Kindles, eReaders & ‘Everyone is (should be) like me’ bias

Posted on June 19, 2013 by switch11

There’s a very interesting bias amongst people who don’t read much, and perhaps even among people who read a lot -

The ‘Everyone else is (should be) like me’ bias.

This is a fundamental misattribution error – where you misattribute your own personal perspective/world view to EVERYONE else. Sometimes it’s worse – You realize other people aren’t like you, but you ASSUME that they are wrong and they should be like you.

Everyone is (should be) like me

Let’s look at some examples of this -

  1. I don’t read. That must mean that Everyone doesn’t read. The ex-CEO of Apple and the current CEO of Google are two examples of this. No one reads any more – By the way, we have 100 million people who are iBooks customers.
  2. I only read on LCD screens. That must mean Everyone should read on LCD screens.
  3. I think a Tablet is better than eReaders because a Tablet can do more than read. That must mean people who buy a device dedicated for reading don’t know what they are doing.
  4. I think eReaders should be $50 ($100? Free?) because reading isn’t important. I, personally, don’t think reading is important. So, a device that can’t be used for anything other than reading should be $50. Wait a minute while I fill up gas in my $23,000 car, wearing my $125 shoes and my $177 sunglasses. What were we talking about? Oh yes, there’s no way an eReader can be worth more than $50.
  5. I like Apple/Google because aesthetics/openness are so important and because Steve Jobs/Do No Evil is my hero. You are so evil and wrong because you think Google/Apple is better.
  6. I like Amazon/B&N because customer service/real people customer service is so important. You should like Amazon/B&N too because your reasons are meaningless compared to my marvellous reasons.
  7. I detest DRM because it violates my personal rights and it’s evil. eBooks are never going to take off with DRM because everyone in this world is like me.
  8. I love Amazon because it has great customer service/largest range of books/cheapest book prices. Everyone else values these exact same things. I don’t understand why anyone else would like an iPad or a Nook or a Sony eReader – so what if they are much better made hardware?
  9. I think Amazon needs to go to ePub because interoperability is paramount. Without going to ePub Kindle will be dead in 2 years. Is it 2 years already? I meant 4 years. Kindle will be dead in another 2 years.
  10. I read a lot on my iPad. 5 books a month. That must mean each of the 151 million iPad owners must also read 5 books a month. Which, in turn, must mean that ebooks are 279% of total book sales and Apple devices account for 587% of ebook sales. What is that you say? That’s more than 100%. Don’t try to overwhelm me with figures and statistics. I’m experiencing the higher plane of existence that animated page turns and reading on LCD screens in bright sunlight affords me.
  11. I think that people who bought a device dedicated for reading read less than people who bought a tablet that you can also read on. I’m basing this on my sample size of one. All those people should get Tablets instead. They could play Candy Crush Saga when they get tired of all the long words in books.

The crux is that you could take any viewpoint you believe strongly in, or any behavior characteristic, and delude yourself into thinking one of the following -

  1. Everyone else is the same as me. Everyone else will do the same things I will.
  2. Everyone else should believe/do what I do. Because I’m right and they are wrong.

This is very interesting. Why? Because our existence revolves around what we see and perceive and believe. It revolves around how we interpret the world.

That makes it really difficult, at first, to switch perspectives and try to see things from someone else’s perspective. Until you start doing it. Then it’s exceedingly easy. Because we have an unlimited capacity to IMAGINE another perspective or belief system and understand why other people think differently from us and do different things.

Guess what helps your imagination – Reading Books. So, and this is quite funny, people who don’t read books will have a harder time understanding other people’s perspectives. Which might explain why the thought of a dedicated reading device frustrates them so.

Kindle will be lucky to sell 40,000 units lifetime

That’s what one journalist wrote about the Kindle. To put that in perspective – a person whose livelihood revolves around people reading what he has written, thought Kindle would be a failure. People just don’t read anymore – except news, websites, books, magazines, newspapers, textbooks, signs, etc.

Here’s the amusing thing. Now we have 10 million eReaders sold every year. However, those journalists still can’t wrap their heads around the concept that people would want a device dedicated to reading.

They feel as if there was some tear in the time-space continuum and eReaders miraculously took off. That now the tear is mended and things will go back to how they should be. People who love to read will do their reading on a device optimized for movies and games.

People who don’t believe in eReaders, who think that it makes no sense to have a device dedicated to reading for people who love to read, now fight very strongly for certain things that will help validate their world-view -

  1. eReaders will soon die out.
  2. People who read once a year on their Tablets are more important than people who read once a day on their eReaders.
  3. Reading on a Tablet is better than reading on an eReader.
  4. Reading isn’t worth a dedicated device.
  5. Reading isn’t cool.

Notice how all of this isn’t about what is actually happening with readers and eReaders. It’s just people who don’t value reading trying to make sense of something they can’t understand.

It would be much simpler for them to simply realize that -

  1. Just like twittering and reading news articles and watching movies and playing little casual games is very important and meaningful to them.
  2. Reading is very important and meaningful to people who love to read.

That people who are buying devices dedicated to reading are no different from anyone who buys things that give them pleasure and are built/optimized for them. It’s the exact same thing.

Why does Reading make so many people defensive?

