The metamorphosis of Kindle and of Amazon

In celebration of the Kindle Fire and the new Kindle, the CEO of Amazon wrote a very interesting letter (which can be found on the main page of Amazon).

A particular section has been stuck in my head and tonight (thanks to reading The Strain for half the night) it finally struck me why. First, let’s consider what Mr. Jeff Bezos wrote:

There are two types of companies: those that work hard to charge customers more, and those that work hard to charge customers less. Both approaches can work. We are firmly in the second camp.

This is really, really interesting. Particularly when you take a look at the diagram in this article on why the iPad and Kindle Fire are Mirror Opposites.

  1. iTunes feeds the funnel for iPad. Apple makes most of its money from the iPad.
  2. Kindle Fire feeds the funnel for Amazon.com.

So, and we are taking major liberties here, we could translate Mr. Jeff Bezos’ statement into –

There are two types of companies: Those that work hard to create a very attractive ecosystem where the price of entry is a premium device, and those that work hard to create a very attractive and low-priced device that brings you into their ecosystem.

Both approaches work. We are firmly in the second camp because we think we can sell people everything.

Both approaches do indeed work. Amazon is certainly in the second camp.

Why else would it sell the Kindle Fire (whose bill of materials alone is around $191) for $199? Why else would it sell the new Kindle for $79 (an insane price no matter how you look at it)?

This strategy is a very dangerous strategy and my gut feeling is that it’s not going to work the way Amazon intends and it is going to cause a metamorphosis of Amazon.

The Coming Metamorphosis of Amazon

Going back to the excellent Apple/Amazon/Funnel article, we get this gem –

  • Apple can happily ‘just about break even’ on music downloads because of the way it helps sales of their high margin i-devices
  • Amazon can happily price the Kindle Fire so aggressively that it is priced more like an MP3 player (and expect to lose money for the near term at least) because of the volume of sales of content it expects / hopes it will drive

Notice the rather critical part –

… expect to lose money … because of the volume of sales of content it expects/hopes it will drive.

Hopes and Expectations don’t make a good bedrock for future profit. Especially when the Internet and the common people are busy driving the value of content to zero.

Amazon can’t let that happen (except perhaps in certain loss-leaders like music).

To Guarantee Profits, Amazon has to Build a Very Closed Ecosystem

If people start buying Kindle Fires and Kindles and buying/getting content elsewhere, Amazon will never make a profit.

This forces Amazon to do some interesting things –

  1. Amazon has to lock users into its ecosystem. That’s why we have no ePub support. That’s why there is unlimited Cloud Storage for Amazon content but just 8 GB storage on the Kindle Fire. That’s why Kindle Fire doesn’t have an SD Card slot. That’s why Amazon has to build a custom version of Android and its own Android App Store.
  2. Amazon has to figure out how to make money from content. Amazon has to ensure it makes money from content because it’s selling Kindles and Kindle Fires at a loss. It’s a painfully amusing situation – content owners themselves can’t make profits from their content and yet Amazon is expected to make a profit from its 30% cut.
  3. Amazon has to figure out how to sell more and more things to users. Since there is no guarantee that selling content will make up for subsidized Kindles, Amazon has to sell people everything it can (including kitchen sinks and designer shoes).

Amazon wants to become ‘The One Shopping Destination’. However, it is taking such big risks to achieve this that it is putting itself into a position where it MUST become The One Shopping Destination.

A closed ecosystem is one way to try to guarantee things don’t go to Hell. Amazon is, perhaps to a larger degree than it realizes, trapping itself into this ‘Closed Ecosystem’ requirement. It’s already at a stage where it needs the Closed Ecosystem just to make a profit.

What if the Profits from Content don’t materialize?

Amazon has been delaying gratification and growing bigger and reinvesting into growth. There are a few possibilities:

  1. It doesn’t want gratification. It’s OK with forever delaying gratification. In that case all bets are off.
  2. It expects that all this delaying will lead to amazing gratification at a future point of time.
  3. It expects gratification at a slow but steady pace for many, many decades.

If Amazon is trading instant gratification for constant gratification over a long period of time, or even if it is trading instant gratification for huge gratification at a future point of time, it needs to find a way to profit from existing customers.

Every customer getting a subsidized Kindle or Kindle Fire has a ‘Delayed Gratification Tax’ attached to her. What happens if the Content Strategy fails? What if all these customers turn around and say – We never signed up for the ‘Delayed Gratification Tax’.

The funny thing about us (as humans and as customers) is that you can almost guarantee that all of us will forget we got a subsidized $199 Kindle Fire  as soon as we get it. As soon as Kindle Fire is in our hands we will simply want content for free or for ridiculously cheap prices (perhaps not all of us, but enough of us to make profiting from content sales rather difficult).

