By now nearly everyone who follows tech news knows that Amazon has plans to release a smartphone soon. From what we know it would seem that the new phone will feature a 3D display, which is definitely cool. But let’s be honest about something for just a moment – Amazon doesn’t really care about selling smartphones. That’s right, Amazon is not interested in making money from phones, but creating them is still a great strategy.
To really back up this point, let’s take a look at Amazon’s existing hardware that they are already selling. We’ve got the Kindle E-reader, the Kindle Fire, and the Amazon Fire TV. All of which on their own sales don’t make Amazon all that much money – and in the past have instead actually represented a loss on the balance sheet. But that loss is one that Amazon is willing to take so long as the device can accomplish its mission, which is to get you to buy things from Amazon. That’s right, Amazon is not a premium hardware manufacturer – that doesn’t mean they don’t make decent devices, it just means that is not their primary business. Their core business is to sell you things via their massive online catalog, which features physical goods, eBooks, TV Shows, Movies, Games, and Music.
In a way Amazon’s strategy when it comes to devices isn’t too different from Google’s strategy with software. Google offers free software and services (Gmail and Android – for example), and then sells custom-tailored ads to recoup the cost (and at the end of the day, make a lot of moolah). Amazon’s strategy is to sell devices at cost or at a loss, and then make the big bucks selling you their products and services. Does it work? Absolutely, that is evident by past Kindle successes of the company. The same strategy is being employed even now with their new Fire TV and you can bet it will be used with the new phone as well.
Then there is Amazon’s Prime service, an offering that seems to expand every so often – now encompassing a streaming music service. Prime began by offering faster shipping to its members but has grown since to encompass video and music streaming, and will probably continue to grow in an effort to lock users into their ecosystem. Amazon is simply following the example of other tech giants offering similar services, but instead of breaking their services out into multiple subscriptions – the services are tied to one subscription, Prime membership. Amazon’s phone will likely be considered a raving success by the company if it manages to attract most of its owners to the Prime service.
What we will likely see is a cheap phone with good feature-set for the price and an interface that gets out of the way, and lets users consume Amazon’s products and services as easily and quickly as possible. There is nothing wrong with that, as consumers will ultimately win in this deal – and another player in the smartphone market will almost certainly result in improved offerings from the likes of Google and Apple in an effort to compete. Amazon’s strategy is a wise one, and this phone is just another piece of the puzzle in its device lineup that seeks to do what they all do – sell you things.
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