My assumption (and it is an assumption) is that Reading is something that worries a lot of people.

  1. It worries advertisers because people who read become smarter.
  2. It worries companies because then they can’t just show a pretty girl next to a car and make the car more attractive.
  3. It worries people who don’t read. At some deep level, they understand that watching After Earth and Transformers isn’t going to confer as much of a benefit as reading books and exercising your imagination will.
  4. It worries pretty much everyone who has been trained to hate reading by being forced to read things they didn’t want to read in school.
  5. It worries everyone who got taught that if they can’t ‘study’ books then they get pain (bad grades).

A large part of the population is brought up to detest books because books get associated with forced education of questionable value.

A large part of the corporate and advertising machine detests books because it makes people very, very hard to ‘influence’ via advertising.

Devices that cater to readers. Devices that result in people reading more. Devices that get more and more people to start reading. Devices that let people read, who were locked out of reading earlier.

They are a nightmare for everyone who detests books and reading and people exercising their imaginations.

People are hating eReaders even with $69 eReaders – So the problem isn’t the price of eReaders

When Kindle was $399 and people questioned the value, there was an implicit assumption that at $199 or $149 or $99 we would reach a ‘logical’ place. Where both readers and non-readers could agree that eReaders were a good thing.

Why hasn’t it happened?

Why do we have people, who are buying $199 and $499 Tablets, refusing to acknowledge that eReaders, even $69 ones, have their own unique value and benefits.

Perhaps the problem never was the price. Perhaps the problem was the perception that reading is worth a dedicated device.

If that is the case, then the problem lies entirely with people who don’t read books and/or don’t read much. For them, reading isn’t worth much. For them, a dedicated reading device doesn’t make sense. They are projecting that on to people who read. That leads to this whole ‘Everyone should be like me and read only on Tablets that aren’t optimized for reading’ circus.

I think over time, all these people who find Tablets so much better for reading books than eReaders, will read more and more books on their Tablets and develop a more mature perspective of things. Then they’ll see the value of a device dedicated to reading, just as we readers see the value of Tablets optimized for meaningless entertainment.

Filed under: evolution | Tagged: , , , | 2 Comments »

Kindle Family – All Kindles So Far

Posted on April 28, 2013 by switch11

Let’s paint a picture of what the Kindle Family looks like, and what it might look like by end of 2013.

Kindle Family As It Currently Stands

Right now, as of April 28th (2013), we have -

The eInk Kindles

  1. Kindle 1. The original Kindle. The Kindle that started it all. Can you believe it came in at $399. The tech media were having a field day – claiming it would sell only 40,000 units. That no one reads. And other such nonsense.
  2. Kindle 2. The second Kindle. This did a good job but not a great one. It was more of a Kindle 1.5 than a Kindle 2.
  3. Kindle 3. This was a major step forward. Perhaps the best eInk Kindle made so far. This was also the last Kindle with a physical keyboard (Amazon now refers to it as the ‘Kindle Keyboard’). It is, in my opinion, by far the best eInk Kindle made.
  4. Kindle WiFi. Not exactly Kindle 4. More like a Kindle Economy Edition with neither a keyboard nor a touchscreen.
  5. Kindle 4 (Touch Kindle). This was not really an improvement over the Kindle 3. However, the addition of Touch makes it the ‘next Kindle’ after Kindle 3 – hence Kindle 4.
  6. Kindle 5 (Kindle Paperwhite). This, again, wasn’t really much of an improvement over the Kindle 3, apart from the light. The addition of the lighted screen makes it the ‘next Kindle’ after Kindle 4 – hence Kindle 5.

The Kindle Fire Tablets

  1. Kindle Fire. The first Kindle Fire. It was rushed to market to prevent B&N’s Nook Color and Nook Tablet from eating up the market. A solid success. Amazon now wants to refer to this as ‘Kindle Fire Original Edition’ (Because calling it Kindle Fire 1 would be too straightforward).
  2. Kindle Fire. This is the newer version of the Kindle Fire. This was improved over the first Kindle Fire, but not by much. It’s such a slight improvement that perhaps we should just call it Kindle Fire 1.1.
  3. Kindle Fire HD. This is the real Kindle Fire 2. It adds an HD screen, great speakers, and several other improvements. An actual solid successor to the Kindle Fire, and worthy of being called ‘Kindle Fire 2′.
  4. Kindle Fire HD 8.9“. This should have been called the Kindle Fire Max or Kindle Fire X (something simple). I consider this an entirely separate device (since it’s a 9″ Tablet). We’ll disregard the various variants i.e. Kindle Fire X with LTE or without LTE – it’s all just one line of 9″ Kindle Fires.

Where does that leave us?

With 6 Kindles and 4 Kindle Fires in all.

With 2 lines of eInk Kindles – the Kindle line and the Kindle WiFi (Kindle Economy Edition) line.

With 2 lines of Kindle Fires – the Kindle Fire line and the Kindle Fire X (9″ screen) line.

The newest devices in each line are -

  1. Kindle 5 (Kindle Paperwhite) is the newest eInk Kindle.
  2. Kindle WiFi (Kindle Economy Edition) is the newest economy eInk Kindle.
  3. Kindle Fire 2 (Kindle Fire HD) is the newest Kindle Fire.
  4. Kindle Fire X (Kindle Fire HD 8.9″) is the newest 9″ Kindle Fire.

