Kindle Review – Kindle Fire Review, Kindle 4 Review

The relentless use of terms like ‘Kindle Killer’ by the press creates the illusion that beating the Kindle is an easy task. The press like to think that a new eReader is going to come in and in a few short weeks nullify the Kindle’s first mover advantage, quickly equal its existing customer base, and take over the #1 spot.

In this post we won’t be talking about the iPad because it’s a multi-purpose ‘magical and revolutionary’ device that is trying to kill everything. If it kills, it’ll kill eReaders and reading. So let’s limit the scope of this post to discussing what it would take for a dedicated eReader to come in and kill the Kindle.

Let’s start with a rather sobering realization about first movers and early market leaders.

First Movers get a Huge Lead – In more ways than one

Let’s start by looking at the lead the Kindle has -

1. Kindle is the first brand that jumps to mind when people think eReader.  
2. Kindle has sold ‘millions of Kindles’ with estimates ranging from 3 million to ‘I’ve never seen one so no one must have bought it’. 
3. There are rumors that 90% of ebook sales are via the Kindle Store.
4. The Kindle probably reaches economies of scale other ereaders don’t. 
5. Kindle for iPhone is the #1 Book App for the iPhone.
6. The Kindle Store has more new books than any other store. It also has more blogs, more newspapers, more indie authors, and more magazines than Sony and Nook.
7. The Kindle Store also has the lowest prices – although that might not last thanks to the agency model.
8. There are more ‘Kindle owners’ and ‘Kindle customers’ than Sony/Nook owners and customers.

Any eReader starting off from scratch (or for that matter from the #2 spot) has to take on all these factors.

It’s worth noting that contrary to what the press would have us believe first movers and market leaders are rarely defeated.

David doesn’t often kill Goliath – Even in technology

David kills Goliath stories make for good news and are very appealing. However, Goliath doesn’t lose often – even in a rapidly changing realm like technology and the Internet. Consider this interactive list of the Top 100 sites from the BBC. It’s full of Goliaths that haven’t met their Davids or have crushed them mercilessly -

1. Google is the #1 search site and has been for most of the 2000s.  
2. Microsoft is still huge – both in software and with MSN and Bing and Hotmail.
3. It’s worth noting that Google hasn’t been able to destroy Microsoft’s advantage in Operating Systems and Office Software and Microsoft hasn’t been able to kill Google in search.
4. Blogger is still the #1 blog network.  
5. YouTube still rules Video. 
6. Apple, Dell and HP still rule computers along with other giants like Acer and Asus.  
7. Weather Channel and Expedia still rule their niches.

There are very few giant killers on that list. There are, however, a lot of Giants that have proven immune to hordes of Giant Killers. A surprisingly large number of sites on that list are early movers – perhaps it would be more precise to say they were the first big successes in their niche and the early market leaders.

That’s exactly what the Kindle is – the first successful eReader that validated the market.

You have to be significantly better than the leader

Could things get worse than knowing that the early market leader doesn’t lose often? Actually, yes.

To beat a first mover you have to be significantly better – It’s not enough to be as good or to be a little better. If Nook 2 or Sony 606 are as good as Kindle 3 that won’t be enough – The Kindle’s better brand recognition, users’ inertia, and social proof will win out.

You have to be clearly better than the leader to start selling more. Plus it’s going to take a little bit of time to catch up in market share and you have to make sure you continue to be significantly better during the interim.

The Market Leader trains people to expect certain things

Here are the things the Kindle has trained people to expect -

1. Free Internet.
2. Very easy to use reading device.
3. $9.99 books.
4. 60 second downloads.
5. Great customer service.
6. Light weight and reasonably compact.
7. 1-click purchases.

This goes beyond advantages and disadvantages – It’s about how people expect eReaders to look and behave.

It’s why the Entourage Edge is getting blasted for being 3 pounds. That’s in the same ballpark as a netbook and much less than a laptop. Yet, people used to really light Kindles and Sony Readers are finding 3 pounds too heavy.

