Why Did Amazon Make a Phone? A Conversation With Jeff Bezos

http://bits.blogs.nytimes.com/2014/06/19/why-did-amazon-make-a-phone-a-conversation-with-jeff-bezos/

by 127001brewer • 12 years ago

24 41 12 years ago

bits.blogs.nytimes.com

Here's why Amazon nsde a pho e: 1. To make consumers a part of the Amazon Ecosystem. 2. To make it easiertfor existing users to access the Amazon Ecosystem. 3. To entice Prime User 4. To make it easier to buy anything and everything using Firefly.

free2rhyme214• 12 years ago

It's obvious why Amazon made a phone. Profit. People visit Amazon. Amazon has millions of customers. Sell them something else and Amazon makes even more money.

Amazon isn't trying to make the best product in the world but I'm not gonna lie, the Kindle Fire newest version is pretty good compared to the first models.

To finish my statement, Amazon is sucking up revenue wherever possible. They aren't trying to win the smartphone race but just trying to get a piece of the pie. It's smart and profitable.

sanowski2• 12 years ago

Laughable! what is the cost of 16GB these days? Stopped reading after that answer, but keep going if you like advertorials.

Q. I was surprised that you weren’t competing on price so aggressively. This is essentially the same price as rival devices.

A. Well, it’s 32 gigabytes instead of 16, which is a big deal.....

franciscomello2• 12 years ago

If it's so cheap to pack it into a smartphone, why doesn't Apple offer 64 on its base model?

bradfa• 12 years ago

Differentiation, physical NAND chip size, and margins.

If the base model is 16 GB, then you have the ability to sell 2 higher spec models which have more capacity and to price them substantially higher netting larger margins (but likely lower sales volumes). If the base model was 64 GB, it would be difficult for Apple to have 2 higher spec models without impacting their phone's physical size as 512 Gb (64 GB) NAND is generally the largest available single chip size, today, so packing more than 64 GB into a constrained space inside a phone is hard.

The margins come from pricing what is likely a $5-$20 cost step as $100 price steps. Obviously more people are going to buy the less expensive phone so you make lots of profit but at lower margin, but you create a market where the lower sales volumes (larger storage capacity phones) have higher margin and net reasonable profits enough to justify having the larger storage capacity versions as carrying additional part numbers for sales is not 0 cost.

maxsilver• 12 years ago

Your right, but it's still $90 of margin that Apple takes and Amazon is giving up (on top of whatever Prime actually costs).

gdilla3• 12 years ago

Cost has nothing to do with price. It's all about customer perception and their willingness to pay. Handbags cost very little to make, but some are priced at $800 and some are $8.

16GB more on an iphone 5 is $100 more in price. That is the choice given to the customer.

sanowski2• 12 years ago

My point is that knowing Amazon's business model, It's surprising they are openly playing the margin game on this device and bleeding the buyer vs. recouping that $100 in Amazon purchases.

pbreit• 12 years ago

On iPhone, $100. So 50% of the phones price. That's a alot. And it was just one example. Hardly laughable.

r00fus• 12 years ago

50% is a deceptive percentage, as that's a subsidized price with 2-year contract. For real price of the phone ($650 base model unlocked), it's around 15% of the total price.

exhilaration• 12 years ago

Interesting that Bezos is actually dogfooding this phone. Compare that to Facebook's failed attempts at Facebook phone(s) and the "Home" Android effort -- Zuckerberg never gave up his iPhone. Perhaps that's the clearest way to tell when a company is really behind a new product: is the CEO using it?

jacquesm2• 12 years ago

I'm trying to imagine Jobs using an android phone and that really shows how absurd it is that Zuckerberg would not use his own company's gear.

franciscomello2• 12 years ago

I think Amazon is slowly taking a very significant place in this market that previously was dominated by Apple. I myself now have 2 Kindles at home, and a fire TV. Would definitely give the phone a try if my IPhone wasn't new. And he's doing it without buzz..