Is there really a need for each of these 4 Kindle lines?

The need for the 7″ Kindle Fire line and the main eInk Kindle line is very well established. One is Amazon’s main Tablet and one is Amazon’s main eReader.

Given how frequently Amazon is cutting the prices of the Kindle Fire X (HD 8.9″), it’s quite possible it might be discontinued. There is a market for 9″ and 10″ Tablets – However, it seems to be shrinking as people go for the lower priced, more convenient 7″ and 8″ Tablets.

Amazon needs a new Kindle Fire X (X2?) to compete against the iPad. However, the market for iPad and 10″ Tablets is shrinking so it might just be better for Amazon to concentrate on its main 7″ Kindle Fire line.

Kindle WiFi (Kindle Economy Edition) is needed for people who want a super-cheap eInk Reading device. Amazon might consider simplifying and going with just one Kindle line – However, that would lead to a lot of lost sales. Casual Readers don’t want to pay more than $50 to $100 for a dedicated eInk eReader. Amazon needs something for them.

So we may see the end of the 9″ Kindle Fire Tablet, but the other three lines of Kindles should be around for a while.

Kindle Family with a Simpler Naming Scheme

The current naming scheme for Kindles is a bit complicated – better suited for algorithms.

Here are the names Amazon has for its currently selling eInk Kindles and Kindle Fires. Next to each is my suggested ‘simple’ name.

  1. Kindle Keyboard 3G, Free 3G + WiFi, 6″ eInk Display. That’s ridiculous. Better Name: Kindle 3.
  2. Kindle (for the Kindle WiFi). This is a good choice. Very sweet and simple.
  3. Kindle Paperwhite. Better Name: Kindle 5.
  4. Kindle Paperwhite 3G. There’s no need to have this separately.
  5. *****
  6. Kindle Fire Tablet. Better Name: Fire. Just Fire or Kindle Fire is good.
  7. Kindle Fire HD Tablet. This is a decent name, actually. HD is easy to understand. Better Name: Kindle Fire 2.
  8. Kindle Fire HD 8.9″ Tablet. Better Name: Kindle Fire X.
  9. Kindle Fire HD 8.9″ 4G LTE Wireless Tablet. There’s no need to have this separately. LTE is an optional add-on.

Amazon needs to focus on easy to remember, simple names that make sense. Choosing ‘Kindle’ for the Kindle WiFi is a good step. Amazon should consider doing similar easy names for all other Kindles. For Example: Kindle Fire HD 8.9″ is really awkward. Who on Earth puts 8.9″ as part of their name?

Kindle Family 2013 Likely Additions

Let’s go with our own simple names (Amazon is probably going to name its phone – Kindle Phone 3G with Voice Calls and Voice Mail and Almost as Good as iPhone for Half the Price).

Firstly, as Larry mentioned in the comments for an earlier post, Amazon should use the Amazon brand whenever possible and not the Kindle brand. Yes, people at Amazon are all emotionally attached to ‘Kindle’, plus all devices are made by Lab 126 (which also made Kindle). However, people understand and love ‘Amazon’. Just like Apple didn’t name its tablet the iPod iPad, let’s not name the Amazon Phone the Kindle Phone. It just causes confusion and kills the opportunity to ride on the trusted Amazon brand.

Here are the likely additions to the Kindle Family in the rest of 2013 (with suggested names suited for use by human beings) -

  1. Kindle Phone Medium Range – Amazon Phone. Or something even shorter like APhone or UPhone.
  2. Kindle Phone High End – Amazon Phone Premium or Amazon Phone+. Or perhaps just keep the name the same. Just have it as a variant of the APhone.
  3. Kindle TV – Amazon TV. This is short and sweet and makes sense.
  4. Kindle TV with Special Features etc. – Amazon TV X or Amazon TV Plus or Amazon TV+.
  5. New eInk Kindle with HD screen - Kindle 6 or Kindle HD. That’s it. No ‘Kindle Brighter Shade of PaperWhite’ or any of that nonsense.
  6. I think there’ll be two Kindles released. For the Economy Model it’s best to just name it Kindle (the current name) or Kindle Mini and stick with that.
  7. New Kindle Fires – Kindle Fire 3 (or Fire 3) and Kindle Fire X2 (or Fire X2). I’m assuming Amazon will continue with a large screen Kindle Fire.

It’s quite possible that Amazon makes a royal hash of things and introduces 4-6 different phone models. In case it does, it should try and keep things simple and have just 1 or 2 phone names (APhone and APhone+) and have variants.

For Kindle TV (Amazon TV), it’s hard to mess things up. However, let’s hope Amazon sticks with a name that’s easy to remember and also serves as good solid branding.

Kindle Family at the end of 2013

At the end of 2013 we’ll probably have -

2 Lines of eInk Kindles (with one holdover)

  1. Kindle 6 – the newest eInk Kindle. The successor of the Kindle Paperwhite. Very conveniently it’ll be a 6″ screen too.
  2. Kindle WiFi – Perhaps even cheaper at $49. The name will probably just be ‘Kindle’.
  3. Kindle Keyboard (a holdover). Since Amazon hasn’t made a better Kindle, and since keyboards are critical for some readers, I don’t see this being discontinued.

