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.
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