Update: Thanks to gous for a wonderful comment. First, this gem –

What strikes me is how vulnerable to disruption the digital content side of Amazon looks. The Google that created Android would scent blood and attack by attempting to drive the selling price of that content to zero so as to sell ads. Whether that Google still exists is another story.

And then this great link: Musings by Michael Mace on Amazon and Apple.

Gous’ comment above really is what I meant to point out and didn’t do a good job of.

Amazon must either make the Content Strategy work or a Metamorphosis will happen

We don’t know what the metamorphosis will be.

We do know that if all this ‘Delaying Gratification’ and ‘Taking a Hit on Kindle and Kindle Fire’ doesn’t get rewarded down the line, Amazon will be in some amount of trouble. Companies in Trouble do very interesting things.

If its Content Strategy works, Amazon will rule the retail world – to an extent that makes Wal-Mart seem trivial. If its Content Strategy doesn’t work, Amazon will be in a rather interesting conundrum.

We don’t know what the metamorphosis of Amazon will be (in case its Content Strategy doesn’t work) but we do know what might be the facilitator.

The Metamorphosis of Kindle and the Metamorphosis it will facilitate

Kindle and Kindle Fire play a very critical part in Amazon’s Content Strategy, and they will play an even more critical part if the Content Strategy fails.

Consider another section from Mr. Jeff Bezos’ letter:

 We are building premium products and offering them at non-premium prices.

Again, we’ll take some liberties (we aren’t good at denying gratification), and restate it as –

We are building premium mini-Amazon stores and making them very compelling by offering them at non-premium prices.

The Kindle and the Kindle Fire are not exactly devices –

  1. They are mini Amazon.com tributaries. It’s the perfect analogy – tens of millions of little tributaries joining into the great Amazon.com river and turning it into something vast beyond comprehension. What happens when there are 27 million Kindle device owners and they all are gifted Amazon Prime and do 80% of their purchasing from Amazon.com? What happens when the number grows to $100 million?
  2. They are a direct channel from customers to Amazon. A channel where Amazon doesn’t have to pay Google for traffic or CBS for advertising slots.
  3. They are an emotional and physical connection between Amazon and Customers. We only have to look at devotees of the various tech religions (Android, Apple, etc.) to see how powerful this could be.
  4. They are behaviour capturing devices. We don’t mean ‘in an evil way’ – just in a ‘what does she buy, what does he wish for, what do they covet’ sort of way.
  5. They are a defence against competitors.

We are way beyond the stage where Kindles were eReaders. The Kindle has metamorphosed into an Amazon.com tributary.

Ask any shopkeeper what he would give to have mini-stores in customers’ hands. Ask grocery stores why they hand out those points cards and membership cards. Ask any marketer what she would give to get a full history of customers’ purchases and customers’ explicit and implicit wish lists.

All of that is dwarfed by what the Kindle and the Kindle Fire promise to deliver to Amazon.

In the end it will come down to Kindles and Kindle Fires

Pick whichever path you like – Each ends with there being a hundred million Amazon.com tributaries in people’s hands.

If Amazon’s Content Strategy works then each is a steady source of profit for Amazon. And that’s just from the content.

If Amazon’s Content Strategy fails it might still be able to profit by ramping up the mini Amazon store aspect.

If everything else fails, Amazon still has a hundred million direct channels to customers. Companies are willing to pay for Search Ads and even for Ads on sites where people have zero intent to buy anything. What would companies be willing to pay for a channel where customers’ main intent is to buy?

We haven’t considered all the aspects and all the possibilities. Once you have Kindles in enough users’ hands there are a lot of different things that can be tried.

Amazon, if it is forced to metamorphose, will almost certainly base the transformation on the hundred million Kindles and Kindle Fires it will have in circulation. At its core, Kindle is a hedge of a spectacular kind – it plays an absolutely vital role no matter what happens. It’s gold and stocks at the same time. It’s emerging markets and developed markets in parallel. It’s the Schroedinger’s Cat of retail.

If Amazon’s gambles pay off, Kindle and Kindle Fire will be the channels delivering consistent and comforting gratification to Amazon. If Amazon’s gambles fail, they will morph into devices of resurrection.

That letter from Mr. CEO is genius. Perhaps explaining exactly why Amazon is in the second camp would be overkill. However, it would certainly be interesting to hear more on exactly why Amazon is working hard to charge customers less and why/how it is able to sell premium products at non-premium prices.

Kindle 4 Review (Kindle 4 Review, Photos)

Having played with the Kindle 4 it’s time to write a proper review. This Kindle 4 Review will cover – Review Assumptions, A Detailed Kindle 4 Review, Kindle 4 Photos, Upgrade Recommendations (if you have Kindle 3 or Kindle 2).