3 Lines of Kindle Fires

  1. Kindle Fire - A newer version of the lower range Kindle Fire.
  2. Kindle Fire 3 – The successor of the Kindle Fire HD.
  3. Kindle Fire X2 – The successor of the Kindle Fire HD 8.9″. This isn’t guaranteed, just likely.

2 Lines of Kindle Phones

  1. Amazon Phone (APhone? UPhone?). The lower end Kindle Phone.
  2. Amazon Phone Plus (APhone+? UPhone+?). The higher end Kindle Phone.

2 Lines of Kindle TV

  1. Amazon TV. The $50 Kindle TV set-top box.
  2. Amazon TV+. The $50 Kindle TV+ set-top box with a subscription and special options. This might be the same hardware as Amazon TV or it might be completely different hardware with DVR capabilities and live TV.

Other Products?

It’s not very likely, yet entirely possible, that Amazon releases other Kindle hardware. Will have to think more about what Amazon might have in the works. An innovative color screen device (either Tablet with color eInk screen or eReader with color eInk) is quite possible. Amazon did buy Liquavista from Phillips Netherlands.

For now, it seems the Kindle Family at the end of 2013 will consist of Kindles, Kindle Fires, Kindle Phones, and Kindle TV.

Filed under: evolution, kindle | Tagged: , , | 7 Comments »

Is this an Amazon Tipping Point?

Posted on April 23, 2013 by switch11

Are we witnessing a massive Amazon Tipping Point? Is Amazon changing subtly but importantly as a company? Is it restructuring its DNA and raison d’être?

Well, let’s consider recent events -

  1. The rates increase for Amazon sellers that has a lot of Amazon 3rd party sellers up in arms. The rates went up from 7% to 12% which is a 70%+ increase in 3rd party seller fees.
  2. The decision to end associate commissions to sites that have gotten ‘too good’ at promoting Kindle Free Books. Want associate income from Amazon? That means you have to stop mentioning free books which Amazon loses money on (3G costs) and have to instead mention deals.
  3. The reluctance to fight the eBook Wars on price. Where are the big price drops after the end of the Agency Model?
  4. The handicapping of lower priced books. Basically, a shift from ‘We are the Future of Publishing’ to ‘We are the New Gatekeepers of Publishing. Just like the Old Gatekeepers of Publishing’.
  5. Amazon’s shift to In-App Purchases in its Android Store and its own Amazon currency in the Kindle Fire App Store. Interesting that a company that was totally focused on using ‘Free App of the Day’ to add customers is now shifting to selling ‘gold coins’ that can be used as ‘virtual currency’ to buy ‘virtual goods’. So many levels of abstraction that Zynga is clapping.
  6. Amazon signing a contract with the CIA where, instead of providing cloud services, it will provide in-house services. Basically, Amazon is morphing into an Enterprise Software Company for the CIA.
  7. Amazon’s inordinate focus on Prime and ‘profitable’ Prime customers. Has there been any other time in Amazon’s history when it focused on ‘profitable customers’ and not just ‘more customers’?

These (and other similar signs) signal some very big shifts -

  1. Amazon, at some level, is shifting from ‘gratification in the future’ to ‘profits now’.
  2. Amazon, at a very deep level, feels it has reached ‘untouchable’ status in lots of markets. Amazon’s algorithm and data analyzing PhDs are telling it – You’re home safe. There’s no other viable option. We’re past the ‘Amazon is King’ Inflection point. Now it’s time for new Inflection Points – Amazon as Profitable Company, Amazon as Benevolent Dictator.
  3. Amazon is realizing that it has to start making good on all the promises of HUGE Profits at some distant point of time in the future. That it can’t keep delaying gratification FOREVER.
  4. Amazon is perhaps realizing that the economy might go into a prolonged state of nothingness. That it has to shore up its defences so that it can survive. That for survival it needs more than $676 million a year in operating income.
  5. Amazon is, even though it doth protest much to the contrary, bowing down to Wall Street and its demands. Because Wall Street can really hurt Amazon if it decides Amazon isn’t playing along.

Let’s look at a few things.

  • Why is Amazon restructuring its DNA (or trying to) and shifting to a Profits Focus?
  • What happens if Amazon succeeds?
  • What happens if Amazon doesn’t succeed?
  • Can Amazon change customers focused on free and cheap to profitable customers?
  • What are the factors outside Amazon’s control?

First, the restructuring.

Why is Amazon restructuring its DNA and shifting to a Profits Focus?

Amazon was founded in July 1994 and it went online as Amazon.com in 1995. Today is April 23rd, 2013.

In 2012 Amazon had a whopping $61.09 billion in revenue and a surprisingly low $676 million in operating income. It even had a net loss of $39 million.

To put that in context, out of the Big 4 Tech companies (Apple, Microsoft, Google, Amazon), Amazon is the only company that isn’t raking in billions of dollars in profits every month. Apple, Microsoft, and Google are making roughly $3 billion a month, $2 billion a month, and $1 billion a month in profits.

Amazon is making nothing in profits. All it has are businesses that have HUGE potential and MIGHT be HUGELY profitable at some distant point of time in the future.

