iPad Mini, Microsoft Surface, Kindle Fire, Nook HD TV Ads

Posted on November 22, 2012 by switch11

First, sans comments.

2006 iPod Ad –

2012 iPad Mini Photos TV Ad –

2012 Microsoft Surface Ad –

2012 Kindle Fire Ad –

2012 Nook HD Ad –

Second, a few observations.

  1. Hard to believe the company behind the 2006 iPod App came out with the 2012 iPad Mini Photos TV Ad. It almost seems as if Apple is now marketing only to support confirmation bias and only to existing Apple users. Not a bad strategy to strengthen their base.
  2. If this 2012 iPad Mini Photos Ad was created to strengthen existing Apple owners’ likelihood of buying an iPad Mini – then it’s good. It does make you wonder why Apple wouldn’t try to focus on new users.
  3. If, however, it was intended to create excitement about the iPad Mini, then it fails spectacularly. The same for the iPad Mini Piano TV Ad. It’s not really doing a very good job of anything other than saying – I’m Mini-Me. Buy me to give your iPad some company.
  4. The Microsoft Surface Ad is the spiritual successor of the whole ‘iPod is cool and it will teach you how to dance’ series of commericals. With a bit of directness and more humanity. The twist is that the Ad does such a good job of putting a smile on your face, you have to wonder what people are left with. The desire to buy a Surface Tablet or just a psychological link between happiness and smiles and Surface. The latter is very powerful but it would suggest Microsoft cares more about creating a bond for the future than about selling in the present.
  5. Kindle Fire Ad is interesting. Very good use of music. Very good situations. Does a decent job of showing what you can do with the Tablet. The ending is really weak. It’s like they put you into this nice happy trance state – ready for a strong emotional connection to the product. Then the man with the strangely annoying voice breaks the spell and starts discussing logic and prices. Are you kidding? How do you go from ‘Play with Fire’ to $199? Update: It’s delicious irony that the first lines of the song in the Kindle Fire Ad are ‘stop talking’.
  6. The Nook HD Ad does a really good job of selling the Profiles feature. On the other hand, the use of music is weak and they don’t create a strong enough emotional connection – which is surprising given they have so many opportunities. Also, the dog is a touch of genius.
  7. My Ranking would be – Surface Tablet, iPod, Nook HD, iPad Mini, Kindle Fire Ad. If they removed the man’s voice and the price from the Kindle Fire Ad it would go to #3 since they do a really good job of showing the functionality and amping up the energy.

There’s something very strange going on at Apple. First, the annoyingly subservient Genius Boy Ads. Now these strangely laid back iPad Mini ads. Did they fire their creative team and replace them with interns?

It’s almost as if Apple has forgotten it’s selling its products to human beings. Or perhaps its on the defensive and just trying to strengthen its position with existing Apple product owners. Of all the different things I’ve seen lately from Apple which are non-Apple, this is the one that’s hardest to fathom. The company that made the 1984 Ad and the Facetime Ads is now reduced to making Ads with an iPad and an iPad Mini side by side showing photos?

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Kindle Fire HD, Nook HD, Nexus 7, MS Surface – The rise of non iPad Tablets

Posted on November 19, 2012 by switch11

This post is ostensibly about Kindle Fire HD, Nexus 7, Nook HD, Microsoft Surface and how they are gradually disrupting the iPad Market Tablet Market.

Beneath the layers, however, it’s really a post about FLOW.

Flow is about falling in love with doing something because it’s so smooth and feels so good. There’s a very smart man who’s written a very unreadable book about it – in case you want to dig deeper (the link above covers the book).

We’ll cover two levels. The surface level of Technical Specifications and Price and Features. The core level of Flow.

Surface Level Things vs Core Level Things

With any device, with any technology, with any experience, there are two levels of things -

  1. Surface Level Things. These are things like technical specifications, features, price, branding, marketing, psychological triggers. These are often barriers or incentives to buy and/or use a product. However, these are not the core. These can often set expectations and tie people into lying about the quality of their core experience (even to themselves). However, they don’t replace the reality of the core experience.
  2. Core Level Things. These are the things that make the ABSOLUTE CORE of your experience with the product.

What the iPad did is that it focused on some of the main things people did with computers i.e. email, surfing, checking Facebook, playing casual games, using simple applications.

