Hugh Howey
Hugh Howey

Bestselling author of Wool and other books. Currently sailing around the world.

What Amazon Should Have Built

The Amazon Fire Phone has been hammered by the media as a colossal failure. There’s at least a story a week about the device’s disappointing launch — and Amazon has been running promotions and fire sales (sorry) for months now. When the phone came out, it was tied to AT&T (which took it out of consideration for me without needing to look at a single feature or review). Since then, the phone has also been sold unlocked for use with any carrier, occasionally for less than most smartphones cost with a carrier’s subsidy (you can get one right now for $449, unlocked. But that price has occasionally dipped below $200).

Amazon took a write-off on its unsold stock of Fire phones last quarter to the tune of $170 million. That’s a lot of money. Or as one commentator pointed out, it’s basically a Hollywood flop for a film studio. Which they suffer all the time. Some are calling this an existential crisis. Others are more cautious with their criticism, remembering the reviews and doubts about the original Kindle. Amazon CEO Jeff Bezos recently said that Amazon would be doubling down on its investment in the Fire phone and iterating until they get it right. And they need to. Pundits who say Amazon is making a mistake to develop a phone don’t seem to understand what’s at stake. Shopping began moving online two decades ago. Now it’s moving mobile.

Online shopping is still a fraction of total consumer shopping, and mobile is a fraction of that fraction, but both are gaining steam and present massive opportunities for whoever gets it right. My money is on Google for the interface and market share of eyeballs. My money is on Amazon for the distribution network and shipping speed. Google needs to solve the latter, and Amazon needs to solve the former.

Amazon already has the best and most popular online shopping interface, but Google is making major strides in that department. Search for a product on Google, and you’ll often find a better price from a non-Amazon vendor (I did recently, and the product is shipping from Italy for less than I could buy it here). The shipping might be slower this way, so it’s a matter of how quickly you need the thing. Google search dominates lives in a way that only Facebook can match. A staggering number of people interface with the internet by starting with Google. They go where Google’s algorithms take them. By offering the Android operating system for free, Google has crushed all competitors for mobile OS market share. So more mobile searches start with a Google search, which is great for Google shopping.

Amazon needs to be on that screen in your pocket. They can’t rely on Google to provide them a window, not with Google interested in being a retailer as well as a search and ad engine. What Amazon is feeling right now from this incursion is what book publishers felt when Amazon moved into book publishing, first with self-publishing and print-on-demand and then their own imprints. Amazon was already an uneasy partner for having disrupted the publishers’ brick and mortar bookstore relationships, but then they became a direct competitor as well. Google is now doing the same thing to Amazon. The Fire phone was an attempt to inoculate against that. This is why Amazon will continue to invest in the phone. It’s as important as their Amazon.com domain.

The mistake Amazon made with the first Fire phone was to create something different in a way that nobody needed. The 3D effect might be cool, but I’ve seen comments from users who deactivated the option once the novelty wore off. Smartphones already do most things that smartphone users think they need them to do. Coming up with features that stand out is difficult. Dozens of companies have been iterating these devices for a decade. But there are ways Amazon could have gone to win immediate market share. Several ways. And they missed all of them.

The most obvious is price. Amazon appeals to price-sensitive customers, but they went with a phone that has top-notch specs and specialty in-house features. They could have built a phone with slightly lesser specs, off-the-shelf parts, and subsidized the entire cost of the phone with Prime memberships. Two years of prime ($199), and you get a smartphone for free. Or if they’d rather: A $199 smartphone, and two years of Prime membership thrown in. (I like the first one much better. Everyone can understand the allure of a free smartphone. Not everyone knows they need two years of Prime for free.)

And then they could highlight all the benefits of Prime integration: Film and TV streaming, the Prime music program, automatic and unlimited cloud photo storage, and the Kindle ebook store.

The 3D feature was a distraction for how the phone plus Amazon Prime could change daily use through their tight integration. If you are a regular Amazon shopper, Prime is a must. But if you are a Prime member, you might not be using all the free digital content you have access to. Amazon should have focused on this content and the tight integration. Why not have access to all of that content all the time? That’s how I would have run the campaign. I would have taken the same $170 million dollar loss and chalked it up to customer acquisition by practically giving the phone away and hooking people on the free 2-day shipping.

