As the Kindle finishes off a very interesting year it’s worth taking a look at the major kindle strategy decisions and doing a rough review.
Kindle 3 and Sticking with eInk
Kindle 3 represented a huge move for a variety of reasons -
- It was a commitment to readers. Sticking with eInk is the surest sign Amazon is serious about serious readers.
- It was a much-improved device – It improved over the Kindle 2 in a multitude of ways (and also made a few mistakes).
- It came in at $189 despite having the new eInk Pearl screen.
Amazon did exceptionally well in terms of improving the Kindle – it kept the price low, it stuck with eInk, and it made improvements across the board.
Kindle 3 probably allowed Amazon to keep wrapping up a large portion of serious readers - not to mention lock-up the ebook revenue stream they represent.
This was brilliant.
Kindle Strategy Grade: A+.
The $139 Kindle WiFi
Another brilliant move. Kindle can be encroached on in two directions – by the ‘do-more’ Tablets at higher prices and by the ‘do-less’ bargain eReaders. Amazon released the $139 Kindle WiFi and effectively destroyed the latter threat.
It also probably wrapped up a large portion of people who couldn’t afford the Kindle 3 or thought a reading focused device wasn’t worth $189.
Kindle Strategy Grade: A+.
Not expanding the Kindle family with a Color screen device + Depending on eInk
These are actually two interdependent strategy decisions and both are terrible.
By depending on eInk Amazon tied the Kindle to the rate of progress of eInk’s technology. That left a lot of room for LCD based Tablets to attack Kindle. By not expanding the Kindle family with a Kindle Tablet or a color eInk Kindle Amazon let an apples vs oranges comparison (Kindle vs iPad) flourish – much to the Kindle’s detriment.
Basically, when Apple came out with the iPad and leveraged the Press to create an illusory Kindle vs iPad showdown Amazon should have gotten a Kindle Tablet ready – Whether the Tablet lost to the iPad or did OK – it would free Kindle from unfair comparisons.
Amazon will face this problem again when the iPad 2 comes out (it’s rumored to come out in February 2011). At that time, hopefully, Amazon can quickly release a color screen Kindle or Kindle Tablet - which would leave the black and white eInk Kindle free to focus on books and reading.
Kindle Strategy Grade: F.
Not going for a revolutionary Kindle device
It’s hard to say whether this was a good decision or not.
Kindle 3 and Kindle WiFi capture the exact type of customers Amazon wants - people who will keep buying books and provide a super valuable revenue stream.
At the same time the mind share is going to devices that try new things like iPad and Nook Color.
Could Amazon have found the time to release a Kindle that was very revolutionary? Would that distract Amazon from the Kindle’s core mission and from eBooks?
This area of strategy is completely lost to me – There’s always a huge risk when you veer away from your core competency and perhaps it’s not the most sensible thing for a market leader to change things drastically when it’s winning.
Kindle Strategy Grade: Incomplete.
Kindle for the Web to match Google eBooks
This is actually going to be announced today. It highlights how Amazon is the King of reacting to competitors.
We knew a long time ago that Amazon would have to do this when its biggest eBook Store rival launched. All Amazon did is release a web preview feature. Instead of going all-out and letting people read Kindle books in the browser and letting any site in the world sell Kindle books Amazon made it a gutless preview feature.
Now that Google eBooks has launched Amazon, within a day, is announcing that it will match these two features i.e.
- You will be able to read Kindle books from a browser. Not sure of the details – should be clear after today’s announcement.
- Any site will be able to sell Kindle books. Again, the announcement today should provide the details.
By announcing this a day after its rival ebook store’s announcement Amazon has missed out on the chance to steal its rival’s thunder. On the plus side, it’s instantly neutralized two of a competitor’s differentiating features.
Matching two out of the 4 main strengths of its biggest eBook Store competitor is a great, smart move.
Kindle Strategy Grade: B.
The focus on Kindle Reading Apps
This is brilliant strategy and pointless strategy at the same time.