It focused on these things and removed as much of the friction as it could. It helped create A STATE OF FLOW. Zero Friction. Actually, close to zero friction.

For a lot of people this was a very big deal. They wanted all the benefits of PCs and Computers but didn’t want the headaches and the friction. That’s really one of the big reasons for the success of the iPhone and the iPad.

Apple was winning at Core Level things. It was winning at some Surface Level things (marketing, branding, etc.) and losing at some Surface Level things (technical specifications, openness, etc.). However, the crux of the iPad and the iPhone’s success was that it absolutely beat everyone else at Core Level things.

Actually, decimated everyone else would be more appropriate.

The Tablet Market was the iPad Market because only iPad focused on Flow

If you strip away everything about Tablets that falls under ‘Surface Level’ or ‘Religion Level’ (the latter being openness and aesthetics and similar things), you’re left with an exceedingly simple center – How are the core experiences?

How is reading? How is surfing the web? How is checking emails? How is playing games? How is watching movies?

iPad was the only Tablet that realized that it’s not about how many cores the processor has, or how open the Operating System is, or how many GB of RAM there are.

It’s about how the user experience is.

Can a typical user experience a state of flow? Where she gets lost while surfing the web. Where she gets lost while reading a book.

Without the ability to experience that state of flow, everything else is meaningless.

Now Everyone is beginning to get it

Please Note: I am NOT saying everyone is beginning to DELIVER it. Just that companies are beginning to get it – they are beginning to understand that they have to deliver Flow State.

You see numerous examples of companies who are ‘getting it’ -

  1. Google made Nexus 7 ‘very smooth’ for games. It’s now almost as easy to get into a state of flow in games on Nexus 7 as iPhone. Of course, the actual number of great games is very small on Android – but the hardware delivers ‘Flow’.
  2. Kindle Fire HD delivers ‘flow’ for photos and music. The speakers are really beautiful. The screen is really good.
  3. Nook HD delivers ‘flow’ for photos and movies and some games. Nook HD is very light, it has the best screen of all the smaller tablets. It just DELIVERS FLOW when it comes to certain areas like movies and photos and some games.
  4. Nook HD+ is a very large screen tablet (relatively, it is 9″) in a very compact and light frame. The screen at 1920 by 1280 and 253 pixels per inch is 97% of the way to Retina Display. Flow for just $269.
  5. Microsoft has made Surface incredibly ‘smooth’ on a hardware level. Holding it and using it delivers flow on the hardware level that no other device does (not even iPad). You don’t have to buy this to experience it – just go to a Microsoft Store and try it.

Notice what’s interesting here – they all deliver flow in a few areas. They are nothing like the iPad which delivers Flow in most areas. However, they are beginning to get there.

You can be a main-stream tech blog reviewer and you can focus on the areas non-iPad Tablets come up short -

  1. Nexus 7 doesn’t have ‘excellent’ speakers and the screen doesn’t match or even come close to Nook HD.
  2. Nook HD+ and HD suffer from software that should have been an alpha release. Speakers suck.
  3. Kindle Fire HD has very few ‘great’ apps.
  4. Surface has software that is shipped 3 months too early and it has a tiny, tiny app store with less than 100 ‘great’ apps. It also has a disapponting screen (it looks good but not great – good isn’t good enough in the Tablet Wars).

However, that would be getting lost in the trees when the forest is what we should be looking at.

Each of these devices now delivers FLOW in one or more core Tablet functions.

Each of these devices delivers FLOW while winning in one or more Surface Level arguments -

  1. They are all much cheaper than iPad Mini (except MS Surface).
  2. They mostly win the technical specifications battle.
  3. Nexus 7 wins the openness battle.
  4. Surface absolutely wins the hardware quality battle.

While this in itself would be enough to enable the Rise of the non iPad Tablets, you see something else that is stunning.

Apple is beginning to forget Reality

Apple is messing up in some Surface Level issues i.e. maps software (calling it Surface level because 90% of users are not affected by goofy mistakes that seem terrible like a missing Statue of Liberty), scratches, etc.

However, the absolutely insane mistake is the poor quality screen on the iPad Mini.

