The Kindle Fire is out, and it's going to be the hottest Trojan Horse we've seen since .. the original Kindle. Jeff Bezos has started building computer hardware with one primary purpose in mind: to make Amazon a software company. An unusual approach, but one that will ultimately succeed.
Sure the Kindle Fire will be the only significant competitor to Apple's iPad, but it is also showing that Microsoft is still stuck in the 20th Century. (Have you noticed that Microsoft really doesn't generate much buzz these days?) Microsoft just hasn't figured out the Internet software business.
Bezos started selling hardware (books, then other physical consumer products) because the market for selling software through the Internet wasn't there yet. Now he's favoring electronic books, music, video and cloud computing services because that's where his real future lies. It costs nothing to distribute software, as long as there's a device out there to receive it. Much cheaper than UPS.
The market is different now. The 21st Century calls for great devices that get their software--this time in the form of content and services--through the Internet. So he's borrowing strategies from both Microsoft and Apple to make sure the hardware and software infrastructure is there.
Apple-like Strategies
Steve Jobs loves making hardware hardware AND software, and likes to integrate them into great products. His hardware products are great showcases that create whole new categories of consumer electronics. He also gets the advantage of using the devices to sell his own software--music, books, video, etc. Jobs likes the high-margin strategy of building premium products and pushing old versions down the price ladder as he introduces new top-end products.
Bezos likes building harware and software primarily because he wants to sell software. Similar to Jobs's strategy, he puts out exclusive devices that run his software so that he can sell more of that software. So he makes sure that his products, while not as great as Apple's, are still impressive enough to compete with Apple while other hardware makers fail. And part of their appeal is the very fact that he has a lot of software to sell, making the hardware more appealing.
Microsoft-like Strategies
But Bezos is also copying pieces of Microsoft's strategy: start at the low end of the hardware market in order to sell his software, and build up. Microsoft ensured that Windows would be the operating system for the masses by licensing Windows to all PC makers, creating price competition and ensuring low PC prices and high Windows volume.
Bezos is aiming at the mass market with cheaper hardware that appeals to more that just the early adopters. The Kindle Fire doesn't have all the features of the iPad and is smaller, but is half the price. By creating his own hardware, he also gets Apple's advantage of selling devices that favor his own software. He'll sell you electronic books, movies, TV programs, and will throw in cloud computing services for free, just to make them more appealing. It's great that you can read a book on one device, then pick up where you left off on another device. That's because your books--and memory of what page you're on--is stored in the cloud, on Amazon's servers. The Kindle Fire will allow you to do the same thing with movies and TV shows.
But he wisely doesn't try to compete in the OS market for new devices. Increasingly, that's a war between Google and Apple (in this case, Google takes on Microsoft's old role.) Why should he? He gets the Android OS for free.
Microsoft just can't seem to compete with Apple, Amazon and Google in the Internet software business. It can't make inroads into the mobile phone and tablet markets. Sorry, Ballmer.
So look for Bezos to move deeper into the content and software services business. There have already been rumors that he would like to buy Hulu as well as Netflix's streaming movie service. He could have trouble keeping the rights to that content, but he's a tough-ass competitor, and if he (like Jobs) has the hardware to play it, the content producers will have to give in.
At least, once those content companies finally get the fact that the rules have changed in the 21st century.
We might also see Amazon making its own cell phones and other devices that will bring in service revenues. Technology is becoming a service business, and Amazon is becoming a technology retailer. It's got a great future there.
Thet's just hope that Jobs can remain active enough at Apple to ensure that Apple still has a great future as well.
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