At one level it seems like daylight robbery – All these other companies invest billions into their devices and take big risks and finally get customers. Then you make a tiny little app that takes you one month and you steal all the ebook revenue. It almost seems too good to be true.
It seems too good to be true because it is.
Sooner or later these device makers will have their own offerings. Then they will use the power of the default and customers’ natural loyalty to the device maker to steal back the ebook revenue.
Making a bunch of Kindle Reading Apps is a great strategy for a divided market. It’s also great if the device makers aren’t interested in eBook revenue. However, it has to be accompanied by a Kindle Tablet so that Amazon can get customers it can lock-in.
Now that both Google and Apple are interested in eBook revenue it’s only a matter of time before it becomes much harder for Amazon to get a free ride from Android and iPhone. Then the lack of its own Tablet will come back to haunt it.
Kindle Strategy Grade: A in the short term, F in the long term.
Kindle App Store
Deciding to go with an App Store is a brilliant decision.
It has been a bit of an experiment so far so it’s only next year when we’ll know what happens with the Kindle App Store.
Kindle App Store will probably compete with Nook App Store as each tries to add value to its associated eReader devices. It’s quite a delicate balance as Amazon knows it can’t get left behind on apps. You never know when a particular app makes one eReader a favorite over another eReader for a particular user. At the same time you don’t want to let apps overrun your eReader and destroy ebook revenue or its utility as an eReader.
This is an open item – At least Amazon is in position to react to B&N. Perhaps that’s what’s needed before Amazon gets serious about apps – a competitive threat.
Kindle Strategy Grade: Incomplete.
Spurning ePub’s advances
This is a very smart decision.
While every other eReader company is throwing away its lock-in, and in effect its ebook revenue stream, the Kindle has stayed far, far away from ePub and kept its ebook revenue stream safe and secure.
Where it has hurt Amazon is in lack of support for library books. There you could make an argument that customers who prioritize library books aren’t ideal customers and that adding library book support hurts revenue from existing Kindle owners.
A good business decision – not sure what all the strategic implications might be.
Kindle Strategy Grade: A for profit, F for popularity/perception.
An uneasy compromise with the Agency Model
Amazon has fought the Agency Model for a bit in both US and UK and then adopted it. It’s been an interesting tussle – Amazon didn’t really have an option since it needs the content.
Now that we know the Agency Model hasn’t slowed down eReaders and eBooks much it’s remarkable to see how much better off Amazon is - it’s no longer losing money on every Kindle book sold.
Agency Model definitely increased Amazon’s take per book, it might have weakened Publishers and strengthened indie authors, and it has done precious little to slow down eReaders. It’s had the almost exact opposite effect of what Publishers intended.
Kindle Strategy Grade: Hard to say. The end result has been an A but the strategy (i.e. give-in) was probably terrible.
Trying to avoid the race to Zero
This is the most delicious piece of the strategy puzzle.
Amazon has to balance two things – It has to come in with eReaders and eBooks and destroy the existing Publishing model and the entrenched Publishing Mafia. At the same time it has to avoid the anarchy of free and make sure there are still enough profits in eBooks.
It’s done a lot of very under the radar things (such as channel immense power to the Bestseller lists) and a few very obvious things (such as offer 70% to authors who price their books between $3 and $10).
It’s also stayed far, far away from free. Consider how most other eBook stores have a million or more free books and just a few thousand new paid books. Amazon is the opposite – it offers just 20,000 or so free books and 700,000 paid books.
The Kindle Store is a store of good intent.
Kindle Strategy Grade: A+. This is very impressive balancing and if it keeps working it’ll really, really pay off for Amazon.
Openings that Amazon’s Strategy has created for its Rivals
In around 50% of areas Kindle strategy has been excellent – a solid A. There’s also a solid B and a few things have turned out well despite questionable strategies. So Kindle strategy, overall, has really paid off.
We do have one obvious long-term weakness and two incomplete areas.
