Amazon launch Kindle Fire
On November 15th, Amazon launched Kindle Fire, their latest tablet device and the first from the Seattle-headquartered retailer to draw comparisons with the iPad. In truth, from the moment you unbox them the devices are quite different, with the Fire’s unpretentious recycled packaging contrasting heavily with the sleek design of Cupertino’s tablet: where Apple is about the device, Kindle is about the content, and this distinction runs deep.
Kindle Fire is great news for consumers. In the world of smartphones, Google have helped bring a wide range of devices to market by giving their Android operating system to a wide range of hardware vendors: incumbents like Samsung and Motorola, as well as rising stars like HTC. Here, it’s not necessary to own an iPhone to participate in an ecosystem of apps and mobile access to the Internet.
Tablets won’t be like smartphones
But so far, the tablet landscape has been quite different. Whilst the same underlying operating systems (iOS and Android) power a range of devices and Android is making headway, for most consumers a tablet means an iPad. This is due to a combination of cost and quality: Android tablets have typically retailed at similar prices to iPad, but so far have offered a poorer user experience. There’s less content, too: Google won’t say how many Android tablets apps there are; Apple proudly boast of more than 140,000 for iPad. With tablets still seen as a luxury purchase consumers have been unwilling to go for second-best, and cheaper tablets have proved poor and unattractive. Launching a new device is tricky, as HP found when it launched the TouchPad, only to withdraw it weeks later; and most businesses don’t have the deep pockets and distribution of HP.
Amazon can change all this; with their core business still revolving around sales of content, and e-book sales growing at 6% of the consumer book market (and growing) margins on the Kindle Fire can be kept low: analysts estimate the bill of materials for the device to lie somewhere between $150 (according to UBM TechInsights) and $202 (says iHS iSuppli) – meaning that a retail price of $199 for the device is likely just under cost. This will leave vendors of other Android-based tablets with an uncomfortable decision: price low enough to compete with Kindle and sell at break-even or worse (IHS iSuppli puts the BoM for the Samsung Galaxy Tab at $262), or aim higher and compete head-to-head with Apple where they are strongest, at the top of the market. And if Apple had plans to extend the reach of iPad down-market, they now face competing with a business which, much like Google, doesn’t care much for margins on hardware sales.
This leaves us with the likelihood of a tablet world split between Amazon and Apple in much the same way as the smartphone market splits between Apple and Android.
Disrupting Google
And despite the fact that Kindle Fire is build atop the Android platform, messages of support from Google for what will be one of its largest-volume Android licensees in the tablet world have been deafening in their silence. Google sell advertising, and an assumption underlying their Android strategy is that they can advertise to users of Android devices. Amazon undermines this assumption in two ways: firstly, by deep customisation of Android, and secondly with Silk, the mediated web browsing service which ships exclusively on the Kindle Fire. Silk routes web access via Amazon cloud servers, improving the perceived performance of the web from the point of view of end-users whilst gathering useful browsing and preference data for Amazon, and opening up the possibility of Amazon stripping or supplanting advertising online.
Google disrupted the telecomms industry by playing to a different set of rules; and in turn Amazon have a chance to disrupt the disruptor.
