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.

How I Got It All Ass-Backwards, or How Android Got Free Again

Free!

Last week I wrote a piece about the huge cultural gap between Google and Motorola, and how Motorola is such an bad fit for the Google organization, and what it will do for it’s relationship with Android licensees. I also stated that if Google acquired Motorola for the patent portfolio alone – that’s not such a big deal in the marketplace.

Well boy was I wrong. A person who’s very close the story saw fit to fill me in.

Google’s acquisition of Motorola was indeed all about the patents. But not necessarily Google’s lack thereof, but really its licensees’. What Google is trying to do to the handset market is what Microsoft did to PCs – give the hardware market to cheap Chinese / Taiwanese / Korean manufacturers, and thereby own the software platform. The catch? The incumbents – Nokia, Apple, Microsoft (and Motorola) own restrictive patents. And they sue / charge these manufacturers to a point where they are agnostic between Google’s “free” OS and Microsoft’s “pricey” one. The only player in the Android camp who was relatively safe was Motorola, who owns a nice portfolio developed over many years.

Solution – Google buys Motorola and promises Android licensees a defensive umbrella – it will fight their patent wars for them with its newly acquired arsenal.

Right there and then, Android is free again.

So what is Google to do with the Motorola organization one might ask?

This is where it gets pretty interesting. You see Motorola is in Illinois. The state a certain president (and his associated mayor) come from. And 2012 is an election year. Who wants to see 10,000 layoffs in Illinois on an election year? Certainly not someone who wants to Do No Evil…
2012 Election

Google acquires Motorola. Say again?!

With so many so-called experts (read: people who use Google and used to have a Motorola RAZR phone) providing different angles on this acquisition, I figured it’s time to chime in. I have a pretty good handle on Motorola (you can Google that!) and think I know something about Google too.

And what I don’t get is the culture clash. Truly. Motorola, like it or not, is an 83-year old Chicago (well Schaumburg) company, and no, the split to MMI and MMS did not change that. It is a slow mover 18,000-employee corporation, with an organization that takes years to design products, and even under Sanjay Jah that could not change much.
You see, when a company is hit as bad as Motorola Mobility was hit in 2008-2009 (and by the way – that happened through their complacence over the success of the RAZR), the good, dynamic, innovative people tend to leave. Especially in a market where Google, Facebook and Groupon are snatching all the good people who’d still like to work for a “safe” company. The culture has not changed all of the sudden, nor was there a good reason for great people to join lately.

Google is, or aspires to be, a fast-mover Silicon Valley company with a flat hierarchy, a market-driven (really numbers-driven) no-nonsense approach, with little respect for old-world processes. And it wants to retain this culture while growing to 25,000 employees.

See the issue?

So if, as some people have suggested, Google is only after the patents and will spin out Motorola again as a stand-alone device manufacturer, not so much has happened in the market (but congratulations to all the lawyers, accountants, bankers and management consultants who’re going to get the fat checks).

But if Google is truly looking to become the anti-Apple and the Motorola team is its weapon-of-choice… well, good luck with that.

P.S.: I especially like the theory that Microsoft was going to buy Motorola which forced Google to buy them first. It’s just lovely.

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.

Post MWC: Android’s Tour-de-force. Is that the shape of things to come?

Over the last week I’ve had several discussions with colleagues about MWC 2011. The general gist of things was “wow, how far Android has gone”. And indeed, Android’s presence at the conference was impressive, to say the least. The usual Android suspects were there, of course – HTC, Motorola, Samsung and others. But what was even more impressive was the vast number of unknown Android manufacturers, mainly Chinese, who’ve flocked to the free platform en-masse. Known names like ZTE and Huawei were to be expected, but upstarts like Malata (who seems to make impressive Android tablets, incidentally) were there by the dozen. And of course – given Nokia’s and Apple’s absence, and RIM’s limited presence, it sometimes seemed like Android is the only game in town.

Malata Android Tablet

The Nokia / Microsoft news just fanned the fire. Essentially while it is a feather in Windows Phone’s cap (not necessarily a beautiful peacock feather, incidentally), it means that Nokia will be out of the smartphone game for a long time. And to judge by the employees’ reaction – could be long indeed.

The general conclusion I heard drawn, then is simple – Android is taking over the market, Android will define the shape of things to come, Android is where to take your mobile start-up / corporate mobile app first cause that’s where all the users will be. Right?

Sorry, it’s not that simple. Contrary to what some people think, Android to phones is not going to be Windows to PCs. At least not in the next 2-3 years. There are many reasons, but I think the most important one lies in the personal relationship between consumers and their phones. Unlike PCs (at the time), phones are a means for personal expression both explicitly (as in what you put on them / use them for) and implicitly (as in making sure your peers know what you have – just like cars). Most smartphone users associate their phone selection and habits with their identity. And with identity, a “one size fit all” strategy doesn’t work, fortunately. So as long as there are technologically credible alternatives with a well differentiated product (e.g iPhone, BlackBerry), they will draw significant audiences.

