Amazon – Bad Omen

Fire phone’s draw looks to have already faded.

• Some observers are wondering why anyone outside the US would want to buy Amazon’s smartphone but I am struggling to see why anyone inside the US would want to buy it.
• The phone is being made available on July 25^th but demand for the device seems to be already fading fast.
• A quick tour of Amazon’s website shows that the device has fallen from the top slot in the electronics bestseller list to number 72.
• Looking at just the contract phones category, it still ranks at number 2 but I suspect that it does not take a large number of sales to make it onto this list.
• (The Galaxy S5 and S4 variants occupy No. 1 and places 3-12, indicating that this is not a great measure of demand).
• I think that the problem is pretty straight forward.
• The device costs the same as the iPhone or the Samsung Galaxy S5 but it has virtually no ecosystem to make it appealing.
• Aiming this device at shoppers makes little sense as smartphone users spend only a tiny fraction of their time on smartphones shopping.
• They spend far more time playing games or social networking and Amazon does not really have an offering for either of these two activities.
• Some of the core apps like Facebook, Twitter and Skype will be available on the device but how well they will work remains to be seen.
• Hence, I suspect that users look at this as an unattractive proposition as they will have to give up the ecosystems within which they currently live, in return for 1 year of free Prime membership.
• This will involve the risk that many of the apps they currently use being unavailable or not working very well on top of having to rebuy them.
• Furthermore, there is nothing that stands out to really improve a user’s Digital Life beyond some graphical gimmicks.
• Hence, I suspect that heavy Prime users who are about to renew their contracts may be drawn to buy this device but I can’t see anyone else would.
• This limits the pool of potential buyers to 21m (Amazon Prime users) of which I expect only a fraction to try this proposition.
• Amazon is continuing to put the cart before the horse when it comes to its Digital Ecosystem strategy. (see here and here)
• It needs to develop the ecosystem first because without a great offering there really is no reason to buy this device.
• Hence, I see Amazon continuing to linger at the back of the ecosystem pack and see nothing but losses from this latest foray.