Amazon’s Fire Phone (launched earlier this week) is one of the best examples of device-service integration the world has witnessed. It has demonstrated the best way for any company to leverage the mobile platform. Amazon’s intent with Fire Phone is not as much as to garner the smartphone market share as it is to leverage the increasing consumer usage and on-person characteristics of the smartphone to push its store. The company has taken shopping mobile, and the killer app of Fire Phone is “Amazon”.
While the hardware features of Fire Phone (2.2 GHz processor, 2GB RAM, 13MP camera, etc) provide little differentiation (albeit being competitive), it’s the software features such as Mayday, Firefly and Dynamic Perspective that provide the necessary differentiation and lend to the core value proposition of the device. The company has gone a step ahead and offered SDKs for both Firefly and Dynamic Perspective.
Scale and Revenue Potential Could be the Key Offerings
Both Apple and Google have demonstrated how a company can leverage its large captive user base and scale to create successful ecosystems. And this large user base is what Amazon currently possesses. The company has over 250 million users, and if it can convince a fraction of them to migrate/upgrade to Fire Phone, it could be a lucrative offering for ecosystem partners (Amazon already managed to encourage app developers to publish over 220K apps on its app store, primarily for Kindle tablets).
More importantly, Amazon could potentially solve a fundamental issue for app developers – Revenue. If the company could institute a revenue-share policy for app developers who could potentially develop innovative augmented and virtual reality apps that enable/encourage users to purchase from Amazon, it could be a win-win situation. And, in consumer’s mind, since Amazon is synonymous with shopping, the developers could be assured of revenue through Amazon apps as opposed to depending on user app purchase or ad monetization.
Could “Fire Glass” and “Fire OS” be Next?
The key features of Fire Phone and the experience they offer are optimized to capture the user purchase behavior and encourage shopping on the Amazon store. If this continues to be the core idea behind of Amazon’s product development, then can a Virtual Reality-based Goggles be the next hardware device we will see from Amazon (“Fire Glass”, anyone)? What better way to bring the showroom (and store) experience to the user? Jeff Bezos did mention the company’s experiments with the head gear (and glasses) during Fire Phone launch, and with the advances in the Virtual Reality space, I believe it could definitely be a possibility.
The focus during the Fire Phone launch was to attract developers to create apps for the Amazon app store (and, the core operating system of the device hardly got a mention). Could Amazon be on its way to develop its own operating system (“Fire OS”, maybe) that all its devices could be based on?
I know it is really early, the devil often lies in the execution, and we are yet to witness the successful adoption and usage of Fire Phone before any of this is possible. But, strategically, this could be the direction Amazon might be heading. And, if anybody can pull this off, then a company “obsessed with details” can! Thus developing a compelling third ecosystem (after Apple’s & Google’s).
Impact on Microsoft’s Strategy
One company that could be potentially impacted by Amazon’s foray and potential ecosystem development is Microsoft. In the post-PC era, Microsoft’s Windows Phone has been lagging Apple’s iOS and Google’s Android both in terms of market share and developers’ attention & focus. And, with evolution of Amazon’s strong ecosystem, Microsoft could potentially be further relegated in terms of developers’ mindshare and prioritization.
In the smartphone space, Microsoft’s Windows Phone game plan was a mix of three different strategies – Licensing the operating system (Microsoft’s own strategy), Device integration (Apple’s core strategy) and Distribution of OS to other OEM partners (Google’s core strategy). And the company couldn’t execute well on any of these or provide necessary scale for developers.
In hindsight, the company should have leveraged its strong understanding, expertise and brand in the enterprise space, and capitalized on the rapidly declining Blackberry’s share and the growing BYOD trend to become a dominant smartphone player in the enterprise space. It should’ve evolved into ‘retail consumer’ space by pivoting on and succeeding in the ‘enterprise consumer’ space. This is something, the company can still do to leapfrog and remain competitive in the Post-Post-PC/IoT era. While Apple (with HomeKit, HealthKit, reportedly upcoming iWatch) and Google (with Android Wear, Smart Watches, Glass, Nest & Dropcam acquisitions) are focusing on Consumer and Home IoT space, Microsoft could leverage its enterprise know-how, coupled with expertise on sensor-based technologies and offerings (Kinect) to dominate and own the Enterprise IoT space.
The rules of the game are evolving to go beyond the hardware and software & services. The companies are leveraging their large captive user base to develop strong ecosystems around their core strengths. With Apple’s WWDC, Amazon’s Fire Phone launch and the upcoming Google I/O, June 2014 could potentially be the month to usher in a new era, and go down as a key milestone in the tech history.