The Lack of a Kindle Tablet and Over-reliance on Kindle Reading Apps could destroy the Kindle
By not releasing a Kindle Tablet and by focusing on reading apps the Kindle ecosystem has been exposed to Tablets in general and Reading Tablets in particular. There was quite a gap in price and focus between iPad and Kindle – The Nook Color has waded into that gap and set itself up to steal enough Kindle sales to be a problem.
The other problem is the reliance on a bunch of devices and platforms Amazon doesn’t control.
This seems to be the only huge strategic mis-step – Which isn’t bad given there were a lot of areas Amazon could have stumbled in.
Choosing Evolutionary over Revolutionary and Hesitation on the Kindle App Store front are also exploitable weaknesses
These are unknowns but interesting -
- Will Kindle be taken down by an eReader that tries something revolutionary? Perhaps. If enough companies try bold new things one of them is likely to hit upon a winning formula. The Kindle will continue on the path of incremental improvements and just hope that no one conjures up a magicReader.
- Will Nook App Store generate apps that make Nook Color more compelling than the Kindle? It’s unlikely but not impossible. Often, a Kindle vs Nook Color comparison hinges on a few features – eInk, LCD, library book support, ebook selection, folders, custom screensavers. It’s not impossible that a developer creates an app that’s impressive enough to feature on that list and sway decisions. At that point the App Store that generated this killer app has paid back the device manufacturer several times over. What’s more – It could be 20 killer apps. There isn’t an upper limit.
For a market leader to choose revolutionary over evolutionary isn’t the safest option. It’s almost as if Amazon’s #1 position forces it to play it safe and be much more cautious than its competitors.
My overall grade for Amazon on its Kindle Strategy would be A- with one huge weakness and two areas of concern. It sets things up very well for 2011 – Enough intrigue and possibilities to keep everyone involved.
Filed under: kindle Tagged: | ereader strategy, kindle strategy
Everything seemed fuzzy on my comp. I looked at my kindle and my eyes were fine. I love eink.
awesome comment.
“Spurning ePub’s advances … This is a very smart decision.”
I agree.
With Google’s announcement e-books have really hit the big time. Isn’t it awesome to know that amazing changes in publishing are on the verge of happening, and yet still being unable to say what they’ll be? I.e., there could be lots of twists and turns ahead.
Yeah, every time it seems one company has it won there’s a huge change.
“The Lack of a Kindle Tablet and Over-reliance on Kindle Reading Apps could destroy the Kindle”
I disagree with this. By focusing on their Kindle apps on the various platforms, Amazon has simultaneously avoided the expensive development costs of their own tablet device which would inevitably be compared ad nauseum with the iPad and any other competitors and have upstaged the device manufacturers on their own devices (yes I know there are the hints and rumors that Amazon is looking into this tech, but it’s not out now). Look at how many comparisons were made between the iBookstore and the Kindle store at the release of the iPad, and from recent readings it seems that the Kindle store is still superior. Amazon took the device of one of its biggest competitors and turned it into another revenue stream for themselves. Amazon neatly neutralized the criticisms of the Kindle device with their “read everywhere” philosophy – now people can read on the device they prefer.
In the end, I think that it is the book sales that are far more important to Amazon than device sales. There is probably the slimmest of margin on the sale of a Kindle Wifi, but look at the profits they’re making on the sale of their books. I was talking to a friend last night who posited that with Google’s store available, is it possible that we’d see cheaper prices on eReaders, but I argued that the prices for eReaders are as low as they are now because the companies have their eBook revenue to help subsidize the cost. In the end, the battle is not going to be about eReaders, but rather the places where people buy their books – and in this Amazon has the considerable lead and advantage,
Agree with you that Amazon has the lead and advantage in places where people can buy their books.
However, they are still at a lot of companies’ mercy.
If Amazon really do keep ignoring Tablets they will gradually lose a lot of that market. It might not happen by end 2011 or mid 2010 – However, it’s going to happen.
As for me, I’d be happy with a 7″ or so e-ink reader, perhaps with even sharper screen and maybe a touchscreen to make it easier to navigate, click a work for dictionary, etc.. Faster/better browser would be fine, but I use my Android phone to do any web surfing and email checks.