Amazon Fire: The Tablet War Begins Now

by Andrew McAfee on September 29, 2011

Amazon’s Kindle Fire doesn’t start shipping to the public until November 15, but talk about its impact is already coming fast and furious.

So far, I particularly like the speculation by early Apple employee Chris Espinosa:

The “split browser” notion is that Amazon will use its EC2 back end to pre-cache user web browsing, using its fat back-end pipes to grab all the web content at once so the lightweight Fire-based browser has to only download one simple stream from Amazon’s servers. But what this means is that Amazon will capture and control every Web transaction performed by Fire users. Every page they see, every link they follow, every click they make, every ad they see is going to be intermediated by one of the largest server farms on the planet. People who cringe at the data-mining implications of the Facebook Timeline ought to be just floored by the magnitude of Amazon’s opportunity here. Amazon now has what every storefront lusts for: the knowledge of what other stores your customers are shopping in and what prices they’re being offered there.

And this analysis of the disruptive power of Fire from Robert Wheeler at HBR.org:

It’s not just a low-end competitor to the iPad. There is scalable technology at its core that the present-generation iPad lacks — the extensive use of the Cloud. That is why Amazon can get away with shipping a device that has only 8GB of memory. What’s more, the Fire has a business model advantage too — Amazon is using content to subsidize the hardware.

Now that Apple has proved the skeptics wrong and showed how big the tablet market is, there’s no way it’s going to remain a monopoly. And it certainly feels like Amazon is in a good position to compete by offering a content-consumption device with lightweight interaction capability (email, social media, etc.). Amazon has a massive amount of content to offer, and will certainly be smarter about the Cloud than Apple has been to date with iTunes. What’s more, Amazon has also proved to be a pretty good hardware designer (proving once again the silliness of the argument that high tech design needs to be somehow close to manufacturing in order to be successful), so I’m looking forward to getting my Fire and see how well it works.

I have trouble thinking of two companies that have done a better job of delivering great user/customer experiences over the last decade than Amazon and Apple. So they seem like the most likely candidates to split up the tablet market, where I predict that very few users will care about specs and features, and the great majority will care about simplicity, elegance, ease of use, utility, and content.

I wouldn’t be surprised if the tablet market becomes a two-horse race, at least for the next couple years. Does this sound right to you? If not, who else will enter and succeed, and why? Leave a comment, please, and let us know what you think.

 

 

  • http://AlexBain.com Alex Bain

    “Now that Apple has proved the skeptics wrong and showed how big the tablet market is, there’s no way it’s going to remain a monopoly.” Swap out “tablet market” and swap in “music player”, then go back to 2001, and WOW are you wrong :-)

    Part of what will determine whether or not this is a two horse race is how liberally people will want to define what the “tablet market” is. I couldn’t disagree with you more that Amazon’s subsidizing hardware with content is a business model advantage. Their content is just as low margin as their hardware. A lack of margin through the chain is not an advantage of any kind. Apple’s always been able to compete at the low end, and has always chosen not to. If you lump that low end in with them, you’ll be able to say that it’s a two horse race, but that’s not the race that Apple’s running.

  • http://andrewmcafee.org/blog Andrew McAfee

    Alex, never argue with your former teacher; grades can be adjusted retroactively…

    You make excellent points, particularly about the duration of Apple’s near-monopoly over portable music playing. But in the era of Spotify, Pandora, turntable.fm and others, I wonder what % of portable music heard today is songs purchased via iTunes and listened to via and Apple device. I suspect, in short, that that monopoly is eroding. But as you point out, it was a hell of a long run for Apple.

    Are you saying that you don’t fear that Apple will be disrupted from below in the tablet market? If so, technology history is not on your side. Or are you saying that Apple will disrupt itself if and when necessary? 

  • http://AlexBain.com Alex Bain

    [My grade can't go much lower than it already was, so I'll reply]

    First of all: http://www.asymco.com/2011/09/30/the-case-against-the-kindle-as-a-low-end-tablet-disruption/
    Secondly, I’m not that interested in the market for the sale of portable music. That’s zero margin. I was referring to the market for the sale of profitable portable music players. Spotify’s welcome to try to compete for music customers. You sell the content to generate interest in profitable hardware. Spotify and Turntable don’t have profitable hardware, so they’ll either eventually go away or be bought by someone that can use content to support a separate, profitable business.

    Thirdly: I’m saying that Amazon has NOT figured out a way to make a tablet that’s both profitable and inexpensive. They’re likely losing $50/unit or more, by many estimates, and NOT making it up on content. If THAT’S Apple’s tablet competition, bring it on.

    Finally, here’s an interesting Jobs quote (I know you love quotes):

    “The Mac-user interface was a 10-year monopoly,” says Jobs. “Who ended up running the company? Sales guys. At the critical juncture in the late ’80s, when they should have gone for market share, they went for profits. They made obscene profits for several years. And their products became mediocre. And then their monopoly ended with Windows 95. They behaved like a monopoly, and it came back to bite them, which always happens.”

    When it becomes technologically possible to produce a cheap tablet at better-than-negative margin, Apple will go after and dominate the low-end. That was the point when you started seeing iPod shuffles. We’re not there yet with tablets, but Apple won’t be caught off guard.

  • http://andrewmcafee.org/blog Andrew McAfee

    Alex, you (and all other readers) know that I’m a huge Apple fanboy, and am blown away at what the company has accomplished. I hope and expect that Apple’s strong performance to continue well into the post-Jobs era.

    My only point and prediction is that the skirmishing is over and the tablet wars begin now. This is great news for us as consumers (and for me and my colleagues as researchers on technology and innovation). I predict that the Fire will be popular, and will offer people a real choice. To which I say, yippee!

  • http://twitter.com/ebala Shaun Bala

    right now Amazon has low margin throughout the chain, however now as they move into becoming a publisher that might provide a better margin for them. The represents a tremendous amount of demographic data. Simplicity and a complete user experience throughout the chain is what put Apple in its current position. Amazon is one of the few companies with the resources to offer a similar experience with some very tempting innovation(cloud). I can’t wait to see a side-by-side performance comparison. This could alllow amazon to peddle cheaper hardware with what’s being handled in the cloud.

  • Anonymous

    Shick and Gillete

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