That would have been the safest and most logical path, but there are riskier and I think sexier ones. The first of these would have been to concentrate on something other smartphone manufacturers are doing wrong, and that’s slimming phones down while sacrificing battery life. Amazon Prime is all about consuming digital content (music, videos, books), which stresses battery life. I’ve been dying for a manufacturer to release a phone twice as thick that lasts three times as long. The phone should know when to go “offline” for digital consumption sessions and better control data-hungry and battery-sapping apps (Android and iOS are a hog with these). One way to sell this thickening device is to integrate a small rubber edge on the top and bottom of the phone, so it can be dropped hundreds of times without shattering. Show a commercial with an iPhone and Android saddled up with those bulky and ugly cases we have to put on our devices, then show a Fire phone right beside them, with the protection integrated, the battery three times as powerful, all at the same thickness but better looking.

That sells phones. You could even combine the two ideas above, but would probably have to increase the cost a little.

The wildest idea would be to create a phone with two screens: OLED on the front for all the smartphone features, and then e-ink on the back for reading sessions. These sessions could be used for more than ebooks. They could be for web browsing and long-form content as well. It’s a natural fit for the Washington Post and other periodicals. Every LED-ink phone would come with a year’s subscription to the Post. Reading on the back of the phone lasts over a week. You can read all day and not run your phone down for other uses. You could also use the e-ink screen to check scores for your favorite teams, control your music player, and other features that are largely static without having to wake the OLED screen. Maybe the phone comes with a year of Kindle Unlimited as well, or pre-loaded with a handful of books.

Any of these launches could have made Amazon an immediate player. They have the largest online mall on which to sell the device, they just needed a compelling reason for people to buy one. Price and Prime integration are the top points. Battery and bumper integration could have set them apart. A dual display with e-ink could have created a new product category while greatly expanding battery performance.

It’ll be interesting to see what they try next. It’ll have to be something. This is too important to do as some are suggesting, which is to give up.

31 replies to “What Amazon Should Have Built”

All good ideas. They could also be the one partner that might make sense with Blackberry. The amazon app store already ships standard on blackberry phones and there is a metric ton of patents and features sitting in the blackberry vault that could be used to make amazon ‘different’.

Will be interesting to see what they do next.

The eink back is interesting. Also a way to push notifications and a slowly updating clock that won’t wake the real screen. I wonder if there would be some way to tap into the hipster market with that. Make the phone round, metal, and put it on a chain and bring back the pocketwatch.

I think that the killer app would be a new type of cell phone plan. I mean who likes dealing with their cell company? And who doesn’t like dealing with Amazon?

I have been expecting Amazon to do something in that space since the original kindle came with an included data plan. Think of it… Buy a Fire Phone and with Amazon Prime get access to the Amazon Fire Network. There are a lot of creative billing opportunities. Maybe re-sell both ATT and Verzion networks. Pay as you go with no contact. With AWS and the Kindle they are already in business of providing computing/networking services. A Amazon MVNO could really shake up the cell plan business and could make for some really compelling business opportunities.

Now that is what I want to buy: a new cell phone plan managed by the Amazon I have come to know and love. In fact, when I first heard rumors that Amazon was developing a cell phone, that was what I was expecting. The reality was utterly disappointing.

As a non-American [I’m Australian], I don’t think that plan would be global enough. A dual e-ink/mobile phone function, however, might just do it.

I have a smart phone but wouldn’t dream of reading on it – too much like hard work. But something I could flip to a Kindle interface would be fantastic.

I believe the only way the phone could have worked (or will work in the future) is if they nearly give it away for a bargain price. At anything even near the price for a regular smartphone, it makes no sense whatsoever. Amazon’s app store is weak (at least compared to Apple and Google), and there’s no real customer need for a smartphone who’s most prominent feature is the fact that it makes it easy to buy stuff from Amazon; a task that any smartphone can already do pretty well. It failed for the same reason the “Facebook Phone” failed. (or, digging into the sands of time, the ROKR E1. It was a phone who’s sole virtue was it worked (badly) with iTunes.) Incremental improvements in being able to spend more money do not justify charging anywhere near full retail for your product.

With the Kindle reader, tight Amazon integration made (and makes) perfect sense. After all, you need content to populate the reader, and with Amazon having such a good position in book retailing, if you wanted to use an e-Reader at all, Amazon was the best game in town. Competing readers (such as the Sony) made it a PITA to acquire content, and B&N’s Nook tied itself to a store that offered zero advantages (and many disadvantages) over Amazon. Amazon did not need to heavily subsidize the Kindle since it was the only reader that worked with their store. (It’s for the same reason that Apple can charge a premium for the iPhone… if you want Apple’s excellent UI, the iPhone is the only available choice.)

