The Many Problems with an Amazon Smartphone

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The rumor of an Amazon smartphone is picking up steam, with Bloomberg citing two unnamed sources who say the device is in development.

Amazon is reportedly working with manufacturer Foxconn on the device, and is looking to acquire some patents to avoid getting pelted by lawsuits. The idea sounds plausible, though Bloomberg doesn’t say when the device will launch. It’s probably not happening anytime soon.

In any case, I’m not yet convinced that a Kindle phone would be a vital competitor in the smartphone market. While Amazon’s Kindle Fire tablet made perfect sense, a good smartphone requires a different set of apps and services, and it’s not obvious why Amazon would be any good at providing them.

The Kindle Fire was a no-brainer. Amazon already had thriving stores for digital books, videos and music, and had also opened its own Android app store. Amazon’s tablet also served a clear market need: At $200, it was significantly cheaper than the iPad, making it a great holiday gift for people who consume lots of content.

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On a smartphone, the user’s priorities are different. It’s all about getting things done efficiently, and Amazon doesn’t have much experience making software for that purpose–certainly not enough to match the highly advanced smartphones that are already available.

To compete with other phones, Amazon needs a turn-by-turn navigation service and built-in apps for calendars, alarms and reminders. It needs a way to quickly switch between apps, and a top-notch camera, with user-friendly features such as face detection, auto-focus, HDR imaging and burst shooting. On top of it all, Amazon could use a virtual assistant–or at the very least, rudimentary voice commands–to compete with Apple’s Siri and Google Now.

All those features are now table stakes in the smartphone game, and none of them are available for the Kindle Fire. Although the Fire is based on Android, Google doesn’t license its own apps, which on Android phones are crucial. On the tablet, Amazon was playing to its existing strengths with easy access to digital media, but on a phone, the company will have to start from scratch on other, more important aspects of the device.

Even if Amazon can provide all those services, it’s still unclear what purpose a Kindle phone would serve in the market. The Kindle Fire’s biggest hook was its $200 price, which at the time was unthinkable for a mainstream tablet from a reputable brand. But thanks to subsidies from wireless carriers, pricing isn’t an obstacle if you want a decent smartphone. On AT&T, you can get an iPhone 3GS for a penny, and on Verizon, you can get an LG Lucid for $50. (Amazon Wireless, by the way, sells some great phones for just a penny with a two-year contract, including the Nokia Lumia 900.)

It’s possible that Amazon could do something revolutionary and offer cheap, off-contract smartphones, while using its own content sales to help subsidize the price. That’s the same strategy Amazon uses to make money on the Kindle Fire, but with phones, the situation is different. Amazon would still have to sell wireless service, and would therefore need to cooperate with the very companies it’s trying to disrupt. Anyway, it’s pointless to speculate too much, since we just don’t know what’s going to happen.

Obligatory bet-hedging: I don’t want to rule out the possibility of a great smartphone from Amazon. As my colleague Harry McCracken pointed out last November, Amazon has a knack for simple and elegant designs, and it has the advantage of knowing a lot of people’s credit card details already.

But the smartphone market has been fiercely competitive over the last few years, to the point that a great phone is more than just an app store, a media player and dialer. If Amazon wants to build a phone, it’s got a lot of work to do.

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11 comments
saoud.almualla
saoud.almualla

No need to patronize me at that time. I guess amazon still doing well last I checked . Wall Street will never understand a forward thinking company, which the future is what matters, not the president or the past . I thought I'd reply as I promised back then....told you so :)

alfred002
alfred002

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Saoud Al Mualla
Saoud Al Mualla

The number of times I heard that Amazon will fail, endless. It is usually the media and Wall street experts. It bugs them so much because it keeps defying their rules and expectation. Amazon will continue to prosper because it clients oriented and not Wall street oriented, so WS will never "get" Amazon. Is the author Short AMZN ?

yeomandroid
yeomandroid

Amazon has a business strategy that simply works for both tablets and smartphones; it's called content and that content includes everything you could possibly need and that includes productivity software. Google is playing catch up because for too long the company has ignored its Android Market and the content is sorely lacking right now because of it. 

Cameron Strickland
Cameron Strickland

I'm guessing that they'll market their smartphone as "the shopper's best friend." They don't need to sell digital content or target the same audiences that Android and Apple fight over, why not make the phone target those thrifty shoppers who like to browse stores and compare them to online prices?

Simon Cohen
Simon Cohen

I think anyone who is already counting Amazon out of the smartphone race should take a second look at Amazon's track record. If they do in fact jump into that space you can bet they will have done their homework. These guys are amongst the savviest players in the consumer landscape right now. 

newmanjb
newmanjb moderator

@saoud.almualla I'm not sure what you're saying "told you so" about. A year has passed, the Amazon phone still doesn't exist--and Amazon just said it won't exist this year--and all of the challenges facing Amazon in this area are the same as they were before. If your only point is that Amazon is or isn't doing well as a company, then you have completely missed the point of this piece.

Jared Newman
Jared Newman

"Is the author Short AMZN?"

Nope. I don't invest in any company that I might cover. Care to actually argue against any specific points raised in the story, or is it just ad hominem all the way?

Saoud Al Mualla
Saoud Al Mualla

 I am not going to say much because it is simple common sense. Amazon phone will have both google/android app store plus amazon app store making it already the most likely new smart phone to challange iOS and Andoid Sumsung. The price has been always a sore point with investors because amazon sells cheap and does not seem to care about profit margine. It is very likely that their smartphone will be the cheapst among its peers. Amzon tablet are doing well and even apple took notice, why wouldn't the smartphone be any different. I will end up by mentioning Amazon clouds, the are the leaders and with the expansion of use of smart phone as payment device or id,plus ads and information gathering,Their clouds will play an important role, I can go on about retails but all point to the fact that from the first day amazon enters the smartphone market, it will be ready to compete. Anyway, let us agree to disagree however, please let us wait and see. I will post a comment if I am wrong and would apologize. I promise.

saoud.almualla
saoud.almualla

No need to patronize me at that time. I guess amazon still doing well last I checked . Wall Street will never understand a forward thinking company, which the future is what matters, not the president or the past . I thought I'd reply as I promised back then....told you so :). Lol. Oh yes and since that time, I've made a handsome profit going amazon long, thank you very much. Wonder what happened to the shorts, I always annoy them with my comments about amazon ( check seeking alpha few months ago when the author got angry , he was short , never replied me since , although he said he would. I am not sure if he has anything left, guess he wagered on the wrong horse ... Oh " experts" don't you love'em

Jared Newman
Jared Newman

"Amazon phone will have both google/android app store plus amazon app store."

What? How do you know this? The Kindle Fire doesn't have the Android app store. It's highly unlikely that Google would allow Amazon to license its apps, since it's a competing platform.

We can agree to disagree on everything else. I'm not saying Amazon will fail, but they've got a LOT of work to do if they want to make a competitive smartphone (see the points raised on the article for the specifics).

Cheers.