It could get even worse - A market leader could patent a technology (such as multi-touch for phones or 1-click buying) and thus ensure you can’t duplicate what users expect.

Most early leaders have war chests

There’s an obvious benefit to being a market leader – You’re selling more and making more than #2 and #3. Often, a lot more. Since you have economies of scale on your side you can choose between making more profit per device than competitors or undercutting them on price.

You have also probably built up a war chest and a set of dedicated customers who’ll buy your future products.

This is exactly what’s happening with eReaders – the formation of war chests and loyal customer bases. Every Kindle owner is a small trickle of income to Amazon – from ebooks and new kindles and subscriptions. Over the last 2 years and 4 months they have built up millions of these little trickles of income.

A company like Entourage or Cool-er coming in now has nothing of the sort. Plus by competing on free they are ensuring they won’t have anything of the sort. Sony Reader and Nook advertise a million free Google Books and let people read library books – Sounds great, until you realize that Kindle owners are paying for books and earning Amazon money instead of reading free books and lending eBooks from the library.

Market leaders sometimes have multiple revenue streams

With Kindle and Kindle Store Amazon are probably making money both from eReaders and eBooks. Perhaps they aren’t yet - at some point of time in the future they will. At that point a company that hasn’t built up both revenue streams won’t be able to compete.

That’s just scratching the surface though. Amazon was an early mover in Internet retailing of books which gave it revenue and customer information and retailing expertise and Internet expertise and let it become an early mover in Interent retail of other goods. It’s also an early mover in cloud computing and it bought Zappos and it has multiple billion dollar businesses.

There’s just a lot of ammunition for Amazon to take on competitors. Of course, Microsoft and Apple have more ammunition – but no small company has much of a chance. Even if a company like Stanza wins an important channel Amazon buy them up.

If a Kindle Killer really does arrive then, unless it’s a tech giant, Amazon can just buy the company or its technology.

Market Leaders have time on their side (and escape plans)

Time is another element that people underestimate when they talk about Kindle Killers and Netbook Killers.

It often takes years to beat the market leader

Even if a company has a significantly better product, strong cash reserves, and keeps improving its product it faces the vagaries of time -

1. People have to get to know about the product and switch to it. We all have a lot of resistance to change. 
2. A significant number of people are going to wait a year or two – For the next generation of devices or when their eReader gets really outdated.
3. The Market Leader gets time to improve.
4. There are buying cycles and shopping seasons and recessions.
5. There are revolutionary new products in completely unrelated fields that take up people’s attention and money. 

The ‘killing‘ of a market leader doesn’t happen overnight - it usually takes years and sometimes even decades.

Even when they’re beat they don’t necessarily die

The last thing worth keeping in mind is that going from #1 to #2 isn’t really ‘being killed’. For eReaders, being #2 would probably mean that in a few years instead of 10 million eReaders a year you’re selling 4 million eReaders a year. You could always go into a sub-niche and dominate that niche or switch to a related product area.

Alternately, you could reap the benefits of being #2 in an exploding niche and wait for your chance to bounce back and take the lead.

Amazon has a lot of businesses – websites, cloud hosting, Kindle devices, Kindle books, Amazon.com, Zappos, and more. If a company does manage to come in and wrest away the #1 spot Amazon will just stick with the Kindle, reap the rewards of being #2, and await the opportunity to win back the #1 spot.

Out of all the companies in a space the first mover (the early market leader) is usually the best placed. By first mover we do mean the first company that manages to actually succeed in a space.

It’s an idealistic notion that the little underdog will come in and upset the champion – It sounds beautiful and that still doesn’t change the fact that it’s rather unrealistic and hardly ever happens. The lonely exceptions prove the rule and keep the fantasy alive.

Filed under: thoughts Tagged: | first mover advantage, kindle killer, lack thereof