Ronnie05's Blog

The drivers of Amazon’s Tablet success

Posted in Mobile Devices and Company Updates by Manas Ganguly on January 30, 2012

The 10% increase in market share of Android is due largely to the entry of the Kindle Fire by Amazon.

Flurry, which compares application sessions among all Android tablets For January, uses month-to-date figures to provide hard testimony to the success of Amazon Kindle Fire. In November, Samsung Galaxy Tab dominated application session usage on Android, with the Kindle Fire only having recently launched. At that time, the Samsung Galaxy Time was widely considered the only viable competition to the iPad, though a distant second. The holidays provided a strong adoption of Kindle Fire, combined with significant downloads driven from the Amazon App Store, which has resulted in a massive surge in session usage that edges out the Galaxy Tab. Kindle Fire represents 35.7% of sessions and Galaxy Tab represents 35.6%. Remarkably, the Kindle Fire overtook the Galaxy Tab in just half a quarter. Total Android tablet sessions in January more than tripled over November, with Galaxy Tab sessions increasing by more than 50%. Overall, Android Tablets are growing aggressively as a category.

So how can a late entrant like Amazon, with little-to-no hardware DNA, waltz in and knock off a consumer electronics juggernaut like Samsung, a company that also enjoyed strong growth in 2011? Amazon’s launch of Kindle Fire had more in common with an Apple-style launch than it did with aligning with the Android system.To date, the Android world has focused on marketing the operating system and the “power” of the devices, with quality of content and the consumer experience subordinated in priority. With Google managing the Android Market, which lacks content control and a seamless commerce experience, inertia pushes those developers who choose to build for the platform toward advertising models.Developers who monetize through other means tend to make less on the platform. To ensure that it could take full advantage of its unique digital store prowess, Amazon forked the Android operating system.

Apple, on the other hand, understands that great content is the key to increasing the attractiveness of hardware. They learned this hard way during the 1980s when an inferior combination of PC hardware and operating systems overtook Apple computers, primarily due to a lack of software.For the iPhone and iPad, Apple created a robust economy in which developers could thrive, ensuring their allegiance to innovating for the Apple platform, ultimately making Apple hardware more desirable, and creating a rare, but powerful virtuous cycle.
Amazon’s go-to-market strategy for the Kindle Fire is ground breaking among the Android guard. With its offering, Amazon takes the focus away from the device and operating system, emphasizing content, a differentiated consumer experience and commerce. For its launch, it lined up key content such as Facebook and Angry Birds, as well as offering Amazon Prime, its own streaming TV and movie service. Beyond leveraging its cloud and e-commerce infrastructure, Amazon controls its own store, commanding among the largest aggregations of consumer credit card accounts on the planet. Upon launching the Kindle Fire, consumers must either link to their Amazon account or enter credit card information. This makes the user base 100% payment enabled.

Amazon’s approach to the distribution of digital content is the ultimate razor-razorblade model, where the “stalk” (tablets) is given away for as little as possible and profits are made from the sale of razors (content). Understanding that Amazon is a high volume seller of goods, now becoming ever more digital than physical, sheds light on why they embrace the end-user experience and the religious focus on making the sale of content compelling and easy. Thus the launching with an aggressive low price penetration strategy for their hardware, priced at $199, was critical to its strategy.

Amazon, once moved the world from buying goods at retail to buying them online and having them shipped to doorsteps, is now distributing the new form of mobile store via tablets. In a move that reduces the possibility of its own disintermediation, Amazon’s distribution model starts with its own roots: books, music and video (aka “BMV”). Through this move, Kindle Fire is changing the rules of engagement on the Android platform to shape the playing field into one where they, the consumer and the developer win.

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