer. No way their forked Android phone is going anywhere. Only company making money besides Apple is Samsung, even Microsoft can't get any traction. You're telling me Amazon is going to outdo Microsoft?