My Birthday Gift: The Kindle Fire, and Why It’s The First Credible Android Tablet

Over the past 6 months, I’ve been watching perplexed as vendor after vendor launched Android Tablets into the market with no success. Perplexed for a simple reason – I could not understand how they expected consumers to buy their $559, $499 or even $399 tablets when they could get an iPad 2 for $499 and get the real deal – the TRUE status symbol, the best content & app eco-system. What were Samsung, Motorola, Dell and Asus thinking, I was wondering. Was it a shortage / price of components that pushed them to that price bracket? Was it protecting the brand at all costs, even failure?

A couple months ago, I asked a question on Quora and the results were staggering – over 20:1 for iPad.

So what has changed?  The $199 Kindle Fire. You can get two of those, and still have money for another holiday gift.

Amazon’s Kindle is an ecosystem, not a device. Amazon sees it as a way to make sure you buy all your content – books, music, TV – from Amazon. Just yesterday they announced the streaming deal with FOX TV - more free content for Amazon Prime subscribers. Guess which devices will feature it? Remember Sony’s Howard Stringer’s announcement a few weeks ago – “Apple makes an iPad, but does it make a movie?“. Amazon doesn’t make them, but it sure-as-hell moves them around. In a move right out of Steve Jobs’ books, Amazon is tying it all together – device, app store, content store, streaming rights (with free content for Prime members), e-commerce for physical goods, payment options (from one-click to credit cards), cloud storage, even a loyalty program!

Kindle now touches everything Amazon does, and so many other companies. It threatens Netflix streaming – Amazon is securing more content for Prime members, and has a sound pay-TV model with a complete eco-system around it and it obliterates all other Android tablet manufacturers volume forecasts for the holiday season (a $200 rival with a strong brand behind it).

And it’s a credible contender for Apple’s eco-system. It is as broad, as far reaching, and goes even further with physical e-commerce embedded.

Probably the only risk is execution. If the software / hardware is good enough (defined as – better than most Android implementations), this will make a huge dent in the market. iPad will become the high-end product, but Android, through Kindle, could be the mass-market. Not so different from iPhones and Androids, actually.

My pre-order is in.

Amazon’s Android Appstore (Tries) To Take Care of Business

So – the fabled Amazon Android Appstore (not App Store! That’s an App-le trademark!) is here. And almost as expected – these guys get the big things right, but the small things…

First thing you’ll notice -The Amazonian design. Besides the obvious branding elements, It is a much more effective design than Google’s. It is meant to generate sales. As soon as you open the store, you’re faced with credible alternatives – stuff you may well want to download, cause everyone else does. The screen space is used efficiently, and navigation is simple and easy. Very little innovation over, say iTunes, but also no clear disadvantages. The desktop web store is similar in approach, and not very far from the Amazon website that is so effective with retail shoppers in general.

The main attraction is a featured, “bonus” download, updated every day (i.e. a product that is usually not free being given away for free). Amazon takes care of business. To make an app store a business, you need paying customers. This requires people to have a payment method. That’s a hassle. That requires an incentive – give them something for free. But force them to connect a payment method to get the free stuff. Makes perfect sense. And gets me Angry Birds Rio for free. It also keeps me coming back every day for something else. Yes, it costs Amazon something. But probably not a lot. You see app developers have a great incentive to be providing these downloads for virtually (or literally) free – that day you were featured and provided as a free app, is going to put you very high in the Top Downloads chart – which will get you paid customers the following weeks (note the Top Downloads in the screenshot – yesterday’s free download, and today’s…). So even if Amazon pays virtually (or literally) nothing – it’s still a great deal. Everyone wins.

Caveat emptor – this also needs to work. The Appstore requires you to set up one-click mobile purchasing to get the download (as it should). However – no matter how many different ways I tried to do it, and despite the fact that all my info is shown, and my account shows mobile one-click purchasing activated (even when I connect on my desktop through a browser) – it still asks me again and again to “please add a payment mehod in your 1-click settings”. Now I am a loyal Amazon customer – Prime, Amazon Store Card and all that. My guess is that Amazon is not accepting its own store card on its own Appstore. Otherwise I don’t see how such a blatant bug could have slipped their people.

So – as expected, these people mean business, and know how to do it. They’ll have to cross a few t’s and dot a few i’s before they do, however.