This is a problem for two reasons -

  1. Firstly, if there is another big crash or a prolonged depression, then Amazon will be in a lot of trouble. $676 million operating income on $61.09 billion revenue is a stunning 1.1% profit margin. That leaves absolutely zero room for error (or, for that matter, for sales tax impact).
  2. Secondly, it means Amazon keeps getting left further and further behind as Microsoft and Apple (especially these two) and Google keep adding to their Total Assets and their Profit Streams.

It’s one thing to invest in a big bet for the future. It’s something completely different to ONLY make big bets that will ONLY pay off in the far future. What happens if something goes wrong? What happens if your competitors and compatriots find businesses that are profitable NOW and also profitable in the FUTURE?

Fundamentally, someone at Amazon has realized that Profits aren’t a bad thing. It might seem trivial. It might be common sense. However, Amazon is so far-thinking that it tends to forget the present and near future. It’s nice that someone woke up and said – Hey, perhaps we can make billions NOW and also make Hundreds of Billions in 2059.

The other possibility is that Jeff Bezos woke up one morning and thought – My dreams of making a company that lasts for 10,000 years might get disrupted if we have another big crash and we don’t have enough margins or assets to survive. What if there’s a 5 year stretch of desolation? Wouldn’t it be nice to have $100 billion in the bank like Apple and Microsoft do? Wouldn’t it be nice to have profit streams of billions of dollars a month like Microsoft, Google and Apple do?

Whether you think of Amazon as a business that wants to make profits for shareholders (I promise I won’t laugh), or as a business that wants to live forever (a rather fruitless endeavour), shifting to a profits focus suddenly seems like a really, really good idea.

Remember: Profits = A Hedge against bad times.

What happens if Amazon succeeds?

Amazon has several businesses that can be shifted with some amount of effort to being very profitable -

  1. Kindle and Books.
  2. Kindle Fire and Apps and Movies.
  3. Electronics. I suspect this might already be quite profitable.
  4. Physical Media.
  5. Kitchen Sinks. You would not believe how much those custom fitted Italian Faucets cost.

Amazon also has several businesses that are probably already profitable and will keep becoming more profitable as Amazon scales them -

  1. AWS is the big one. This might end up becoming Amazon’s Star Cash Cow, unless other Cloud Companies (looking at you Azure) spoil the party.
  2. Luxury items like designer shoes and designer jeans and designer handbags.
  3. Amazon Wireless. While it is possible that Amazon is avoiding profits here, it’s hard to do. Even Amazon might be unable to avoid wireless data plan profits.

Finally, Amazon has new businesses it might be launching soon. These would provide additional opportunities to profit -

  1. Kindle Phone. This is going to be a big profit center if Amazon doesn’t get greedy about number of sales.
  2. Amazon Russia.
  3. Amazon expansion to other companies.
  4. Amazon Logistics Services and Intelligence to other companies.
  5. Amazon Ad Exchange and Advertising.
  6. Amazon NanoAnt Farming. Just checking if you’re paying attention.

So we see lots of businesses that Amazon has up its sleeve that will provide the ‘Profits Magic’ it seems to now be looking for. Add that to the ones that are already profitable and the ones that can be made profitable and we have quite a large portfolio of businesses.

If Amazon succeeds in making some of its existing businesses profitable and also adds some new profitable businesses, we’ll see something very interesting – A company that has never embraced profits ending up with 5 to 10 very profitable lines of business and perhaps even 2 to 4 BIG Cash Cows.

At that point Amazon will probably look for 5 to 10 additional big bets. It might even double down on some interesting bets like its own TVs, and its own TV Series, and its own movies, and its own cars and its Publishing imprints.

Perhaps most importantly, Amazon would suddenly be in a stronger position than any other technology company. Why? Because it would have all three of -

  1. Hundreds of Millions of Customers that are paying it money and are available for it to try lots of different experiments.
  2. 2 to 4 Big Cash Cows that are generating solid profits.
  3. 5 to 10 additional profitable lines of business that might one day become additional cash cows.

It could then collaborate with all the secret projects Amazon has a stake in (Space Travel, Reforesting the Amazon, Energy, etc.) and become a Samsung type chaebol/conglomerate. Except it would span the world and it would not run ads starring hipster baristas.

What happens if Amazon doesn’t succeed?

The first negative possibility is that Amazon just gets stuck in the ‘low profit, high revenue’ business state forever. Hard to beat because it’s willing to forfeit profits. Hard to like because it’s more of a charity than a business.

Note: Just because Amazon wants to change its DNA doesn’t mean it can. If all you have is a ‘We can take losses’ Hammer, then everything seems like a Zero Profit Nail.

The second negative possibility is that Amazon loses the ‘low profit, high revenue’ attitude but doesn’t quite get the grasp of the ‘high profit, high revenue’ model. Then it’d be stuck and might end up dead.

To be quite frank, neither of these is very likely. At least one and perhaps two or more of Amazon’s big bets are likely to pan out. That would mean it would have at least one highly profitable business and it’d be in a Google type position. One huge unassailable cash cow (well, seemingly unassailable) and trying to find more.

The most interesting thing with that scenario is that it might actually be worse for Amazon than its current state. In a strange sort of way, Amazon has the least worries of any of the Big 4 Technology companies. If Apple does something wrong and messes up iPhone, or if Microsoft does something wrong and messes up Windows, then those companies will suffer greatly.