For the Kindle 4 Photos (including Kindle 4 vs Kindle 3 Comparison Photos) please jump to the second half of the post.

Kindle 4 Review – Assumptions

This is a review of the Kindle 4. Review = Helping someone decide whether or not to buy it.

It’s not for you if you’ve already bought a Kindle 4 or have already decided to buy a Kindle 4. You will probably not like the fact that we point out a somewhat long list of mostly minor negatives.

We’ll start off with three assumptions –

  1. We are looking at whether Kindle 4 is a great eReader. The most important criteria being – ability to find and buy books easily, the reading experience, the value for money. Some other important criteria – battery life, ease of use, portability, the actual price, reading related features, resale value.
  2. We value ‘value for money’ over raw price. This Kindle 4 Review will focus on answering two questions – Is Kindle 4 good value for money? Is it the best value for money (especially since Kindle Touch and Kindle 3 are just $20 more)?
  3. We are in a very competitive environment and Kindle 4 co-exists with other options. Thanks to the Kindle vs Nook vs Kobo battle and the various Kindles on offer – we get to choose the very best option.

On with the Kindle 4 Review.

Detailed Kindle 4 Review – The 5 Best Things

  1. The very low $79 price. If your primary criteria is to buy the cheapest eReader possible – then Kindle 4 is the clear winner.
  2. Very good Value for Money. This also shows up on Top 5 Negatives list because it offers lower value for money than Kindle 3 and Kindle Touch. However, at $79 Kindle 4 is incredible value for money.
  3. Kindle Store and Kindle Infrastructure. You get a connection to the best eBook Store and get Amazon’s amazing infrastructure to support you.
  4. Great Reading Experience if you ignore the things that are at the periphery. The eInk Pearl screen makes for a great reading experience.
  5. Very light and compact. It’s just 6 ounces and it’s 18% smaller in size than Kindle 3.

Basically, if you look at the most important qualities an eReader should have i.e. easy to find and get books, good reading experience, value for money – Kindle 4 does very well on all three. The problems start when we look at the other qualities an eReader should have (the ones that aren’t deal breakers but will still have an impact on the overall experience).

In a nutshell – Kindle 4 is a good eReader but misses out on being a great eReader.

Kindle 4 Review – The 5 Worst Things

  1. The decision to have neither a touchscreen nor a keyboard is a big mistake. It makes everything awkward and/or adds additional steps everywhere – bookmarking pages, changing font settings, highlighting, entering a website address, doing a search, note-taking (more on that later), etc. There are lots and lots of things that are slower and/or painful on Kindle 4.
  2. Kindle 4 is far less value for money than a Kindle Touch or Kindle 3. My estimate would be – Kindle 4 is worth around $100 in value, Kindle Touch is worth around $160 to $180, Kindle 3 is worth around $160 to $170. It might be $20 cheaper than the other two options – However, it provides less bang for the buck.
  3. If you like taking notes then Kindle 4 is pretty much out of the question.
  4. Kindle 4 doesn’t have speakers so text to speech is impossible and you can’t play music on it.
  5. 50% less battery life than other Kindles and 50% less memory (actually 60% less than Kindle 3).

If this is your first Kindle then some of these things are things you’ll never realize – so it’s not as bad as it sounds.

In a nutshell – If the extra $20 is not an issue, then Kindle 4 just isn’t very compelling when compared with Kindle Touch and Kindle 3.

Kindle 4 Review – Core Reading Experience

Kindle 4 shines here. The eInk Pearl screen is the same as the Kindle 3’s and it’s great for reading. The background is now whiter and there is a black border around the screen that helps bring out the contrast better.

The screen is flashed only on every 6th page turn which makes page turns faster and less annoying (if the flash bothers you).

It’s easy to get books and you still have 60 second downloads.

One slight negative here is that the page turn buttons are now even smaller and harder to get to. Of course, this is a very personal thing and people’s opinions will vary wildly.

Overall, the Core Reading Experience is superb.

Kindle 4 Review – Things that prop up the Reading Experience

This is where the Kindle 4 runs into trouble.

Making a bookmark, adding a highlight, adding a note, changing the font, doing a search – everything is now slower or takes more steps. If you like making highlights and taking notes then Kindle 4 is ruled out.

Adding a highlight now involves – Pressing down on the 5-way, getting a menu and choosing ‘Start Highlight’ (usually the first option), moving the cursor, pressing 5-way again, getting a menu and choosing ‘End Highlight’ (always the first option).

It also involves two screen flashes.

If you’ve owned a Kindle 3 it might be rather annoying – especially when everything else also involves extra steps. If you’ve never owned a Kindle – then there’s no frame of reference and you might not mind it.