Why Amazon Needs An Android App Store – A Different Take

A couple of weeks ago, Amazon’s opened it’s App Store to developers, and promised to actually open the store to consumers “this year”. While TechCrunch’ Jason Kincaid has done some good work explaining the premise to consumers and the overall eco-system, a clear answer to the question “Why” remains open. After all, if this brings about further market fragmentation, if it’s going to be that hard to get the store pre-installed on phones which is the only sure-fire way to generate market traction, and if the direct returns from running an app store are generally not meaningful – i.e. the app store is a means to facilitate activity on your platform and make it competitive, (smartphone, e-reader, whatever), much more than a system to generate revenue from commerce.

So why does Amazon, which does not have a smartphone platform (Kindle aside), and certainly no platform / device stake in Android, need an Android App Store? The only attempt at an answer I’ve seen came from Gizmodo, and left much to be desired.

While it is entirely possible that the simple answer is “it doesn’t” and this is just a mistake carried too far, here is a  more strategic explanation.

An App Store Is About A Billing Relationship With Users

The biggest advantage the iTunes store had on prior online music stores, and the iTunes App Store on various other app download sites, is the immediacy of transactions that is enabled by the requirement to have a credit card registered with iTunes from the get-go, and by the support for $0.99 micro-payments. This made one-click purchasing a reality, and made the iTunes App Store such a hit with people looking for a quick-fix to their boredom, as well as entertainment app developers of all sorts. Competing app stores which did not have that billing relationship with customers never created a similar volume of sales – including the Android Market itself.

In the same token – while initially most of the business executed on the iPhone App Store was through a pay-before-download model, it seems like more and more of the business is now tied to in-app payments, i.e. “download for free and then pay for digital goods” – be they more levels of play, various items to use in-game, premium content etc. . For instance if you look at the iTunes’ App Store’s “Top 10 Grossing” chart today you will find the FREE game “Zombie Farm” – a game that monetizes only through in-app payments, facilitated through the iTunes micro-payment capabilities.

Amazon is all about a billing relationship for retail. It has made simplifying payment and delivery key pillars of its strategy. It keeps your credit and debit cards on file, and even issues its own store cards for many users. For a very high percentage of existing Android users, this means an Android App Store is a store where they could immediately purchase and download apps based on their existing payment cards stored with Amazon. This is a key advantage Amazon likely hopes to put to use.

But even more importantly for Amazon – Android is a smartphone platform that is already penetrating new global markets en-masse, and if Amazon manages to become a de-facto standard app store, then the billing relationships created with new Android users will then be mined to sell other digital goods – and later physical goods. i.e. the “Amadroid” app-store has the potential of recruiting new Amazon customers in massive volumes, internationally. And that’s a major strategic opportunity.

Amazon Has Better E-Commerce Credentials

Most every existing platform app-store has managed to miss some critical aspects of optimal merchandising experiences. Whether it’s the billing relationship question, the discoverability issue (that I wrote about before, e.g. here), the lack of personalization and so forth – it looks like no one, including Google, has built a great commerce experience that entices users to buy more. In Google’s case a cursory examination would show you apps in languages you don’t read, prices localized to sums like “$3.13″ which make little marketing sense, an arbitrary or random list of proposed apps. Compare to your average Amazon display – where once you get into the site, shows you products that YOU are likely to be interested in, suggests add-on or replacement products should you not like the ones on display, and tells you what other people are buying. Amazon with an eye for detail and a knack for optimization is well positioned to create a better customer-trap. This is good for customers, good for developers, and good for the platform. Amazon is betting that if they can build a better store, ultimately Google will not fight back. After all, that is not the reason Google built Android, nor is it how they intended to monetize it.

So Amazon has a better shot than Google at building an effective store (for Apps or any other digital content or physical goods), and certainly better than wireless carriers or some of the other contenders. And there are very good reasons to do so – regardless of the size and commercial dynamics of the app market itself.

It’s a Platform, Silly

Taking this a little further – let’s look at in-app payments again. If this model, facilitated by the store, is adopted by apps selling other goods – digital or otherwise, and especially if Amazon can make the commercial terms more flexible based on what is being sold and by whom – this is really a new mobile commerce platform that Amazon can run, and will allow other innovators to use Amazon as an enabler platform.

That is exactly where Amazon wants to be. It’s the philosophy behind Amazon Marketplaces, Amazon Web Services and several other Amazon initiatives. Amazon wants to be the e-commerce platform for the web – including the mobile piece of it. The more end users are reached, the bigger their total market share is going to be. Period. Having a successful mobile app store for Android or any other platform will help them get farther, faster.

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