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Will Amazon do a Gillette?

Posted in Mobile Devices and Company Updates by Manas Ganguly on September 7, 2013

Guess the latest gate crasher on the Smartphone party? The rumours have been doing rounds for a while now – But Amazon, the king of digital distribution seems set to take on the likes of Apple, Google and Samsung on smartphones. Amazon already has a current portfolio of Kindle Fire tablets and Kindle eBooks – and is reported closing down on 2 smartphones and 1 audio streaming device.

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One of the devices that Amazon is working on is a 3D screen smartphone. Details are sketchy – but this could be Amazon’s flagship device – with retina movement sensors and a 3D effect overlay.Also of interest is the rumour that Amazon could release a smartphone for its consumers free of charge without a wireless contract. That could be a very significant departure in pricing strategy in smartphones.

The smartphone game is changing. New smartphone entrants Amazon and Google are beginning to generate revenue primarily through e-commerce sales and online advertising, respectively. As such, they are more willing than their competitors to sacrifice device profit for market share and reach to build on their digital distribution networks.

Its interesting to see how the Apples, Samsungs, Microsoft-Nokia’s of the world react to Amazon’s disrupting pricing. Amazon is doing a Gillete with a easy entry price for the razors and making the consumers pay for catridges.
1. The key for Amazon is to establish a user experience and interface so uniquely engaging that users would stayed hooked to it. Associate that to the Gillette shaving experience and how the user was not able to get rid of the Gillette habit and would spend more and more monies on catridges, foams and others… Yes, Amazon must do the Gillette magic.
2. It has the digital content that can upend a lot of device-only players – such as Samsung.
3. Also key to this equation is the reach and penetration of Digital content in the third world countries – it will require a lot of different other monetization models for Amazon to get threshold volumes in such markets.

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Canalys: World Wide PC shipments (Q4, 2012)

Posted in Industry updates by Manas Ganguly on February 7, 2013

Worldwide PC shipments increased 12% year-on-year in Q4 2012 to reach 134.0 million units, with pads accounting for over a third. Tablet segment grew by 75% in Q4, 2012 to 46.2 million units with full year shipments totaling 114.6 million units.

Apple continues to lead the PC market, shipping 27.0 million units and taking its share over 20% for the first time. Apple’s growth in the pad segment was driven by strong demand for the iPad mini. Its overall shipments, however, were hampered by supply issues. Canalys estimates that the mini made up over half of Apple’s total pad shipments, with its attractive price point and compact design leading to significant cannibalization in the iPad range and wider PC market. Despite record shipments, Q4 saw Apple’s pad share dip to 49%, becoming the first quarter it has not controlled over half the market. Without the iPad Mini, Apple would surely have lost more ground to its competitors

HP shipped 15.0 million PCs, beating Lenovo by 200,000 units to regain second place, with both vendors taking an 11% share.

Samsung, buoyed by strong tablet shipments, had its first quarter in the top five, shipping 11.7 million PCs, giving it a 9% share and fourth place ahead of Dell. Samsung shipped 7.6 million pads in Q4, an increase of 226%, driven by its ability to push products down into lower price bands.

Dell clocked in 9.7million units, a 19% decline over its 2011 numbers. With the planned buyout of Dell to go through- it will give the company time to rethink its strategy and refocus, away from the demands of Wall Street and shareholders. Microsoft’s involvement in the Dell buyout raises eyebrows in the light of its recent aspirations to become a hardware vendor. But it is not likely to solve Dell’s problems as even Microsoft struggles with pads

Amazon’s worldwide shipments grew 18% to 4.6 million units, as it expanded the Kindle Fire range and launched in markets outside the United States.

Google’s own Nexus 7 and Nexus 10 products performed relatively well, with combined shipments of 2.6 million taking 2% of the global PC market share.

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Vanishing readers and rapidly multiplying EBooks- Its all playing Amazon’s way now

Posted in Industry updates by Manas Ganguly on January 30, 2013

Lending more credence to an earlier observation that I had- Amazon will take over the publishing business – the latest reports from Amazon suggest that eBooks as a category have grown 70% Y-o-Y even while the eBook readers (devices) have plunged 36%. The key here is that even while eBook readers are on their way down, Amazon’s Kindle is doing as good as Jeff Bezos would like it to.

Quoting Bezos:
After 5 years, eBooks is a multi-billion dollar category for us and growing fast – up approximately 70% last year. In contrast, our physical book sales experienced the lowest December growth rate in our 17 years as a book seller, up just 5%. We’re excited and very grateful to our customers for their response to Kindle and our ever expanding ecosystem and selection.