Maybe a long-battery-life Phablet would be a halfway-decent choice, but as long as it’s still pretty easy to do all those things on any other phone (read books, watch movies, buy stuff, etc.), they are going to have to heavily subsidize the thing, especially with that still-lackluster app store.

There was a good article recently on the Fire Phone that pointed out that the largest reason for it’s failure is likely that it was a product built on what Jeff Bezos wanted, instead of what an actual customer wanted. It pointed out that ridiculous gee-whiz features like the 3D integration cost millions upon millions in development dollars, delayed the product by a year, and made it more expensive. Tech CEO’s are by no means immune to the “What on Earth was he thinking?!?!?” moments. (Windows 8, Netflix spinning off DVD’s, and yes, the Fire Phone.)

I agree with just about all that you are saying, but the other thing driving Amazon’s desire for their own phone is Apple and its payment rules.

That Apple commands more than 40% of the US market (still the source of most of Amazon’s revenue) and it is effectively barred from that platform by Apple’s rules that payment must go through Apple’s payment system. More than the competition with Google, the loss of being able to sell to Apple’s highly coveted customers from the Amazon app was a major motivation for development of their own phone.

You may make your purchases from Amazon on your iPhone, but you don’t do it inside the Amazon app. It’s the same reason you can’t buy Kindle books from inside the Kindle app.

(o.t) Just finished Sand….Wow….. I bought the fire phone when it was 229 and a year of prime. So basically 129$ I like it. It’s not an iPhone, you have to learn to side load apps (not hard) and you have to give up the some of the great stuff of google (major drawback) and voice commands are weak. Amazon need to directly connect with the google playstore and then it would be an awesome phone. Over all, for the price i got it at, it’s a fun phone, connected with the amazon world, you have full file control (something i hated w/ iphone) You can slide songs and movies on or off using file explorer format, instead of being forced to go though itunes. Best is bringing an unlocked phone onto your phone plan is cheap.

Windows, of all people, came out with this ides back about 6 years ago, they started prodicing a Microsoft Courier, it was a tablet device that opened like a notebook, one side was a computer, the other side an e-ink screen. It never made it to market.
But, Apple has copywrighted a combo screen they are working on. It is a typical retina display but you can put it on low power mode and it turns into an e-ink display that uses a lot less power. Personally i never wanted one device to do it all… I like having it, like the iphone plus now, its a reader, gamer, word processor, camera, etc, but that doesn’t mean i only want to carry the one device, I still carry a kindle.

Wow, Hugh. Great thoughts and post, as usual. You’ve nailed pretty much all I’d like in a phone, too—unlocked, so I can use it with my carrier (Ting). And I need a new phone, right now.

I’m torn between if I’d prefer a color screen or an e-ink one. Maybe e-ink. Color e-ink would be best, but I understand that’s still in progress.

And this is me talking to my husband, who worked in the past decades for Blackberry and Motorola: “I don’t care if the phone is as big as an iPad, I just want the damn battery to last way longer!”

I’d be more than happy to strap the phone to my back or carry a tote, I just get tired of having to recharge.

I would have gotten a Fire Phone if it was Verizon and perfectly integrated to the Amazon ecosystem (as I am) and easy to use and had a good camera. Really, that’s what I need–battery life, ease of use, good camera, and preferably a roomy sharp screen to read Kindle books and take Evernotes. 3D? Meh.

Your idea of free phone with 2 years prime: likey!

I hope Bezos is reading this. Let me test your next phone, Jeff. You can do better!

Amazon needs to be on that screen in your pocket. They can’t rely on Google to provide them a window, not with Google interested in being a retailer as well as a search and ad engine.

If Google stops delivering Amazon search results, what will an Amazon phone in my pocket deliver that an Android or iPhone won’t?

Amazon would create its own version of Google? And its own operating system? And expect consumers to choose that over Android and IOS so they could get Amazon skewed results?

It might be beneficial for Amazon, but why would consumers want it?

Nope. They just modify how top search results show in Google. Other people already do this. It isn’t hard. Go install an Ask bar or any dozens of ad widgets on your computer. You’ll see what I’m talking about.

Customers wouldn’t choose the phone for this reason. They would choose it for price or any of the other ideas in the original post. And then their shopping would become even more Amazon-heavy.

When I was on Android, I used a ZeroLemon ZeroShock case with a 9,000mAh battery for my Samsung Galaxy Note 2. I could go 3-4 days with heavy usage before I needed to think about charging my phone.

