Kindle Review – Kindle Fire Review, Kindle 4 Review

The release of the Kindle 3 has generated so much excitement that most people aren’t paying much attention to less exciting things like Kindle sales estimates and the significance of the two free Kindle Apps.

Was looking at a list of Top 50 Apps for the iPhone in 2010 and realized something that may or may not be obvious – Ideas and Products are only valuable when they are successful.

1. An idea is worth almost nothing. There are over 200,000 App Ideas in the App Store - most of them are worth nothing.
2. A new product isn’t worth much either. In a way it’s just an idea – it’s been executed on but it hasn’t yet been market tested.  
3. If a product is successful then information about it – how much it sells, how much profit it makes, how it’s made, the secrets – all become very valuable.
4. Similarly, if an app takes off (let’s say Angry Birds in the App Store) then information on how it was built and how much it sold is very valuable.
5. It’s like prospecting for gold – It’s only when you’ve struck a vein of gold that information on where you’re digging is valuable. And then it’s exceptionally valuable.

So, in a sense, what we’re looking for is a great market fit and not a great idea. Marc Andreesen talks about it on his blog as the only thing that matters when it comes to creating a successful company.

Once a product has found a great market fit – every bit of information about it is super valuable. It’s especially valuable for companies that are well placed to come in and steal the market.

If your product is a success - revealing information is probably a strategic mistake

There are two exceptions that come to mind (there are probably a few more) -

1. You’ve already gotten a dominant position and need the social proof – You need people to feel they must go with the crowd. In that case you have something to gain and very little to lose by disclosing a lot of information.
2. You have to make your investors and shareholders happy and revealing information is the only/easiest way.

However, when you strike gold with a product or idea you’re usually in a very unique position -

1. Sales are more than you can handle. You’re struggling to keep up.
2. The market demand is much larger than you expected. You’re as surprised as everyone else would be if you told them how big the market is.
3. You’re very vulnerable because it’s a shift – What you thought was a 100 million dollar market is a billion dollar market and you’re probably not prepared for it.

You basically need time to react fully to the opportunity. One of the safest ways to gain time is to not go around telling people you’ve struck gold.

An Angry Birds example

The team behind the Angry Birds app struck it rich and they have had the #1 spot for a while now.

They are really, really surprised. They have made $4 million. They have their entire 17 person team working on just upgrades for this one app. You’d think there wouldn’t be enough ways to throw birds at pigs to keep a 2-person team occupied. However, you can’t argue if they’ve made $4 million from their app.

The Angry Birds developers sharing all this information is interesting.

This level of insight has different consequences at different points -

1. When they first hit #1 sharing information on sales would probably be a really bad idea. Lots of opportunity for competitors to come in and compete by making similar/clone apps.
2. Now that they are comfortably at #1 and have a stronger product and are focused on the app it’s not such a bad idea. It is, however, still not a very smart thing to do. Huge companies like EA and GameLoft are going to see a $4 million opportunity. These are companies with thousands of people and very strong marketing and branding.
3. If they didn’t talk until the App was out of the charts then they’d be safer. People would know they were doing well and would try to guess – However, they wouldn’t have a juicy, tempting figure like $4 million in front of them.

This is a common feature with App Store developers – they’re so excited they tell everyone how well they’re doing. It never strikes them that they’re giving away valuable information.

Amazon is in a similar position to the Angry Birds developers – Except it’s perhaps a thousand times bigger

No one knows exactly how big the eReader and eBook opportunity is. No one knows exactly how fast eReaders and eBooks are growing.

Let’s see what options Amazon has -

1. Make a grand announcement for Microsoft, Google, Apple, and every other giant dangerous company - Hey Guys, we just found a new multi-billion dollar business. Would you like to steal it away from us?  
2. Stay 100% quiet and not talk about it.  
3. Throw a few hints and try to get the best of both worlds. That’s why we get ‘Kindle books sold more than hardcovers at Amazon.com’ and ‘millions of Kindles sold’. It’s reassuring readers that other readers are buying Kindles and ensures authors know that other authors are selling ebooks. It also leaves enough vagueness that the scary tech giants don’t know whether or not it’s worth building a dedicated eReader and focusing on ebooks.

Amazon has chosen the third option and it’s a very interesting choice. My opinion would be that they shouldn’t have disclosed anything – the Agency Model would be a little late in coming and so would large competitors.

At this point Amazon MUST hide Kindle sales figures

It’s pretty clear that eReaders aren’t going to die and we get three possibilities – eReaders stabilize at 10-15 million units a year, eReaders grow to 20-40 million units a year and then stabilize at that level, eReaders keep growing and become a huge category like TVs.

Only Amazon knows which one it is (well, perhaps B&N too). Think about the enormous advantage of being the only company to know how big a market is, how big it might be in 5 years, and how fast it’s growing. It buys you time and freedom from competition and every day you keep that knowledge secret you increase the gap between yourself and potential competitors.

At the moment the secrecy around Kindle sales figures gives Amazon a huge protective wall. Competitors crashed into it last year when they ran out of stock and left Kindle as the only eReader in stock and we are going to see competitors crash into it again this year.

In the eReader market the biggest advantage the Kindle 3 and Amazon have might be that no one else knows Kindle sales figures and how fast sales are growing.

Filed under: thoughts Tagged: | kindle sales estimates, kindle secrets