plg• 12 years ago

handheld vending machine

bentcorner• 12 years ago

I wonder how Firefly is going to work out. Sure, you can scan an item and buy it on Amazon, which is advertised as taking impulse buying to the next level, but what I'm wondering is that if you're standing there, in the store, what could be more impulse buying that just buying the thing right there in the store?

timbre• 12 years ago

I've been assuming the use case is that you're not in a store. The world is Amazon's showroom.

weavie• 12 years ago

Or you are in the store, you see something you like, you point your phone at the item, press a button and buy it from Amazon.

blackoil• 12 years ago

Discounts. 20% off on the item in front of you, can trigger the impulse.

seren• 12 years ago

Where I live high tech retail store are closing one by one. One of the often quoted reason is that there are still plenty of people in the store, but they don't buy anything, they just try the product, and then order it online, sometimes from the store itself. So Firefly is the logical next step for this use case.

hga• 12 years ago

If it puts you on the normal page that includes reviews, the latter can be golden.

There are more than a few things I've locally bought, or not bought, after checking Amazon reviews. Last was a washing machine this month, from our local GE dealership, which my family has had a special relationship with for decades. Amazon had some useful highly negative reviews, which prompted me to check Home Depot and Lowes, which in combination with the repairman noting the new model dropped its warranty period to 1 year as he was suggesting I buy one, prompted me to decide to replace broken parts in my current machine as long as that's feasible.

Amazon reviews also convinced me not to buy a Speed Queen washer. They're making old fashioned high quality washing machines (i.e. ones that get your clothes clean, it's said they bought an old US Maytag factory), BUT their service system is broken, they pay the repairman a flat fee per visit, and if you get a rare lemon you're SOL.

While this is perhaps costing Amazon money in the short term, it's one of many things they do that builds their tremendous brand loyalty, and prompts me to buy more things from and through them than I might otherwise. Heck, because I didn't buy that new washing machine I now have more money to buy other things ^_^.

Tiktaalik• 12 years ago

Examining items in store, then buying online is already so common that it has its own word. "Showrooming." It's a very common, mainstream practice at this point.

bluthru• 12 years ago

The Amazon brand is all over the place for me.

Great products: Kindle, Fire TV.

Cheap product: Kindle Fire.

Costly product: Fire Phone.

I guess when I see a phone like this with a big Amazon logo on the back: http://a.abcnews.com/images/Business/HT_bgr_amazon_smartphon... I assume it's like a Kindle Fire in that it's a cheap option, but it's not at all, which is confusing. Does Bezos want to make the Amazon brand more valuable? Will consumers really view this device as a peer to the iPhone 5s/6 and Galaxy S5?

higherpurpose2• 12 years ago

Amazon should stick with "affordable", and win money on content. Amazon won out initially because of affordable prices, too. This "we're just like Apple" strategy will not work. They should be Xiaomi, not Apple.

napoleoncomplex2• 12 years ago

My expectation and the expectation of my social circle was that Amazon is going to come out with some crazy pricing, subsidizing the phone with future purchases, and offering a 99$ phone, no contract.

All of the tech is neat, but the reaction is more "cool gimmick", not "must have feature". And at that price, "cool gimmick" is not a phone seller. Samsung can pull that off because they pour an insane amount of money into marketing, and have spent years developing the brand to this point. To price yourself at that level, with no market share, competing with gimmicks, seems insane.

The next big winner in market share is going to be someone like Motorola, cheap, great and simple phones, not a new Samsung.

gdilla3• 12 years ago

There's still too much value to be had in high end smartphones for them to start competing on price. They're competing on ecosystems.

josefresco2• 12 years ago

Samsung didn't win due to their extensive marketing. They released a viable contender to the iPhone, and then went about improving it for 5+ generations. Success brought in more money for marketing, but they did it right in the first place and kept iterating. See HTC as an example of a company with a good initial phone and marketing budget but who couldn't keep up and fell behind.