Furthermore, the wider Android spreads as a mid-market solution, the less appealing will it be to some of these people who seek to distance themselves from “the middle”. Think the Mac cult of the ’90s and early ’00s but at a wholly different level. After all – these devices are used in the open. People see what you use, so better pick the “right” one.

So clearly – the fragmentation in the smartphone space is going to continue. Each platform’s market segment will be different demographically and psycho-graphically,  and these compositions will continue evolving. I expect we’ll keep seeing Android pandering mostly to the mid-market (with of course a meaningful number of power-users and high-end customers too). iPhone will generally remain a high-end phenomenon. BlackBerry may well lose its hold on the enterprise, but acquire new audiences amongst the young and price-conscious (free messaging). And when Nokia eventually rolls out Windows Phone handsets, it is quite possible that their considerable distribution clout in European and Emerging markets will make this a meaningful platform for those audiences.

I believe a very similar phenomenon will be seen in tablets. While Android tablets are improving, the good ones are still not meaningfully cheaper than the iPad. Apple only needs some minor improvements with the anticipated iPad 2 in order to stay in the lead. Only when significantly cheaper tablets (probably running Android 3.0) will come to the market can the balance be upset. And what will we have then? A similar market structure with iPad as the premium product and Android tablets as cheaper, “good enough” devices for mid-market consumers.

Where does this leave the Android makers? With the proliferation of Chinese manufacturers with great pricing power, we will see the PC-wars re-enacted. Margins will drop to low single digits for most manufacturers, probably leading to consolidation and elimination of key brands.

So essentially – nothing earth-shattering really came out of MWC. We will see even more Androids, Symbian and MeeGo are dead (duh!) but little change to the fabric of the market as we’ve known it in 2010.

In Smartphones: Google is King but Apple is Rich

A couple of weeks ago, the inevitable was announced. According to Canalys, a leading mobile market research firm, in Q4 2010 Android has overtaken Symbian as the world’s most-pervasive smartphone platform. According to Canalys, 33.4 Million Android phones were shipped by Google licensees in the quarter – more than double the iPhones or BlackBerries.

While this has been touted with much fanfare, some seemingly contradictory information is “common knowledge” to mobile application developers. It is still much easier to get traction and especially monetize iPhone apps than Android apps. How come? With such momentum for Android, you’d expect it to be at least as successful as iPhone.

The answer, which I’ve been proclaiming for awhile now, can be summed up this way – “Android is the new Symbian”. Now I’m sure some Googlers will resent this, so maybe a different way to put it is – “Android is the new MS-DOS”.

What I mean by this are really two things. First, that Google’s strategy with Android is to reach as far and as wide as it can. That’s one of the reasons it is free to licensees, open-source etc. Google intends to eventually leverage Android by tying it to its other assets and ultimately use advertising to monetize it. This means you can build cheap Android phones and target the mid-market, not just the high-end as other smartphones have (in truth, Android hardware requirements are still relatively high, but Moore’s law is taking care of that cost). Furthermore the abundance of licensees means that a price war is evident – and indeed we now see free (subsidized) Android phones on many operators portfolios. So – Android is becoming the dominant player in the mid-market, with high-end presence too, and ultimately low-cost aspirations. This is exactly the path Symbian took in 2004 – 2008, becoming the world’s leading smartphone platform by volume – but dwindling in consumers’ eyes to a point where it drives low-margin devices, with BlackBerries (initially) and iPhones (later) commanding the high-end, high-margin sector. In 2008, a Nokia executive told me personally that Nokia learned the hard way that the top 10% of the handset market commands 50% of the margin. Think about it – if one company takes over the top 10%, it can be worth as much of all the other companies combined (who sell in aggregate 9 times as much as it does). Right? So this is the second point – a smartphone platform that is focused on mass is doomed to become a low-margin platform. Google doesn’t mind. But it’s licensees are doomed to fighting over scraps.

Now this is a tall order claim, that I couldn’t really publish before, until I ran into this analysis by Asymco’s Horace Dediu:

Which brought to mind Noam Wasserman’s “Founder’s Dilemma” metaphor about Rich vs. King. Apple’s startegy with the iOS devices, just like with the Mac before, is to aim for the top 10-30% of the market. The people who can spend, the people who care deeply about the product they are buying and using. Google’s strategy is more like carpet-bombing. If we can get to 80% of the people, we’ll surely find a way to monetize that.

So is this just an interesting business case? Or Valley gossip?.

If you’re involved in this business in any way – you might be an app developer, a marketer wanting to reach mobile device users through mobile ads or a mobile app / website etc., or a service provider who is pushed to provide a service to his customers through their phones, this is critical info. Cause it means that you are going to reach a different demographic and psychographic when you target the different platform. In the Apple case, your demographic will be skewed towards high-income, users may be more engaged with the product, and there may be more willingness to pay. On the Android platform you will eventually reach more people, but engagement and purchasing intent will be different. And your adoption ratio (compared to the total available Android market) will be different, as many of these users are much less enthusiastic about their phones. Yes – they bought a smartphone, but maybe because “everyone else is getting one” or because “it was free, so why not”. So choose your audience wisely, and plan your marketing moves with consideration for its composition.

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.

Follow

Get every new post delivered to your Inbox.

Join 701 other followers