The key is the eco-system and the network effects which is priming the Amazon business of books and a shifting habit from physical to electronic reading. Amazon’s kingship at electronic distribution has also led to Kindle Fire HD, Kindle Fire, Paperwhite and Kindle held the top four slots on Amazon worldwide in the holiday season. Kindle stores have been opened in Brazil, Canada, China and Japan.

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The vanishing readers and Amazon kingship in Publication Industry

Posted in Industry updates by Manas Ganguly on December 14, 2012

The EBook reader space is fading out rather precipitously.The rapid growth—followed by the immediate collapse—of the ebook market is virtually unheard of, even in the notoriously short life cycle of products inhabiting the volatile consumer electronics space.

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Source: SAI Chart of the Day

In 2011, dedicated ebook readers saw shipments of 23.2 million units which dropped a whopping 36% to 14.9 million units in 2012, as reported by iHS iSuppli. Furthermore, the numbers are forecasted to drop by 27% in 2013, to 10.9 million units.By 2016, this number would have dropped to 7.1 million units less than 1/3rd of the 2011 volumes.

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While these are just estimates, the trend is clear: dedicated ebook readers are going to die a quick death. After all, with tablets being able to do more than these one-trick ponies, it’s completely expected.

Yet, Amazon mopped up record number of EBook sales, in CyberMonday 2012.This is a counter-trend given the damning numbers reported by iHS iSuppli. Sure – the pricing starting from $69 for Kindle is a coup. But Amazon is able to deliver such numbers only basis the pricing subsidy enabled by the sales of Ebooks – Pure eco-system play. Thus what looks to me as happening in the next year or two is that Amazon will monopolize the EBook numbers which will be an extremely large bargain power for Amazon versus publishers. Amazon looks to be uniquely capable of becoming the “lord & master” of the book-publication industry – both in digitized and paper format.

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Amazon – Future of digital distribution? (Part I)

Posted in e-commerce, Revenues and Monetization by Manas Ganguly on September 7, 2012

This is the first of two post series on Amazon

Amazon killed it … or very nearly did. Amazon’s device and service announcements in the 6th September event have just gone to show Amazon a few notches above Google, Nokia and Microsoft put together.

Post the launch of Kindle Fire tablets last year and a record sales in the holiday season, Amazon spent a lot of time understanding their customers and how the customers use digital media. In the course they have managed subverting the long held notions of device pricing – and managing the margins without any device contributions. After all, when you make your money through services, device margins are obliterated. That is going to put a awful lot of pressure on the earlier generation of device makers – Samsung, Nokia, HTC and the works. What that means is that Amazon is willing to make the Kindle and the Kindle Fire a loss leader to lure shoppers inside its virtual store. This principle is where disruption @ Amazon begins.

People don’t want gadgets anymore; they want services, and the new ranges of Amazon devices have a clear perspective- to provide a dedicated sales channel for Amazon’s digital storefront with an end-to-end set of services. By taking off the device bit, Amazon signals that it is ecosystems not devices that will drive consumer purchases. As Bezos puts it- “We want to make money when people use our devices, not when they buy our devices.” When business isn’t built on HW margins, the larger ecosystem and services you can do a lot of things competitors can’t – that’s an innovation principle that Apple and Amazon would hold as the key.

Amazon is stepping up ecosystem efforts but is focussing on its own features, services. Third-party apps still seem like an afterthought. Similar is principle to the Apple “Walled Garden”. Given Apple’s iOS app selection & large ecosystem of it’s own, I don’t think iPad is under major threat. But Apple cannot afford to be complacent.

The 6th September event was an act of declaration of war and the whole eco-system and market just got a whole lot more interesting in the course rebuilding the DNA of Amazon. The only other company who is thinking of business in the manner that Jeff Bezos is thinking about it, is Apple! As per Bezos – “We have our own patents, our own hardware, can afford to subsidize, and we’re going after Apple”. That’s setting the perspective.

In short, this is all about Amazon positioning itself as the future in digital distribution

Continued…

The Tablet takeover

Posted in Industry updates by Manas Ganguly on May 17, 2012

According to Gartner, the Tablet segment sales are going to increase from 68 million units in 2011 to 118 million units in 2012 registering a 98% increase in volumes. 2011 saw tablet shipments multiply by 3.5X over 2010. Furthermore, the segment will see growth at 60%+ CAGR for the next 5 years and gartner expects that the total number of tablet users will be in excess of 660 million by 2016.

Apple will be the key player and influencer in the segment, even while Amazon, Android and Windows build base and shall continue its leadership position well in 2015 albeit more smaller margins.