IBM• 12 years ago

They definitely have won out compared to other OEMs because of their deep pockets.

http://83-136-248-155.uk-lon1.host.upcloud.com/wp-content/up...

napoleoncomplex2• 12 years ago

A misunderstanding, I didn't mean Samsung originally, but Samsung in the past 2 years (S4 and S5 to be exact). Their dominance in the past 2 years, in my opinion, has a lot more to do with marketing than with making great products. I completely agree with you that Samsung's initial success was due to putting out a quality alternative to the iPhone.

cwyers• 12 years ago

I feel like another reason is that Motorola completely screwed the pooch on letting Verizon own the Droid trademark instead of owning the brand of their phones themselves.

MBCook• 12 years ago

Samsung spends an ENORMOUS amount of money on marketing compared to Apple. Here's a graph from about two years ago:

https://twitter.com/asymco/status/396253597551570944

samstave• 12 years ago

I'd bet that at&t had a ton to do with the rate and contract terms.

We don't need a company like Google and Amazon to make new phones, we need completely new carriers.

higherpurpose2• 12 years ago

At $99 unlocked, they can't pull off more than a Moto E or so, not even Moto G levels. Amazon can only subsidize so much. And the phone isn't the best device for content consumption, other than music, but music is cheap, and most people don't buy songs anymore these days.

I think they should've done one around the Nexus 5 level in terms of specs, and since it's coming 9 months later, it should cost like $299, or even $249, while still having that great camera. And sell it worldwide, unlocked. I think that would've been a much better strategy for them. The phone itself already is around Nexus 5 level, but with lower res screen, cheaper components except for the camera. Then take out those 4 cameras and AT&T's cut, and it should've been very doable.

At $200 on contract, or $600 unsubsidized (not even unlocked), it makes very little sense to buy one just for that parallax effect, which will be cool for like 2 days, and then you'll get bored with it.

wil421• 12 years ago

Just because you are a tech company doesnt mean you have to make a phone. Whatever happened to that facebook phone?

Or the IBM phone: http://en.wikipedia.org/wiki/IBM_Simon

peterwwillis• 12 years ago

"But that’s not what the phone is about. It has to stand on its own as a fantastic phone. It even has to make phone calls."

I chuckled here, but seriously, why do we even call these things 'smartphones' anymore? The voice calling aspect has been the forgotten feature for years.

I remember getting a cheap Android phone and the whole dialpad UI would freeze up, or I couldn't answer the damn thing when it rang because the UI was locking up due to god know's what. Mine still lags, but is fast enough to react within about 5 seconds of me pressing a "button". Same for clicking on the voice-command feature.... I hear the audible "ping", and 5 seconds later the display comes up.

Let's be realistic: all smartphones are basically just handheld tablets whose radios/SIMs happen to allow access to voice channels.

ghobs91• 12 years ago

I think making firefly part of the Amazon app, or even as a standalone app, would have more effectively accomplished their "impulse buying" task.

Asking people to switch to a phone with inferior app selection and a clunky UI in order to be immersed in the Amazon experience seems a bit short sighted to me.

High end specs have become a commodity, the top priority the average user has when buying a smartphone is whether it has the apps they use. Try convincing a friend of yours to switch to Windows Phone, and the first thing they'll ask is "does it have x+y apps?" Ecosystem is everything.

segmondy• 12 years ago

Amazon made a phone because it has become a big company with no vision. Making tablets was in, so they made one, making phone is in, they are making one. Maybe in 5 years, making your own VR headset will be in and they will make one as well.

jacquesm2• 12 years ago

You can accuse amazon of a lot but not having vision is something I'd be very careful with.

Kindle, AWS and a whole pile of other things were quite the gamble when the launched them.

josefresco2• 12 years ago

Agreed, if anything they have better longer-term vision and discipline than any of the large tech entities. What seems like an also-ran product now will most likely turn out to be a no-brainer in 5-10 years (not quarters)

aeturnum• 12 years ago

Kindle and AWS _were_ impressive plays. However, in the years since introducing them (2007 and 2006 respectively), the company has had a decided lack of imagination. Both Kindle and AWS have pushed adoption and given Amazon huge advantages in growing markets. Are their tablets / phones / streaming devices worth enough to pay Amazon back on the investment required to create them? At this point, and with these products, I'm skeptical.

Why Did Amazon Make a Phone? A Conversation With Jeff Bezos

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