The screen is a core determinant of flow -

  1. While reading - a very high quality display makes text super crisp.
  2. While watching movies – the higher the quality of the screen the better the experience.
  3. While surfing – the resolution determines how much of the screen you can see, the pixel density determines how sharp the text and images are.

It’s as if Apple just completely FORGOT that the quality of the screen affects almost every single usage scenario of Tablets. That a non-Retina display impedes Flow in everything.

Apple is now depending on Surface level things to push a product that is just like the competition. If it didn’t have 270,000 Apps it would be a markedly inferior product (inferior to some of the competition).

Earlier iPhone and iPad delivering Flow in nearly all major things a user would use them for. Better Flow than anything else. Flow ABOVE all else.

iPad Mini is the first Apple product in a long time that does not deliver Flow in most major areas. Not only that, it delivers less Flow than competitors in some major areas.

If you have the time and want to see the evidence for yourself, visit a WalMart or a Target and look at -

  1. The iPad Mini screen.
  2. The Nook HD screen.

You can see it for yourself. The iPad Mini makes compromises in an area that absolutely cannot be compromised. An area that should not be compromised – particularly not by a company that is pushing Retina screens for every other product.

Flow was the Inflection Point … and we’ve crossed it

We’ve crossed the inflection points in both the Phone and the Tablet Markets.

There are 5 to 6 other elements as important as Flow. However, lest someone at Apple wakes up, those are only to be discussed much, much later. After we’ve seen the Tablet and Phone landscape change permanently. After we have had a few new Nokias and Blackberrys (in both the good sense and the bad sense).

It’s all about delivering Flow now. Flow is what we can see clearly for ourselves and experience and what we can marvel at.

Reading a very good book or watching a very good movie is a great example. A lot goes into helping you achieve that state of flow. One part of the responsibility is the content creator’s share. The remaining part is the hardware maker’s share.

Tablet Makers are waking up to that. They are beginning to grasp the reality of Flow. In some cases it’s sheer dumb luck – achieving flow in the midst of mad specification wars. In some cases they really do get it. The latter is infinitely dangerous to Apple because if Apple loses its monopoly on Delivering Flow in all the major Tablet usage scenarios – Well, then it’s dead because Surface Level things won’t win the Tablet Wars.

We are at a very, very unique crossroads in the Tablet Market. For the first time we have an iPad that sacrifices Flow for something external (perhaps the attempt to stem the tide of 7″ Android Tablets without sacrificing profit margins). For the first time we have non-iPad manufacturers realizing Flow and striving to deliver it. For the first time we have Microsoft make a Tablet and succeed spectacularly (in delivering hardware flow) and fail spectacularly (in delivering software flow).

The next time you get lost while reading a book or watching a movie or playing a game or reading a website. After you return, take a moment and think about that state of Flow you experienced. What all went into making it? Who were the people/companies/elements delivering it? How could you achieve deeper Flow? How could you achieve Flow more often?

The answer to those questions is what will decide the Tablet Wars. We’ve crossed the inflection point. We’re not going to realize it for another year or two. However, the Tablet Wars Part I are over and the Barbarians circling Rome are suddenly a lot more refined than they used to be.

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Amazon and Apple’s astonishing attempts to do everything and be everything

Posted on October 15, 2012 by switch11

Reading the headlines today, and adding in various data points, leads to some remarkable inferences about what Amazon and Apple plan on doing.

A Big Day for Reading the Tea Leaves about Amazon and Apple’s plans

First, let’s start with the big news coming out today.

  1. Amazon is rumored to be in talks to buy Texas Instruments’ Smartphone and Tablet Chip Making Operations. Apparently, Amazon has decided that it might as well make the chips for its current Kindle Fires and for its future Kindle Phones. Note: Apple has also gotten into the business of designing its own chips in the last few years.
  2. Apple seems likely to cut off its ties with Samsung (Samsung makes the chips that go into iPhones). Apple has been designing its own chips the last few years and is now rumored to be moving manufacture of its chips to other chip manufacturers.
  3. Apple hired an ex-Amazon and ex-Altavista search technology executive to run Siri. Given that Apple recently ditched Google Maps, and given that Apple has bought some search technology in the last few years, it’s a safe bet to assume that Apple intends to build its own search engine.
  4. Apple’s iPad Mini is rumored to be priced between $250 and $650 (16 different models).
  5. Microsoft has launched a Xbox music streaming service.