If Amazon were to blow up Kindle. Well, that’d be $237 million a year in losses Amazon might never find again. I have this strange feeling Amazon would get over it, eventually.

Same for most of Amazon’s businesses. Amazon is FREE OF WORRIES because it doesn’t really have any cash cows to defend. If it were to go from this carefree state to a state like Google where 97% of its earnings and 100% of its profits were based on one Cash Cow (Search+Advertising), then Amazon might find itself fixated on protecting that one cash cow. Building moats instead of finding new billion dollar in profits a year businesses.

The most intriguing aspect of Amazon’s attempt to restructure its DNA and become a profit-attracting company is its customers.

Can Amazon change customers focused on free and cheap? Can it change them into profitable customers?

No, it can’t. However, there’s a very interesting solution as to what it can do with unprofitable customers.

It’s one thing to restructure your own DNA.

It is, however, almost impossible to change ‘cheap and free’ focused customers into ‘profitable’ customers. There will always be someone else willing to play the game of ‘We’ll make it up on Volume’. Cheap focused customers will choose that company instead.

Amazon is basically stuck with a large number of not-very-profitable customers and a somewhat small number of profitable customers.

The trick it can pull off, and it is very much trying to pull it off, is to turn these not-very-profitable customers into ‘products’ it can sell to advertisers.

So we get a mix of things -

  1. Attract new Profitable customers. This would be Prime and selling $499 LTE Kindle Fires.
  2. Filter out the existing Profitable customers. Sell more things to them.
  3. Turn the unprofitable customers into ‘end product’ for advertisers. Keep selling them things to keep them coming back.

So we get -

  1. Apple type customers and Microsoft type customers that Amazon sells things and services to. These are both existing and newly acquired. These are the profit streams.
  2. Google type customers and Facebook type customers that Amazon sells to advertisers, while also selling them some unprofitable or not-very-profitable things.

It’s a very difficult shift to pull off. However, you can see how Amazon is trying to do exactly this.

My guess is that, at some point of time in the next 3-4 years, one group of customers will win out and Amazon will focus mostly on those.

A lot of the shifts we are seeing i.e. focusing on recurring payments for apps (which is what IAP is, in a sense), taking a larger cut from 3rd party sellers, focusing on Prime customers - are all about filtering out unprofitable customers and attempting to influence customer behavior to make customers more profitable.

It’s a very drastic step. It’s very, very different from everything Amazon has done in the past.

What are the factors outside Amazon’s control?

Quite a few, actually.

  1. Changing a company’s DNA (or a person’s habits) is incredibly difficult.
  2. Changing unprofitable customers into profitable customers is almost impossible.
  3. Changing unprofitable customers into ‘products for Advertisers’ is also difficult.
  4. Amazon’s competitors specialize in Profits. Google specializes in profits from customers as product. Amazon doesn’t have any of this expertise.
  5. Amazon customers are habituated to ‘cheap’ and ‘deal’ and ‘great value for money’. How does Amazon shift to a profits focus without losing them?
  6. The Economy. All of Amazon’s efforts might be for nothing if the economy tanks. In fact, even if the economy stays as it is, Amazon’s grand plans are in danger.
  7. New companies that are quite happy with Amazon’s 1.1% profit margins. This is, in many ways, Amazon’s biggest weakness. As Amazon evolves into a profits focused company, it becomes very vulnerable to an attack by a new Amazon.
  8. WalMart.
  9. Microsoft and Google and Apple.
  10. The Internet.

Amazon is attempting the type of change we rarely ever see.

From a ‘volume is important, profit isn’t’ and ‘tomorrow is important, today isn’t’ type of company, to a ‘profits focused’ and ‘today focused’ company.

If you look at Apple and Microsoft and even Google – These are companies that have always stayed on the course they set out a long time ago, usually at their inception. Their values and DNA have been very, very similar to what they started out with. They might have entered new markets and they might have had ups and downs. However, the DNA was the same.

Amazon is transforming before us. It’s a $61 billion in revenues and $676 million in operating income company that cares more about 2059 than 2013. It’s transforming into something thrillingly different.

Whether or not it succeeds, and regardless of whether it ends up a $61 billion profits company or a disaster, it’s going to be a very interesting transformation. We are at the single biggest inflection point that Amazon has gone through. We might also be seeing the single biggest transformation this decade in a company’s DNA and raison d’être.

Filed under: evolution | Tagged: , , | 10 Comments »

Get Free Kindle Books at www.kebooks.com

Posted on February 26, 2013 by switch11

How to keep getting your Fix of Free Kindle Books and Deals?

If you get the list that says ‘From Kindle Review’ at the top, then you have to do nothing.

  1. If you get the email from WordPress, then you have to instead subscribe at www.kebooks.com if you like the WordPress Format. You can also subscribe to Free Kindle Books here so that future shifts (if any) are seamless.

If you visit the website – Then just visit www.kebooks.com instead.

If you are subscribed to the RSS feed – Then just subscribe to the RSS Feed for Kindle Free Books.

