You are the largest e-commerce website in the world. You also happen to be one of the largest cloud based infrastructure service provider in the world. What do you do next? Hey, why not get into the hardware business and launch a simple yet slick e-reader. Wait, why stop at that? Why not expand the portfolio of hardware products to introduce a feature-rich multimedia consumption device. But why?
Well, that’s Amazon for you after the recent announcement of Kindle Fire along with price variant Kindle versions. The tech press has had a field day and the launch has managed to get the attention parallel to what only Apple product launches garner.
Kindle Fire has been called many things right from ‘iPad killer / competitor’ (which it is not), ‘Android Tablet Killer’ (which it might be) but there is a basic idea that excites me the most. By the way, before we get to my interpretation of what Amazon’s family of Kindle products stand for you should read Sriram’s piece on The Good, Bad and The Ugly Of Kindle Fire.
On to the title of the post now. From a core business standpoint, Kindle(s) don’t seem like a prudent business segment channel for a e-commerce vendor. It’s another thing that Kindle continues to sell like hot cakes and the attractively priced Kindle Fire seems set to shake the tablet market.
For one, there have been reports that Amazon stands to lose a cool $50 for every Kindle Fire sold. Now, which business can afford to lose so much on a new business segment. But Amazon is taking the bite and if you ask me this is too less a price for what Amazon stands to gain from Kindlezing (sounds similar to scandalizing but its not) the world. Here’s why I think Amazon has uncovered one of the coolest marketing and sales channel with Kindle.
Marketing:
A typical e-commerce vendor markets through a plethora of ways on the web. Banner advertising, inbound marketing and what have you. But despite the growth of high conversion advertisement channel and improved targeting, customer acquisition is a costly affair.
Consider the typical case of banner advertising, I spot a banner ad of Amazon for a popular book and I click through. However, I do not intend to buy the book and end up closing the landing page without buying.
Amazon has already paid but does not get a customer. However, I buy a kindle to read books online and it stays with me. Every time I fire up the kindle, that’s Amazon marketing its huge inventory to me – Every Single Time.
So, for every $79$139/$189 kindle Amazon sells, it gets to market to me for the entire lifecycle of the product. The same goes for the newly launched Kindle Fire which not only markets e-books but a whole range of multimedia products for me to purchase.
An apt analogy for the same has been the ‘Gillette gives the razor for free to sell its blades” which has been doing the rounds. Yes, an age old trick but what a way to pull it off. The sheer marketing value that these devices provide to Amazon will make up for the $50 hit on every Kindle Fire sold.
Sales:
Well, an extension of marketing of sorts but making the conversion a much more frictionless process. In a way these kindle devices are akin to your traditional brick-and-mortar Point-Of-Sale terminals or kiosks. Only here, the kiosk has pretty much an unending inventory. Millions of books, TV shows and movies.
All inventory can be browsed right from the device and bought then and there in a few seconds. Kindle is the perfect platform for Amazon to create a revolutionary sales channel which complements Amazon’s e-commerce website superbly. Business needs to be where the consumer is. So, with consumer uptake for mobile devices increasing Amazon has made sure it is present on customer’s preferred channel. I haven’t personally bought stuff on Kindle but if the experience is any way closer to the Apple AppStore we all know it is a killer sales channel.
In addition, there is also the Silk Browser on the Kindle fire for doing stuff which apparently runs on EC2 (Amazon’s cloud based servers). Now the jury is out there on the whole privacy issue around it but if it means that Amazon gets to deep dive into customer behavioral patterns, that’s a huge bonus. Mining this data could provide Amazon incredible insights into customer preferences which it can then implement across all its channels.
All in all, Kindle to me seems like a stroke of genius. What are your thoughts on Amazon’s real vision behind its Kindle family of products?
Non-US people: Don’t buy kindle fire.
I bought it in US with the hope that it’ll work in all the countries. Its waste. U’ve to be physically located in US to use this device. Also to purchase any music/video/book u’ll need a US credit card and US shipping address. They don’t support Non-US regions. I tried kindle fire in India as well.
Very smart thinking by Amazon. Good article.
I see many Amazon network administrators picking this up in a hurry.. If you can have EC2 console on tablet and manage your infrastructure on the move, that too for mere 200 dollars… that itself is a big use case…
I think Kindle Fire will bring more people on cloud than any other platform has managed to do earlier…
Good point.
Good one Ankit.
Kindle Fire is a storefront in millions of people’s hands. No doubt about it.
More than the Kindle Fire, the stroke of genius is its silk browser. Half the computing happens on EC2 and the other half on the tablet. Now it is everyone’s guess which half is useful.
Amazon said that it will not hoard the data as you think it would, but it would hoard. After all that’s what cloud computing is all about. May be that’s the reason why Amazon got into cloud to start with.
Amazon aggregates the consumer behavior and yes, you guessed it : will use that information to sell you more goods and services tailored for you, based on the interactions you had with Amazon’s Silky cloud. Now that’s not genius. That’s AMAZON.
Long Tail just got longer.
Apple to retaliate.
Exactly! Talk about having the cake and eating it too :-)