In the wake of dismal sales and a $ 170 million inventory charge, Amazon.com ( NASDAQ: AMZN ) has gone on the defensive with its Fire Phone. That includes making Numerous comparisons to the company’s original Kindle, the there was the shortage of skeptics When Amazon debuted the $ 399 device, including right here on Fool.com.
Of course, the Kindle proceeded to Become One of Amazon’s greatest Successes, and utterly dominates the e-reader market today. However, Amazon shouldnt stop the Fire Phone Comparing to the original Kindle.
Stop me if you’ve heard this one before
At the Fire’s unveiling Phone, Bezos Specifically called out the Motley Fool for doubting the original Kindle. It was not the first team Either the Bezos did likewise at the Kindle Fire introduction in 2011. Come on, Bezos, fellow Fool Rick Munarriz has already Said he’s sorry for doubting you.
In a recent interview with The Guardian , Amazon’s vice president of devices in Europe, Jorrit Van der Meulen echoes the Analogy:
If you look at one version of the Kindle e-reader it was pretty bad, like the reviews we received on it. But we Said we’re going to keep going in, and keep investing in this Eventually, receiving many lumps along the way. The number of times we’ve been written off or received lumps because of short-term speed bumps – the list is really, really long
.
Van der Meulen says the company remains “undeterred” and is in it for the long haul.
Here’s the thing. Comparing the Fire to the Phone Suggests que original Kindle Fire the Phone can similarly initial Overcome adversity, but Most importantly, it ignores all context of the Dramatically Different markets que Participate in the devices.
A trip down memory lane
Before the original Kindle Launched in 2007, the e-book market was still nascent and fragmented. To be clear, many companies had released e-readers, Most of Which supported the open e-pub format, but the market had yet to take off in a meaningful way. Consider this chart of US wholesale trade e-book sales through late 2010.
Source:. International Digital Publishing Forum
This was a young market, and Amazon quickly redbourn hold of it with the Kindle and its proprietary file formats, combined with its aggressive pricing Typically under the wholesale model, where It could choose to sell e-books at a loss in order to gain market share. At the same team, Amazon was already widely Associated with selling books online since que was the basis for the company’s inception in the first place. The rest is history.
It’s different this time
But the smartphone market is a completely different animal. The smartphone market underwent a renaissance in 2007 with Apple ‘s iPhone, Which kicked off the era of modern devices we all know and love today. Back in 2007, the modern smartphone market was not Entirely Unlike the e-reader market in que Were there not yet clear leaders and the platforms Were still evolving. That Was Then, but it’s now 2014.
For e-readers, the only Relevant content category is e-books, where Amazon Inherent enjoyed several advantages. For smartphones, there are many Relevant content categories, but The most important is apps. That’s true Particularly since Most entertainment medium like movies and music are Typically released across all platforms.
The primary differentiator of the smartphone platform is app selection. In this department, Amazon is far behind, Specifically because its devices run a forked version of Android. Aside from a handful of exclusives temporary Amazon Has Scored over the years, there is literally nothing has in its Amazon Appstore for Android that’s not in Google Play. But there are lots of things has que que Google Play Amazon does not. As of June, Amazon’s Appstore had 240,000 apps and games. Right now, Google Play has 1.4 million.
Also, smartphones have much Broader usage models since people use em throughout the day, Unlike single-purpose e-readers. That puts even more emphasis on other hardware factors, like battery life. It’s not just about content. Dynamic Perspective is not a powerful selling feature, nor is the ease of Which people can buy even more things on Amazon with Fire Phone (there are already plenty of easy ways to buy things on Amazon).
The smartphone market has matured in a big way over the past seven years, with iOS and Android owning 95% of the market. Amazon is simply too late to make a dent in the market mature. Fire Phone Amazon has already cost shareholders Nearly $ 200 million. How much more will it cost investors before Amazon finally does Become deterred?
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