(more…)

Filed under: evolution, free books | 10 Comments »

Kindle Fire’s ‘Hardware, Software, Infrastructure/Ecosystem, 5 Main Uses’ Challenge

Posted on December 30, 2012 by switch11

Kindle Fire HD and Kindle Fire 2 seem to be putting Amazon into a strong #2 Tablet Position this holiday season. My totally uneducated and random guesses would be -

  1. 12 to 19 million iPad Minis sold. Not sure at all about iPads.
  2. 4 million to 7 million Kindle Fire HDs and Kindle Fires sold.
  3. 1 million to 2 million Nook HD and Nook HD+s sold. If B&N is coming right out and saying sales were bad then it’s not inconceivable they were really bad. Note: I suspect there were 1 million to 2 million Nook Colors and Tablets sold on top of this.
  4. 2 million to 3.5 million Nexus 7s sold.
  5. 2 million or so Galaxy Tabs sold.

Basically, there’s a very high chance that Amazon will have the #2 Tablet Spot for this Holiday Season.

The questions that come up are -

  1. Will Amazon be able to maintain the #2 Spot?
  2. What does Amazon need to do to challenge iPad for the #1 Spot?

My guess is that both questions will be answered by the exact same things. That Amazon doesn’t really have a shot at maintaing the #2 spot if it doesn’t make a HUGE challenge for the #1 spot. That, in fact, Amazon will either beat the iPad Mini and get the #1 spot OR it will languish in the #3 spot.

Let’s take a look at why.

Hardware, Software, Infrastructure/Ecosystem

Looking at it from the company perspective, there are three big things Amazon has to master and deliver -

  1. Excellent Hardware. Amazon is doing a good job here. However, it has a way to go before it can beat iPad Mini. It is also, unfortunately, a bit behind the Nook HD+ and HD.
  2. Excellent Software. Amazon’s weakness is software. It tends to make software that is very stunted. This might well be a strategy. Make things that you don’t want users doing (surfing the web, arranging shelves, email) inconvenient. Make things you want users doing (shopping, reading, watching movies) easy.
  3. Excellent Infrastructure and Ecosystem. Amazon has a big advantage here over everyone other than Apple (ecosystem, Apple is far ahead; infrastructure, Amazon is slightly ahead).

Whether or not Kindle Fire can beat iPad Mini depends on whether or not Amazon can beat Apple in 2 out of these 3 areas. Apple will be forced to go with lower prices (it already has with iPad Mini) and the price advantage can’t be a competitive differentiator.

That leaves just – Software, Hardware, Infrastructure+Ecosystem.

Amazon has the best shot at beating Apple on Infrastructure+Ecosystem. After that software. Hardware is the toughest because Amazon can’t even beat Nook HD and Nexus 7 on hardware right now.

The #2 Spot is by no means safe

If B&N can keep improving its infrastructure and ecosystem (which is good but not great). If B&N can fix its software issues (its tendency to release its alpha software as its V1). Then B&N can take the #2 spot from Amazon. Frankly, I really don’t see B&N fixing its software issues. It’s just too hard to change your mindset after already shipping 3 generations of your Tablet. If you’re addicted to the idea that your users are your beta testers then you can’t switch to an ‘Our V1 is actually a V3′ mentality.

Nexus 7 is far more dangerous. Its software is improving even though it is both aesthetically challenged and ‘real users are not PhDs’ challenged. The hardware is good. Its big advantage is that it offers a huge, mostly free app and services ecosystem. The downside is that such an ecosystem tends to attract customers who don’t want to pay for things (to be honest, Google is probably happiest with users willing to trade personal information and data for free services).

Samsung keeps failing. It might, however, eventually succeed and release a Tablet that is actually markedly better than other Android Tablets.

There are dark horses like Microsoft Surface (the Pro version, not the RT version) and Nokia’s rumored Tablet.

Fundamentally, if Amazon doesn’t win in at least 2 of 3 areas over Android and Windows 8 Tablets and Nook, then it runs the risk of losing the #2 Spot it seems to have comfortably taken possession of (this holiday season).

Before we look at what Amazon needs to do to get the #1 Spot in Tablets, let’s look at the User Perspective on Tablets.

5 Main Tablet Uses

Looking at it from the end user perspective, there are 5 Main Tablet Uses Amazon has to deliver on. Since different users are different we actually have 10 Main Tablet Uses we’ll look at -

  1. Reading.
  2. Movies.
  3. Music.
  4. Surfing the Web.
  5. Games.
  6. Apps that are not Games.
  7. Shopping.
  8. Email.
  9. Facebook.
  10. Feeling Good and In Control.

Shopping

I find it interesting that the first link on the Kindle Fire HD is now ‘Shop’ and it lets you shop – Books, Videos, Apps, Audiobooks, Music, Newsstand, Games, Amazon Prime.

By Kindle Fire 4 we’ll see that this includes EVERYTHING you can buy at Amazon.

This is an important use case because a Tablet is much more convenient to buy things on than a Phone and it’s much more portable than a PC. Showrooming is going to be modified to be Showrooming+TabletBuying soon.

Reading

Reading includes books, magazines, and newspapers. It also, to an extent, includes reading websites and articles and PDFs.

There’s actually a TON of reading that we do and a device that makes reading easy and fun and pleasurable and convenient will ALWAYS have a big advantage over devices that don’t.

