Last week Amazon unveiled its oft-rumored smartphone, the Amazon Fire Phone. Compared to popular Android phones and the iPhone it has a familiar design and specs, some interesting new features, and the same price tag. It will be interesting to see if the Fire Phone does enough to stand out in a crowded smartphone marketplace. Why did Amazon make the Fire Phone, and who did they make it for?
Who is the Amazon Fire Phone for?
When rumors of the Fire Phone began circulating I wondered if they were making it for their current customers or to bring new customers into the Amazon ecosystem. Were they trying to create a phone that encouraged their existing customer base to spend more money on Amazon, or were they trying to create a smartphone so unique and interesting that convert Apple and Android users?
I would argue that the Kindle Fire tablets are built for Amazon's current customers. They excel at browsing and buying goods on Amazon.com, watching Prime videos, and listening to music stored on Amazon's cloud, and are priced accordingly. The original Kindle Fire debuted at $199 when the iPad cost $499 and had dominant market share. Amazon priced the Kindle Fire at or near cost and hoped to make up for it with increased sales on Amazon.com and Prime memberships.
Smartphone differentiation is tough
The smartphone market is more complicated though. Phone prices are subsidized by carriers and only represent a small portion of the total cost of ownership over the length of a two-year contract. At $199 on a standard two-year contract from AT&T (and only AT&T for now), the Fire Phone is not competing on price. It does come with a free year of Amazon Prime (worth $99) and its 32GB of storage is double that of most popular smartphones. (But if Amazon is so big on cloud services why do they need their base model device to have more storage than the industry standard anyway?)
The Fire Phone won't run apps from the Google Play Store, and the Amazon Appstore is still lacking some common apps (no Instagram, WhatsApp, or SnapChat for example). It seems that the Fire Phone is targeted at people doing basic smartphone functions: web browsing, taking pictures, buying things on Amazon, playing games, and streaming movies/music. That person could arguably get a better experience on an older iPhone or Android phone that is free on contract, and more choice of carriers.
Why not make more apps for other platforms?
That begs the question whether Amazon should've just spent their time and money developing unique apps for one of the two major smartphone platforms. The only major feature of the Fire Phone that wouldn't be possible on standard Android or iPhone hardware is the Dynamic Perspective 3D technology. They already make Prime/Instant Video, Music, Shopping, Kindle, and Cloud Drive apps for iPhone and Android. What if they had made Firefly and Mayday apps along with unlimited cloud storage for photos and music? It seems that would be a much less expensive way to reach a larger market.
It's easy to poke holes in Amazon's strategy with the Fire Phone. It's not quite cheap enough to be a no-brainer for first-time or casual smartphone buyers, and it's probably not quite unique and high-spec enough to entice power users. I don't expect the Fire Phone to make much of a dent in Apple's or Samsung's market share, but that doesn't mean it won't be a success by Amazon's standards. They have a ton of information about their customers, and must have identified a market segment that's large or lucrative enough to support the investment they've made. It is currently the best-selling on-contract phone on Amazon.com. My guess is that it's part of Amazon's long-term strategy to get people using Prime and buying more things on Amazon. They'll need carrier partners to make that happen, so we'll see if they bring it to more carriers in the future or adjust the price to spur sales.