Amazon Smartphone Shows How Amazon is Changing

That smartphones play a wider role in the connected device, e-commerce also online advertising markets is illustrated by the introduction of a long-rumored smartphone by Amazon.

As has been the case with the other connected devices Amazon has introduced, the issue is how a connected device helps a retailer or application provider sell other products, not necessarily generate direct revenue from providing connectivity services or selling devices.

The Kindle was designed to help Amazon sell video and text content. The Amazon Kindle Fire TV will help Amazon garner information deemed valuable by potential advertisers, and incrementally boost use of Kindle video.

The new smartphone will play a role akin to both of the prior devices, even if it also supports voice communications, general Internet access and text communications.

The smartphone is becoming the most important “sensor” most people have with them all day, providing context and location, as well as information about what people are doing, and where.

But the smartphone also is becoming a retail platform, driving product purchases, as do tablets.

In fact, as one might describe Google as the first technology company whose revenue model actually is advertising, Amazon is becoming, in many ways, a technology company whose revenue model is commerce.

So, one way or the other, all Amazon brand connected devices aim to help Amazon boost product sales volumes.

For that reason, it is likely Amazon will follow it well-trodden path, selling devices a bit above cost, to seed the market with lots of devices that drive commerce revenues.

Strategically, therefore, Amazon is more than “just one more supplier of smartphones.” It is a competitor with different revenue streams, allowing it to package and retail devices in ways that are built on sources other than the actual sales of the devices.

One expects a cable TV company or telco to earn most of its money from Internet access services and a few key applications (voice, text messaging, video entertainment). One expects a consumer electronics manufacturer to earn most of its revenue from selling devices.

But Google and Amazon now are quite unusual, as Amazon is making a transition from “e-tailer” to technology company that earns its revenue by retailing. Just a few firms apparently can become very big by embracing such unusual models.

That might  be the biggest long-term implication of Amazon becoming a smartphone supplier.


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