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Apple’s Crazy Ecosystem and the Prospects for an Amazon Pad

Posted by Bob Warfield on April 18, 2011

I read with interest Marco Arment’s speculation about an iPad competitor potentially being in the relatively near-term offing by Amazon:

I’d bet on Amazon releasing a true tablet, competing more directly with the iPad than the Kindle currently does, in the possibly near future.

While I don’t doubt Amazon could launch a tablet and very well might, I didn’t find Marco’s logic particularly compelling.  In his view, Amazon needs to launch a tablet to deal with the vagaries of Apple’s iOS ecosystem which may soon be hostile to Kindle and very favorable to iBooks.  I note my new iPhone (had to replace one) was immediately pushing the “assumptive close” on me to take iBooks.  No interest Apple: I’ve got Kindle and love it.

I’m also not in the camp of Robin Sloan who has a Kindle and an iPad and claims to use the Kindle 100x more than the iPad.  I used my Kindle well past the point of paying for it based on savings from my book purchases (I read a LOT of books), got an iPad, and I don’t think I have fired up the Kindle or missed it since.  Other than visibility in direct sunlight, I much prefer the iPad in every way.  And visibility in direct sunlight has not been an issue.  I see so little of it, being decamped in front of this darned LCD screen, that my iPad activity is largely before bed at night and any exposure to direct sunlight I will spend enjoying the direct sunlight and not with my nose stuck in my ‘pad.  After catching myself neglecting family by playing with the iPad or iPhone when we were out, I decided that was a bad idea that needed to stop and basically quit bringing them along unless I was off somewhere by myself.  Trust me, it’s a better way to be social.

The logic I got from Marco’s post was that this is largely about Apple’s 30% share of any sales connected with an app like Kindle together with their requirements of same pricing on their platform and their competitive position vis-a-vis iBooks.  He muses about what Apple’s customers will think if Apple boots Kindle.  I confess, I wonder what it would mean to boot Kindle?  Can Apple retroactively zap a happy healthy Kindle reader off my iOS device when I already paid for it?  Can they simply prevent it from being updated and strike it from the App Store?  Remembering how people reacted to Amazon’s retroactively redacting books from people’s Kindles I can well imagine that customers will not be enchanted to put it mildly.  Watching the actual process of giving the boot to the Kindle app will be fascinating.

I think Marco sees the timing of this event as a golden opportunity to persuade people to switch to a Kindle-Pad.  After all, if your cherished app is being zapped at precisely the time Amazon offers an alternative, why not?

But this all neglects the possibility that Amazon has both strong designs on their own aPad and no alternative but to go to war.  I’m not sure either makes compelling sense.

Let’s start with the “no alternative” question.  I will grant that Apple’s terms probably make little sense for the Kindle app.  By the time we slice another 30% off the top for Apple’s treasury, there’s little left for Amazon to share with book publishers.  But have we forgotten that Amazon has a browser-based solution in the wings?  It’s in Beta test today and is called Kindle for the Web.  It shouldn’t be difficult for Amazon to finish that up and redirect any iOS Kindle users to their browsers to access Kindle for the Web.  It isn’t like the user experience on the Kindle apps is so hard to recreate that they even need to be apps.  HTML5 should be more than up to the task, and no Flash in the iOS browser is needed, thank you very much.   It’s not clear to me why a tablet is even remotely needed to save the Kindle business on iOS unless Kindle for the Web is somehow tragically flawed or late.  That shouldn’t be a problem, or if it is, it’s hard to understand why the same organization wouldn’t fumble the much more complex prospect of building a decent tablet and getting customers to switch there.

What about owning a tablet of their own?  While it isn’t entirely clear, it sure looks like Amazon builds hardware as a necessary evil, not as a goal.  Think of their motivation as being somewhat like Google.  They fear hardware creating walled gardens that prevent access to their money makers, but beyond that, they are agnostic.  In fact, they have Google and their Android empire to keep Apple honest.  So what’s the strategic motivation for them to get involved in a messy ecosystem war?  So far, they been more interested in slashing the prices on Kindles than driving them up market into the tablet world.  It could be they just aren’t ready yet, or it could be they’re very deliberate and haven’t moved for strong strategic reasons.

Look at it this way–if they launch a full on tablet, aren’t they going to war with all the other tablets out there?  Do they really want to be they can get big with their tablet faster than the others can shut them down and off the competing platforms?  That doesn’t seem like a great bet to me, though they have a lot better information on which to make a decision.  I’d summarize the strategic arguments for both sides as follows:

Pro: Amazon should build a killer Android tablet ASAP and jump in swinging for the fence.

–  It’s gutsy and would garner a ton of press.

–  It would let them get their other offerings front and center in their owner’s faces and potentially increase sales.

–  They are gatekeepers for some pretty significant functions that a great tablet needs.  Books and music to name two.  It could be this lets them create a profoundly better user experience that wins quickly, at least to the #2 place, and becomes the predominant Android tablet.

–  They can quit worrying about the crazy strategic niceties and just fight a good clean up front fight.  It’s very focused.

–  The days of specialized readers like Kindle are numbered.  If Amazon doesn’t produce a tablet, it will be out of the reader business in a year or two, just like smart phones killed the Flip video camera.

Con:  Amazon wins biggest by nurturing the best ecosystem and not focusing on a device.

–  Amazon should stick to their knitting and core business.  Maximize its success on all platforms instead of on their own platform.

–  Amazon can ill-afford to polarize everyone against them.  What with telcos wanting to control the billing of everything on their platforms and Apple tightly controlling its ecosystem, Amazon has to move nimbly among the feet of these dancing elephants.

–  Amazon is already flirting with the envelope with respect to the content providers–book publishers and the record labels.  The book publishers got off a solid shot across the bow that forced Amazon to back off discounting their books so much on Kindle.  The record labels are not thrilled with Amazon’s new locker service.  They need to mind their strategic P’s and Q’s very carefully lest those players choose to make an Amazon Tablet a nasty little skirmish to demonstrate they’re still in control.

–  Isn’t the open non-denominational way really the more modern way?  Shouldn’t Amazon stick to making its money in the Cloud, where the maximum leverage and margins exist?  Let the rest of the rabble duke it out in the streets over these client devices.  So long as there are good open platforms available, Amazon need only rattle the occasional saber by making sure everyone knows they could field a tablet in short order.  It’s really better to be perceived as capable of moving in that direction than to actually have to pay the price of doing so.

– Smartphones didn’t kill Flip.  Cisco had no business being in Consumer, they blew their numbers, and Flip was the sacrificial lamb.  Kindle is being priced down where no general purpose tablet can go, and even if specialized readers go by the way side, Amazon owns so much of the book market the tablets will have to deal with it even if only via Kindle for the Web.  eBooks have lock-in due to network effects (I don’t want to lose access to my library by switching from Kindle to iBooks), so Amazon’s early win ensures their continued dominance.

Conclusion

I tried to be even-handed with the arguments so you can decide for yourself.  Which way should Amazon go?

I think it’s too early for them to go tablet, so I’ll stay on record as being in the “Con” camp, strategy-wise.   But, I’ll be interested to see which way Amazon goes.  If Amazon does go the full tablet route, I will be interested to see what moves they make to ameliorate some of the “Con” issues.  I suspect they will have some clever solutions to those problems that could very well shift the strategic balance of my pros and cons list.

Related Articles

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Rumor says Amazon tablet a done deal and Samsung will build it.

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