Presenting my first infographic build to emphasize the promise in the Tablet devices segment.

Does Apple need a 7″ iPad?

Posted in Industry updates, Mobile Devices and Company Updates by Manas Ganguly on May 16, 2012

iPad has been the the force-majuere in the Tablet segment and has held strong against the multiple Androids and a one -off RIM Playbook as well. However in Q4, 2011, it was Amazon Kindle Fire Tablet launched the most credible counter offensive to Apple iPad monopoly. Not only did Amazon Kindle Fire impact Android numbers positively by selling 4.8 million units in the holiday season, but it has caused a pause and re-think in Apple on the feasibility of low cost 7″ Tablets. There are rumours about a 7″ iPad from Apple now.

The impact of Amazon: After taking 17% of the shipments in Q4,2011, Amazon’s Kindle Fire slumped to 3.7% market share in Q1, 2012

Now then, does Apple really require a 7″ iPad?

Reasons in favour

1. Apple may have burnt its hands and gone on the path of bankruptcy by not choosing to go with the cheaper computer in the early 80s. So there is meat in the arguement that no segment be left out. A stripped down iPad could fire up sales at low margins for Apple.

2. Apple could also block Android more effectively in Tablets – one of the hottest device domains in the future.

3. Apple could also increase its user base and graduate more users too its unmatched content eco-system and hope to make more gross money out of it.

But on the other hand

1. Does Apple needs volumes? Its exclusivity has been its USP and its profit/revenue/earnings per unit has been the stand out even as Google/Android have generally failed in terms of moentizing their services effectively.

Apple has also historically avoided playing the volume game, preferring instead to have a niche market following while cornering most of the industry profits. Even in the mobile phone business, where its iPhones are selling like hotcakes, its global market share is in single digits but it takes up more than three-fourths of the industry’s profits because of its high margins.

2. The Tablet market is far from mature and a carefully positioned mid end ($300?) 9.7″ earlier generation iPad2 could possibly be a better solution not only in terms of bocking Amazon and Android but also gathering volumes. Carriers would give their left arm, right arm and more for a data machine like the iPad on reduced prices in their network.

This strategy could meet the demand for the low-cost tablets to a good extent without having to develop a smaller tablet.

3. A cheaper 7-inch tablet appeals to a different segment of population that includes mostly price-conscious consumers. The entry of the Kindle Fire has lowered the cost barrier and will pave the way for new consumers entering the tablet market. This will serve to whet consumer appetite for tablets and may even make customers shift to a costlier tablet such as the iPad for their future purchases.

4. Finally then, the iPad with its 9.7″ screen defined the Media tablet space – a tablet which is broadly based on media usage which is in concurrence with Apple’s long term strategy around media – photos, songs, videos, books. Its widespread adoption led to trends such as BYOD enterprise use.

Essentially, the iPad was first a media machine and secondly a mobility device. That is the way Steve Jobs defined the tablets: he ranted the 7″ tabs were dead on arrival.

This size is useless unless you include sandpaper so users can sand their fingers down to a quarter of their size. Users have no need for a pocket sized tablet when they already have a smartphone. – Jobs

Considering the 7 factors listed above, i do think that a 7″ iPad doesnot cut ice for Apple . A low cost 9.7″ iPad (still at a premium from the market) is better. But for the record, i will go wth the late Steve Jobs – Mobility is for smartphones. Tablets are a different breed….

Interestingly a tweet that caught my eye even while i was publishing this post, needs a mention here… Amazon prepping a 10″ iPad equivalent. Interesting but, largely predictable

 

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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Amazon Kindle Tablet firing up Tablet growth numbers

Posted in Industry updates, Mobile Computing by Manas Ganguly on December 2, 2011

Nearly two years after Apple Inc. rolled out the iPad, a competitor has finally developed an alternative which looks like it might have enough of Apple’s secret sauce to succeed

Just two weeks after its introduction, Amazon’s Kindle Fire already is shaking up the market, with the device expected to surpass all other iPad rivals to take second place in the global media tablet business in the fourth quarter.Coming up from zero in the third quarter, Amazon will ship 3.9 million Kindle Fire tablets during the last three months of 2011, according to a preliminary projection from the IHS iSuppli Display Materials & Systems Service from information and analysis provider IHS (NYSE: IHS). This will give the company a 13.8 percent share of global media tablet shipments in the fourth quarter, exceeding the 4.8 percent held by No. 3 Samsung, and second only to Apple’s commanding 65.6 percent portion of the market, as presented in the table below.