Apparently, the new doctrine for big technology companies is to do everything and be everything to all people and sell everything to all people.

Control Everything, Sell Everything

Apple isn’t content to sell high-end phones and high-end Tablets. It also wants to sell low-end Tablets and make Map Software and build Search Engines.

Amazon isn’t content to sell books and CDs and DVDs. It wants to sell phones and make phones and make chips and produce movies and publish books.

Google isn’t content to be a search engine. It wants Android phones and Android Tablets and Google TV and Google Fiber and driverless Cars and Glasses you can wear to get RoboCop Vision.

Microsoft, even King of Software Microsoft, is suddenly in love with hardware and services. It wants to integrate software and hardware and move into selling services and ecosystems.

It’s really very strange. It’s as if the 5 companies live on the same street and are caught in a never-ending cycle of neighbor envy.

Or … perhaps … this is the new future for technology.

The Controlled Ecosystem as the New Internet

The Internet is amazing. Except that everyone is trained to spend nothing on the Internet. To expect everything for free. The problem is exacerbated by sites like YouTube and Facebook that focus almost completely on getting humongous amounts of low quality user-generated content.

And on top of all that is Google with its Search Engine. Making sure that all the value flows to it. That individual sites and content creators only get crumbs.

In fact, Google has gotten so good at hoodwinking people into -

  1. Thinking that all value is created by Google and not by the people who actually run and create sites and content.
  2. Thinking that it’s OK to share ALL your private information with a company just because it has ‘Do No Evil’ as its marketing logo.
  3. Thinking that all those YouTube and Google Site links showing up first in Google Search results are natural.

That the FTC is just about ready to launch an anti-trust investigation. Not to mention the EU is going to open a Privacy case.

Basically, Google has turned the Internet into a Toll Bridge. And it is slowly using its dominance in Search to promote and build up other businesses (albeit ones that earn little to no profits) – Android, YouTube, GMail, Chrome, Google Docs (the list goes on).

Google is a threat to Every Other Tech Company

Regardless of which big technology company you are, you have to be wary of what Google is doing -

  1. Apple has to worry about Android Phones and Android Tablets.
  2. Amazon has to worry about Google Shopping and Google’s Tolls.
  3. Microsoft has to worry about Chrome, Chrome OS, and Google’s Office competitor software.

In its drive to map out every human being’s synapses and predict how to make money from them, Google is devouring entire profitable industries. It is exchanging profits for information. Betting that that information will be move valuable in the long run. That it will be the key to unlock people’s wallets and minds. It’s willing to give away Android for free to protect search and increase the amount of user information it has. It’s willing to offer its Office Software for free to get more and more companies and people to share their data with it.

Google’s product is people and people’s intent to buy things.

If you’re a company like Microsoft or Apple or Amazon that sells hardware and/or software and/or physical products, then you have to be very worried by companies like Google (and to a lesser extent Facebook) that want to give away hardware and software in return for user information and a Matrix Link to the user.

It’s a completely different business model. To understand users. To get them in via free software and/or cheap products. Then to sell users and their wishes and aspirations to advertisers. Or to use them in other ways.

The only defence against Google is to build your SEPARATE Ecosystem

Apple and Amazon and Microsoft don’t have a choice.

Google has used its dominance in Search to start dominating other areas. It can pretty much shut out or slow down ANY product or technology or company.

Google is letting people have everything for free – news, music, software, everything. Even when it doesn’t own stuff it lets people pirate stuff (with the obligatory ‘report piracy and then we’ll turn it off, after 1 million people have stolen your content’ loophole).

So you can’t win on the Internet.

The only solution is to build your own Ecosystem. Build a safe little Ecosystem of Good Intent, populated by Customers of Good Intent, who don’t mind paying ‘creators’ for their creations. There’s no other solution. Because if Google (or other ‘sharing is caring’ technology companies) are given a free run – they’ll devalue everything to zero. Because their product is customers and if they can get the content they need to ‘procure’ customers for free, why wouldn’t they.

To truly control your ecosystem, you need to control the device too

That brings us to the device.

If you don’t own the device, there’s no effective way to build a safe, protected ecosystem. Google can come in and say – Here’s $100 million. Put us as the default search engine. Then it’s game over.