I recently switched to the iPhone 6 Plus. While the battery life is acceptable (poor battery life was the main reason I rage-quit the iPhone 3GS in 2011 for Android), ZeroLemon are coming out with a 6,000mAh battery case for the iPhone 6 Plus next month (i-Blasion already have a 4700mAh iPhone 6 Plus battery case available today).

The ideal Amazon Phone:

I walk into any store, see something I like, snap a photo, it is automatically ordered and delivered through my Amazon Prime account.

I am a big believer in doing what you are good at, and not going full hog into a new area unless you are doing something better than everyone else. Apple took over the music player market because they did it better, they revolutionized the phone market for the same reasons. Amazon did the same with ereaders, self publishing and shpping; but threy messed up with phones, they brought out a phone that was barely equal to the phones we already owned. You have to be better.
As far as online shopping, i don’t know why it isn’t bigger than it is. I do 90% of my non-food shopping online. Need socks? Shoes? A bag? It is all online, and even with shipping, cheaper. I have not been in a shopping mall in over a year. Now that there are food delivery apps, I might never be in a store again, lol.

Amazon has had failures before. Shareholders are spooked now for a few specific reasons.

One is the sheer length of time Amazon has been chugging along without producing profits. Now that its growth is slowing, investors are wondering if the payoff will ever come.

Another–and I personally find this disturbing–is Bezos’s newfound desire to become another Apple. He wants Amazon to be a lifestyle company. It isn’t. He doesn’t have particularly good taste. There is no deep bench of design talent at the company. Customers think of it as a highly efficient utility, not a premium accessory. And most importantly, margins are way too thin to support that kind of strategy. Bezos has always advocated thin margins and dominant market share as the company’s path to success. If he’s rethinking that and eyeing Apple’s margins with envy, then he’s really lost his way.

Contrarian’s opinion here: Please don’t let Amazon dominate everything! ;-)

Oh, I know that Amazon doesn’t sell everything everywhere, it just seems like they do. They’re the Wal-Mart Stores, Inc. of the online shopping world. I go out of my way to avoid buying on Amazon while my wife is a dedicated Prime customer. She won’t buy it if she can’t get it through Amazon. Me? I’d rather do a little digging on my own to find the best price somewhere else.

Mind you, my wife orders at least 10x as much as I do online so a single massive store with free shipping makes a ton of sense for her.

I think you’re right, Hugh. An Amazon phone along the lines of what you’re describing would be perfect for my wife. She’s already in love with her Kindle Fire.

That said, though, Amazon has a major problem. Their OS is still Android at its heart. Can they keep a decent pace behind Google?

For example, take your complaint about battery life. I’ve got an unlocked Google Nexus 4 phone and T-Mobile is my carrier so they don’t mess with my OS. I get the latest Android updates as soon as they are released directly from Google. Android 5.0 at least doubled my battery life with no change in usage patterns. How long will it take Amazon to provide the same capability?

Just finished reading the transcript of your interview on the James Altucher show from last March. You and James both spoke highly of the tools and support that Amazon provides writers. It sounds like you have both been treated very well by them. That’s great.

As a reader, my biggest objection to buying books through Amazon is the forced lock-in to their walled garden. I have been working in IT for almost four decades I have repeatedly seen the friction that proprietary formats create for people looking for new ways to get something done. I really don’t want to build a library based upon such a format because I don’t want to be locked into a single vendor’s e-book reader.

I have also invested a lot of time into building up my e-book library in Calibre (http://calibre-ebook.com). It’s an amazing, free, tool for managing large libraries. I highly recommend it to anyone who reads a lot.

For those reasons, I only buy books that I can get in .EPUB format. This gives me the choice in reader that I want. You mentioned in your interview that once the exclusivity clause ends for Amazon, you do publish in other formats. What has been your experience with sales in .EPUB in particular?

Finally, have you ever explored working with Baen Publishing (http://www.baenebooks.com) as another avenue for publishing your books?

Thanks,

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I bought a Fire phone in November. It was only 99 cents and came with a free year of Prime. As my Prime membership was coming up for renewal just before Christmas, it was a win-win for me. I didn’t have to fork over a hundred bucks for Prime in December when I do most of my ordering from Amazon.

The phone itself if fine. I’m not into lots of apps–as long as the music one works so I can listen to my music I have on Amazon, I’m a happy camper. I can check my email, FB, maps, Amazon (duh!) and have some favorite websites saved.

These things sound basic, but I had a Windows phone before this one, and I had to download the songs to the phone via a usb cable! Felt like the stone ages!

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