The Kindle Fire’s rapid ascent will help fuel the expansion of the entire market, with the additional shipments contributing to a 7.7 percent increase in the IHS forecast of total media tablet shipments in 2011.

Amazon, with the Kindle Fire, has found the right combination of savvy pricing, astute marketing, accessible content and an appropriate business model, positioning the Kindle Fire to appeal to a brand-new set of media tablet buyers. Imagine a Walmart Hyperstore with individual 24*7 supply pipeline to the homes of each of its consumers. Amazon is dong just that with the Kindle in the Digital Space.

IHS now predicts global media tablet market shipments will amount to 64.7 million units in 2011, compared to the previous forecast issued in August of 60 million. The total shipment level represents 273 percent growth from 17.4 million units in 2010.The forecast for the following years also has been increased, with shipments expected to rise to 287.2 million in 2015, up from the previous forecast of 275.3 million. Sales of the Kindle Fire alone will account for much of the growth in sales. Dramatically reduced pricing in general in the non-Apple portion of the media tablet market also will play a role in expanding sales.

A departure from the earlier business and profit models

Most other Android tablet makers must earn a profit based on hardware sales alone. In contrast, Amazon plans to use the Kindle Fire to drive sales of physical goods that comprise the majority of the company’s business. As long as this strategy is successful, the company can afford to take a loss on the hardware—while its Android competitors cannot.

While Apple remains dominant in the media tablet market, speculation is rife that the company will respond to the Kindle Fire’s aggressive pricing with a lower-cost version of the iPad.

And Apple is expected to reply back…

A far more likely scenario is that Apple also may reduce the pricing on the iPad 2 when the company introduces the iPad 3. This will provide a value alternative for entry-level users in the same way that the company continued to offer the iPhone 3 when it rolled out the iPhone 4. This approach would allow Apple to maintain its target profit margins on both the iPad 3 and the iPad 2, while offering end-users an ever-expanding family of products.

All numbers are according to IHS iSuppli december 2011 estimates

Facebook’s smartphone Buffy isn’t a smart idea afterall

Posted in Mobile Devices and Company Updates, Social context, media and advertising by Manas Ganguly on November 30, 2011

Why Buffy could be a problem child for Facebook?

Buffy: Chances are that this name would remind you of the Vampire Slayer, as it did with me when I first heard of it. Wonder who Facebook had on its mind as the Vampire for its first ever smartphone called Buffy. Possibly it’s a combination of Google, Apple, Microsoft, Yahoo, Amazon and more. HTC will be producing the Buffy which will deeply integrate the social network into its platform. So then, after all these years of going round and round mobiles and smartphones as the delivery platform for their social services, Facebook finally is all in!

Slowly but surely all these big players are beginning to acquire, buy or subcontract all elements of the delivery value chain – and become the Walmarts of the digital world. Walmart puts all the shopping needs behind one door for the customer. Apple wants the customer to buy one iPhone and spend all his time in its virtual app world. Google’s the same way. To compete, Facebook needed a piece of hardware. Facebook has the liberty to choose between Android, Windows Phone or even create a new OS (WebOS anyone?). Facebook would obviously opt to heavily customize the Operating systems and store fronts and Android is a readily available choice to do that.

Globally, smartphones and tablets are converging at ecosystems as these become devices to primarily consume data from the eco-systems. Amazon’s success with the Amazon Kindle Fire Tablet is a shinning example and given the success of Amazon, Amazon is thinking of a move into smartphones. Given that Facebook has a been building an apps based ecosystem and is becoming the de-facto web standard OS, Facebook nursing intentions in the smartphones and tablets is a logical extension of their clout to the physical world of devices.

However, as Facebook pursues building a smartphone, it risks alienating far more important partners – a lesson they should have picked up from Microsoft’s Zune fiasco. Arguably, the Zune is one of the most expensive failures that Microsoft has ever had, all because it betrayed its partners and then under-resourced the effort.

Is it really going to be able to promote a piece of hardware? Does it really want to go to war with Apple and every other device manufacturer? Right now Apple, Microsoft and others spend lots of time on Facebook, but they aren’t likely to continue if they view Facebook as a potential competitor. Facebook should be focused on building the best Facebook app for every major platform. Going into competition with these platforms and phone providers could alone turn them into the next Microsoft Zune or Kin. This may partially explain why Microsoft is thinking of building its own social network all of a sudden.

Facebook may be dreaming of the upside of being the next Apple, without considering the collateral damage and opportunity cost that is more likely to make them the next Zune/Kin. However, its equations with major platform operators is destined to sour with the hardware approach no matter how much parity Facebook provides to the deal.

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