The Internet is already controlled by the established players like Google. You can’t compete against the Internet.

The only solution is to replace it with your own device and your own ecosystem.

If you need a device, you might as well make it yourself

Apple probably wants to make a device it can sell at a high premium and strengthen its brand value.

Microsoft probably wants to make a device that lets it feature Xbox and Office and Windows.

Amazon probably wants to make a device that is a shopping portal.

If you look at iPhone+iPad, and Microsoft Surface Tablets, and Kindle Fire – That is exactly what is happening.

These companies are making the EXACT PERFECT device that is suited to the type of ecosystems they need, and to the type of content they sell.

Astonishing & Audacious Attempts to Annex All

We’ve gone from a world where Intel made chips and Microsoft made software and HP made computers to a world where companies want to do EVERYTHING themselves.

What is Amazon building?

An ecosystem where a user fires up a Kindle Fire and a Kindle Phone, watches movies produced by Amazon, buys products from Amazon.com, reads books published by Amazon, and goes to sleep in Amazon branded pajamas.

What is Apple building?

An ecosystem where a user goes to a Starbucks and shows off his iPad and then goes to work and works on his iMac and then sits on the bus and plays on his iPhone and then sits in the living room and streams movies to his TV via his Apple TV. The cherry on top – He also buys all content and all his games and apps from iTunes.

What is Microsoft building?

An ecosystem where users use a PC at work and a Surface Pro Tablet at home and listen to music from Xbox music and watch Netflix on their HDTV via their Xbox and buy games on Xbox Live.

A Fragmented World with Multiple Ecosystems/Internets

Companies have a dual motivation -

  1. Get away from the Internet and the dangerous attempts by Google and Facebook and other Internet companies to keep all the value for themselves.
  2. Build their own ecosystems and keep users involved there and capture 100% of the profits from users.

It’s incredibly compelling.

Can you imagine the amount of frustration Amazon must feel when it has to pay Google to put up Ads for EVERY Amazon related search term?

User searches ‘buy book at Amazon’ and unless Amazon pays Google’s Toll, the benevolent Search Engine company will sell the #1 spot to Target or B&N. Please Note: There is a painfully non-obvious, tiny ‘Ad’ at the far right. That helps avoid legal implications. Because without that tiny ‘Ad’ at the top right it would be as obvious to curious humans as it is to Google’s optimization algorithms that most users don’t know the first few links are Ads.

Can you imagine the amount of money Amazon could make if it could get users to buy EVERYTHING from Amazon?

$1 Profit on a toothbrush, 35 cents on a $2 ebook, $27 on that new computer – It all adds up.

If Amazon relies on Google it has to pay $1 and 20 cents and $5 to get those sales (it must pay Google for clicks (i.e. traffic)). If, instead, Amazon builds cool, Tablet replicating, mini Amazon stores – Well, then it has to pay ZERO tolls to Google.

Fundamentally, there’s HUGE motivation for companies to CONTROL EVERYTHING, OWN EVERYTHING, SELL EVERYTHING THEMSELVES.

There’s huge risk, as we’ve seen with apple ditching Google Maps and with failed efforts like Amazon’s A9 search engines.

However, if Microsoft, Amazon and Apple don’t build up their closed ecosystems, then they are guaranteed to get eaten by Google’s ‘Free Lunch for Your Information’ strategy.

Crux

At least one and perhaps all three of Apple, Amazon, Microsoft are going to survive Google’s attempt to shift e-commerce from selling products to customers to selling customers to advertisers.

The only way they will survive is if they build their own Ecosystem. Free of the influence of companies like Google.

For the companies that manage to build their ecosystem, there is an immense benefit – they can gradually capture nearly all of the profits their ecosystem customers generate.

It’ll be interesting to see which of Amazon, Apple, and Microsoft win their race to build self-sufficient, profit-generating ecosystems. It’ll also be interesting to see whether Google’s attempts to use its Search dominance and Search profits to destroy the value in everything else will work.

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WalMart comes to its senses and stops selling Kindles

Posted on September 20, 2012 by switch11

Reuters reports that WalMart will stop selling Kindles – both Kindle Fire and Kindle will no longer be sold at WalMart.