Movies

Movies are big for Tablets for a variety of reasons -

  1. Watching movies on Tablets.
  2. Second screen while watching TV.
  3. Using HDMI out to stream movies to TVs.
  4. Trips.
  5. Ease of Use.

Movie studios used to make it amazingly difficult to give them money. Now things are getting better and Tablets have a big role to play in making movie buying and renting and watching frictionless.

Music

Smarphones are killing off dedicated music players. However, Tablets are really good for music too. In some ways they are better since you can search for information about artists easily and you can browse for and buy music more conveniently. Lots of things (making playlists, searching, buying) are easier on Tablets.

All that was missing was good speakers and a committment to high quality sound. Amazon has started on that.

Surfing the Web

This is a huge use case. One where Amazon is shooting itself in the foot.

Perhaps it’s because it wants to harvest browsing patterns. Perhaps it’s to deter users from surfing the web. Whatever the reason, Amazon is making a mess of its web surfing experience.

It has to fix this quickly or it will be the end of its hopes of being a #1 or a strong #2 in the Tablet Market.

Games

This is a big use case. There are three categories we’ll look at (though there are more) -

  1. Casual Gamers. Bored people who just want something to interest them for a short duration. These are necessary to target since they are often the decision makers for Tablet purchases.
  2. Hardcore Gamers. A bit pointless really. They will tend to prefer platforms that are optimized for games.
  3. Babysitter Games. This is a big and necessary category to provide. Tablets are increasingly being used as ‘amusements’ for children. Towards that end Amazon must ensure it has all the bird throwing and rope cutting games it can get its hands on.

Games to keep Kids Occupied. Games to keep Bored Men and Women Entertained. These two categories of games are an absolute must-have. Without them no ‘Entertainment’ Tablet has a chance.

Apps that are not Games

Yes, there are actually people who prefer checking their financial accounts and stocks to finding water for OCD crocodiles.

Tablets have become a channel to various services and websites.

In effect a website is just a portal to a service. Tablets (or Tablet Apps if you want to be particular) are a portal to the service too.

People want portals to the services they use. It’s not enough that they can access the website (though that satisfies some users). The portal should be built for and optimized for the device.

So people want apps that provide the services they know and love.

Amazon has a lot of catching up to do here. Get enough users to force service providers to make apps. Get enough apps to entice users into choosing Kindle Fire HD.

Email

Email is absolutely critical. One of the top three uses. Perhaps even a top two use.

Amazon needs to improve support for email providers of all types. It needs to make the Email app better.

Without an excellent Email App the Kindle Fire HD can’t really be the #1 Tablet.

Facebook

Not my area of expertise. It seems to be a top 4 use case for tablets.

Feeling Good and in Control

I can’t explain this. You’re either a company that gets this or doesn’t. If you don’t get this then hire someone who can convince you that users value feeling good about themselves and feeling good about their devices more than anything else.

What does it mean to be excellent in the 5 Main Tablet Uses

Each user has a different set of ’5 Main Tablet Uses’. However, the above 10 items will show up for most users. Usually account for 3 or 4 of the Top 5.

If Amazon can excel in most or all of these 10, then most users will be HAPPY and SATISFIED with a Kindle Fire HD purchase.

For their next Tablet they’ll choose the Kindle Fire HD 2. They’ll tell their friends. They’ll gift Kindle Fires to their kids and wives and husbands and parents. They’ll go to websites and fight against wrong allegations and claims.

To be ‘excellent in the 5 Main Tablet Uses’ means that the user LOVES her experience with the device. That, for the 5 main things she does with the device, it just absolutely rocks.

Why is this necessary to be #1?

Firstly, because people aren’t buying the device to feel miserable or out of control or stupid or lost or disheartened. They are buying the Tablet for it to serve their needs, for the Tablet to be a loyal servant to their desires.

Secondly, because competitors are getting lots and lots of these things right. Apple gets 3 or 4 out of the 5 Main Tablet Uses right for lots of users. Samsung does it in phones and might figure out how to do it in Tablets (or it might get ‘inspired’). B&N might wake up one day and realize that software is just as important as store and hardware. Nokia might find some inspiration in its last few heartbeats.

Most importantly, Microsoft might deliver a Tablet that can be used for BOTH productivity things and the current ’5 Main Tablet Uses’. If that happens then ALL existing tablets get reduced to ‘Babysitting Tablets’ and ‘Entertainment Tablets’ – speciality tablets with a market of 100 to 200 million devices a year.

Kindle Fire HD has an excellent chance to solidify its grip on the #2 Tablet spot and fight for the #1 Tablet spot. At this point Jeff Bezos and Amazon need to get out of their ‘We are so smart. We can use path of least resistance to channel users away from what they want to do, and to where we want them to go’ thinking. Don’t give up on the chance to take over the Tablet Market because you are under the delusion that you can make horses drink water when they aren’t thirsty.

If Amazon can let go of its ’5 Best Uses for Amazon’ thinking and embrace ’5 Most Important Tablet Uses for Users’ thinking, then it really has a chance to take over the Tablet Market. Before the giant thrashing snake with its head cut off grows a new head. Before the monster bear that has been hibernating in its cave having dreams of ‘Developers, Developers, Developers’ wakes up and climbs out to the surface.

Filed under: evolution | Tagged: , , | 6 Comments »

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