In Summary – Things that support the reading experience are now neither smooth nor intuitive. It takes away from the great core reading experience and turns the Kindle 4 from a great eReader to a merely good one. It’s still an absolute steal at $79.

Kindle 4 Review – Looking at the Product Page

Here are a few things worth discussing –

  1. The lightness and compactness are indeed very impressive. If possible, visit a Staples and check it out in person.
  2. The memory capacity is quite enough if you plan on reading just books from Amazon. If you plan on adding PDFs etc. then 1.2 GB of available memory might not be enough. Also, there is no SD Card so you can’t expand.
  3. eInk Pearl Screen – It was beautiful on the Kindle 3 and it’s slightly improved here (Not enough to warrant an upgrade).
  4. Kindle Library Book Support – Amazing Feature. Finally coming for all Kindles and Kindle 4 benefits from this.
  5. Read in Sunlight. One of the big selling points of eInk (along with the fact that it’s much easier on the eyes for approximately 50% of people).
  6. Battery Life – 1 month is quite enough for most people. If you want more, get the Kindle 3 or Kindle Touch.
  7. Simple to Use – Yes. However, Amazon has made a mess of things like highlighting and note-taking.
  8. WiFi. This is a great feature to have. Browse the Internet, Shop in the Kindle Store, etc.
  9. Faster Page Turns. Yes, and the screen flashes only on every 6th page turn.
  10. PDF Support. The screen is too small for PDFs. You can put the PDF in landscape mode – However, the 6″ screen is just too small.
  11. Kindle Store – An undeniable advantage. The widest range of new ebooks and the best prices.
  12. Access to Public Domain books – Available on all eReaders.
  13. Whispersync and Kindle Reading Apps – a Definite plus. You can start reading on Kindle 4 and finish on your Android Phone or iPad.

Kindle 4 is a very solid eReader. It’s not a very big leap from Kindle 3. More like a Kindle 3.25 rather than a Kindle 4. However, at $79, it’s certainly worth considering.

Kindle 4 – Should you Upgrade?

Short Version

  1. Kindle 2 – Please look at Kindle Touch and Kindle 3 first.
  2. Kindle 3 – No. All you gain is a marginally better screen (and perhaps one or two other things). You give up a lot.
  3. Kindle 1 – Look at Kindle Touch and Kindle 3 first. The move from Kindle 1’s sturdy size and largish keyboard to Kindle 4 might be too much of jump.

Longer Version

With every new device there are some changes people love and there are some changes people don’t really care for. However, Kindle 4 is different in that Kindle 4 doesn’t seem like it’s meant for the people who bought Kindles and Kindle 2s and Kindle 3s.

It’s perhaps meant for people who want a really cheap reading device. Amazon has done a great job for them – $79 is a stunning price.

It is unlikely that Kindle 4 will satisfy existing Kindle owners. While Kindle 4 doesn’t compromise on the core reading experience (it’s superb), it compromises on so many of the supporting elements (note-taking, searching, highlighting, etc.) that it just isn’t worth an upgrade. Kindle 4 is a good, solid eReader and it’s not as good as Kindle 3.

That brings us to our Kindle 4 Photos.

Kindle 4 Review – Kindle 4 Photos

All the photos are after the jump i.e. Click on the read more link.

Continue reading Kindle 4 Review (Kindle 4 Review, Photos)

Kindle Review Email Subscriptions

The underlying platform made some changes to the Email Format and it’s causing some problems for some of us.

Here are the options:

Standard WordPress Subscriptions

The best option if the new email format is working for you: Use the Email Subscription option that comes with WordPress.

Kindle Review WordPress Email Subscription (Click on the button that says ‘Free Email Updates’).

If that link doesn’t take you to the button – There is a link to the right of any of the pages at the blog that says: Email Updates. And there is a ‘Free Email Updates’ button.

You can choose whether you want ‘instant’ emails or daily or weekly.

If emails are not working for you

You can either wait until WordPress fixes the Email Errors (which depends on them, not on me – so no ETA). Or you can switch to one of the below options.

New Subscription Options

I’ve added two new options. Please be patient as I’m new at this. Just send me an email at booksummit at ymail dot com or leave a comment if it doesn’t work for you.

Option 1: Kindle Review Free Book Emails.

Get Instant Emails whenever there is a post about New $0 Books. You can enter your email at this page and it will subscribe you. You will have to confirm the email subscription. Then you can unsubscribe from WordPress.

The Format etc. are under work so leave a comment if something doesn’t work for you.

Option 2: Kindle Review All Post Emails.

Get Instant Emails whenever there is any new post (includes Free Book Posts). Again, you enter your email and it will subscribe you. You will have to confirm and after that you can end your WordPress subscription.

Currently, there is no option for Daily or Weekly Posts (as opposed to one email per post).