It’s the second big retailer after Target to do so. It’s interesting that all these companies are coming to their senses. Here’s what WalMart had to say -

“We have recently made the business decision to not carry Amazon tablets and eReaders beyond our existing inventory and purchase commitments,” Wal-Mart said in a memo sent to store managers on Wednesday. “This includes all Amazon Kindle models current and recently announced.”

An analyst thinks the main reason is that Amazon is considered a competitor -

“I think part of it could be margin, though the bigger point is that Wal-Mart and Target view Amazon as a competitor,” Tilghman said.

Yeah, suddenly they wake up and realize Amazon is going to destroy them if they don’t wisen up fast.

Retailers selling mini Amazon.com Stores is Madness

When WalMart started selling Kindles it seemed, to me, the most insane decision ever. Here’s part of what I wrote (the link has the entire post) -

It’s absolutely inexplicable to me that stores like Best Buy and Target and WalMart would sell Kindles and accelerate their own demise.

Do they not realize that Kindle Fire is a direct connection to Amazon.com? That Kindle and Special Offers will end up eroding the sales of the retail stores?

She (Best Buy spokeslady) might as well say -

We are getting tired of selling all these electronics. So we thought we should let Amazon get a direct connection to our customers so that our customers start buying electronics from Amazon.com instead.

This is a standard standard pattern. Fool the existing market leaders into giving you a piggyback ride. Then turn on them when you have enough reach/control/power.

Technology Companies ALWAYS destroy the Incumbents – Right after promising them Salvation

It’s an endless list of new technology companies that destroy existing markets -

  1. Newspapers put their faith in Google. How’s that working out? What they really should have done is banned Google from carrying any of their content.
  2. Borders let Amazon run its online store. Smart move Borders.
  3. Book Publishers are trusting Google and Amazon and B&N. They are going to get skinned alive. Now that the Agency Model has been ruled illegal it’s going to happen even quicker.
  4. The Music Industry let Apple take control of the music industry. It might be great for users but it’s not great for Music Publishers because they are selling $1 songs instead of $11 Albums. Additionally, all the control is with Apple and (to an extent) Amazon.
  5. The list goes on and on. New, upstart technology companies always make an idiot of existing industry giants. The sad thing (from a strategy perspective) is just how often the established gatekeepers think that the new upstarts have the best interest of the existing gatekeepers in mind. Oh this nice young man wants to help us. Young Man, here’s a list of our best customers and thank you so much for all the help.

For all these points PLEASE keep in mind that I’m not saying ‘This is not good for customers’. Of course it is. If you can get free music and free movies and free software – it’s obviously great for customers. And it’s great for the technology company supplying you all this for free – it can run ads and make money, or charge you a subscription.

It’s bad only for the creators and the gatekeepers. Because they gradually lose profitability and control.

It’s madness for the existing powerful companies in a space to accelerate their own demise by trusting new technology companies. The more ‘savior’ and ‘good’ a company seems, the higher the chance it’ll eat you alive (you = existing gatekeeper).

WalMart and Target should NEVER have sold Kindles

If you expect the companies to have half a brain they should have understood that Kindles which allow buying any book, any time, instantly would erode their own book sales. So carrying the eInk Kindle was a stupid decision.

However, it takes a special level of pigheadedness and stupidity to not see what the Kindle Fire was and is.

Perhaps now that Amazon went overboard with Sponsored Offers and Recommendations, it finally struck the fine people at WalMart that they are selling mini Amazon.com stores. Better late than never.

People underestimate the Power of the Path of Least Resistance

WalMart and Target, and people who defend their ridiculously bad decision of selling mini Amazon.com stores, probably make a lot of assumptions -

  1. People would never shop for groceries online.
  2. People would not be willing to wait an entire 2 days.
  3. People would want to see things in person.
  4. People would not go to a store and then buy online.
  5. People want the convenience of a large store they can do their entire shopping at in one trip.
  6. People want to see real people.
  7. People want same day gratification.
  8. People love the weekly drive to the stores.
  9. People want the social aspect of shopping.
  10. People want to support their local retailers.

