The analysts are in a tizzy predicting that Amazon may have what it takes to go after Apple and their almighty iPad. If you listen closely enough you can hear them chanting as if they’re about to see Rocky VII where the scrappy underdog takes on an opponent that is almost larger than life and wins. The pundits of course want ring side seats at this event but in this episode of the series I’m not convinced we’ll see a knock out blow.
Different Sides of the Same Ring – Market Positioning
Apple at its roots is a technology company; although they are entrenching themselves in the consumer entertainment distribution channels none of their achievements would be possible without its legions of loyal Mac OS developers and their commitment to the iOS platform. Apple controls the whole stack and protects it like Mike Tyson vs Evander Hollyfield; hardware, software platform, application distribution and entertainment distribution (music, movies, games) – Apple is the Don King of their eco-system. In the next few years, you can bet that if you’re building something on Apple, you’re going to be paying some kind of fee.
Amazon comes into the market as a distributor of entertainment properties and everyone is expecting that they’re going to enter the ring with Google’s Android in its corner. Out of all of Apple’s competitors, the retailer does appear to have everything it needs to be attractive to consumers, however don’t be surprised if it tackles the market in a slightly different manner. You see, Amazon’s whole business model is selling goods to consumers… it’s not a typical technology company. Everything will be geared to selling you something – more books, movies, music, games and perhaps some productivity applications. However to really turn a profit it’s going to have to know what interests you – I’m actually thinking there may take a page from Google’s playbook and start examining not only your purchase habits, but every activity you do on their device. For starters, say you’re using the Amazon tablet to do some homework regarding how to use Object Factories in Java, the next day (or maybe in the next few minutes), you receive a notification of new recommendations from their store that is now filled with Java programming books; it notices that you like playing racing car games and now Amazon is automatically suggesting other racing titles for you to purchase. They could very well end up being your very own personal shopper! Apple may put you in a clinch to convince you to make a purchase from iTunes; Amazon you may feel a few rabbit punches.
It’s all about the Fans
Don King new that it’s all about the fans when it comes to promoting your fighter. Apple does this really well with the developer community and its customer; regardless of missteps it somehow is able to appease its followers. I’m not sure if there is any company out there that inspires so much loyalty (perhaps PBS with Sesame Street), but its key to Apple’s success. Developers are constantly building new and better things for the platform and Apple continuously takes its cut.
I’m not sure if Amazon will inspire the same type of frenzy. Sure if they use the Android platform, they get a legion of developers, but how many of them will actually build or tailor their application to take advantage of Amazon’s services? Do consumers feel any stickiness to the Amazon brand that they are willing to forego the Apple experience? How far are developers willing to go beyond the true Android experience?
The Pricing Factor
Last week, HP held a firesale of their WebOS Touchpad; admittedly I was running around town unsuccessfully trying to secure one after my online attempts failed miserably (had to sleep and missed Staples releasing another batch – grrr!). Amazon must have been watching very closely at this pricing experiment that they didn’t even have to fund; it showed that there is a very, very large appetite for a tablet that is powerful, yet low cost – the fact that it was already knocked unconscious by the iPad didn’t matter. iSuppli estimates that it costs $318 to manufacture the 32GB model and selling it for $149 is huge loss, but it’s a loss leader that only Amazon could consider taking a chance on. A tablet’s hardware is a one-time sale; if there was no other way to gain additional revenue you would be forced to recoup all costs and profit from the initial sale. But Amazon knows that recurring revenue is king – if they can get you to increase your purchases through its properties it doesn’t have to play by the same rules that previous Android challengers to the iPad would have to. It can release a very high-end product at a low price point to leverage its marketing prowess to target you better than ever. If they drive tons of customers to their devices you can make a wager with your bookie that the developers will follow.
The Verdict – Judges Decision
In the end I don’t believe we’ll see a huge knock out. If anything we may end up like where we were back in the old PC vs Mac days before 2006. Apple may find itself in familiar territory as the high-end niche player while Amazon grabs the majority of those who are looking for something a bit more affordable. If they manage to offer a tablet around the $249 mark, I’d buy one.