Let’s take WalMart’s case and consider why each of these assumptions is shortsighted -

  • People would never shop for groceries online. Well, Amazon is setting up Amazon Fresh and gradually expanding it. We’re soon going to find out how people react to grocery shopping online if there’s same-day delivery.
  • People would not be willing to wait an entire 2 days. They won’t have to. Amazon is setting up enough distribution centers to achieve same day and next day shipping in lots of areas.
  • People would want to see things in person. The Zappos approach – free returns. Amazon already has 30 day returns. They could expand and say – buy 3 items and keep the one you want.
  • People would not go to a store and then buy online. They do it all the time already.
  • People want the convenience of a large store they can do their entire shopping at in one trip. What store can be bigger than an online store selling ten million items?
  • People want to see real people. Not really. It helps but it costs a LOT to have good qualified sales people. Brick and Mortar stores are losing that and it means that the value of real people customer service is declining.
  • People want same day gratification. Amazon is setting things up to deliver this.
  • People love the weekly drive to the stores. That’s just nonsense.
  • People want the social aspect of shopping. Again, this is a bit of a fantasy.
  • People want to support their local retailers. WalMart, how did that work out for all the small grocery stores you drove out of business?

Yes, there are very REAL advantages to shopping in a store. However, there are also disadvantages. And Amazon keeps reducing the advantages real stores have (instant gratification, quick gratification, selection), and it keeps increasing the advantages it has (cheaper prices, wider selection, no checkout lines, etc.).

The Path of Least Resistance is already online stores for a sizeable percentage of the population (perhaps 15% to 20%). As Amazon keeps refining things it’ll reach the point where 40% of the population prefers online shopping. At that point the retail stores will be in trouble because they will start losing out on volumes and impulse purchases and their prices will become less competitive.

Every Kindle Fire is an Amazon.com Mini Store in Customers’ Hands

This is the part that totally baffles me. Was this not clear to Target and WalMart from the start?

They have the following options -

  1. Sell iPads where they make a cut and Apple doesn’t sell anything other than digital content. Not ideal but not bad.
  2. Sell Google Tablets where they make a small cut and Google is only interested in online search and in getting a cut of online transactions. This is worse than Apple because there’s less money and Google has more of a ‘I want a cut’ mentality. However, this is still not that bad.
  3. Sell Kindle Fires where they make a small cut and ALSO make it easier for their users to BUY EVERYTHING easily from Amazon. This is absolutely crazy. It’s the equivalent of WalMart setting up Amazon.com Stores in people’s houses.

There’s no Room for Confusion – Selling Kindle Fires was a self-defeating move by WalMart and Target

People fall into two categories -

  1. People who realize that selling Kindle Fires is the stupidest thing WalMart and Target could do. That WalMart and Target are hammering in the nails into their own coffins by selling Amazon.com mini stores to their loyal customers.
  2. People who assume that ‘Having that Amazon mini Store in people’s hands 2 to 3 hrs a day doesn’t matter’ OR that ‘People will pick a tougher path over The Path of Least Resistance’.

The latter category will use strange arguments like – People could still go online to Amazon.com from any Tablet. Yes, of course. But that’s very different from having a device which literally bombards users with ‘Stuff they can buy from Amazon’ constantly.

Big difference between -

  1. Once a week I go to Amazon.com on my iPad I bought at WalMart.
  2. Every 15 minutes I see one thing I could buy from Amazon on my Kindle Fire HD I bought at WalMart.

Add on the fact that MOST media purchases on iPad go to Apple whereas most media purchases on Kindle Fire will go to Amazon.

It’s not even close. WalMart and Target were literally signing over hundreds of dollars in digital media profits per customer to Amazon with every Kindle Fire purchase. They were also losing a few hundred dollars in physical item profits per customer themselves (which also would go to Amazon).

It’s such bad strategy that it’s painful. It physically pains me to see WalMart and Target selling Kindle Fires. It’s one thing to get beaten by technology because it’s better technology. It’s completely different to be stupid/ignorant/clueless enough to hasten your own demise and to hand over your BEST customers as fast as you possibly can.

We aren’t yet at the Inflection Point

Well, WalMart has come to its senses. Target came to its senses about 5 months ago. At some point other retailers will realize what’s really going on. We haven’t yet reached an Inflection Point – a point at which retailers are GUARANTEED destroyed and Amazon is completely unstoppable. If more retailers start realizing what is REALLY going to happen with all the Kindle Fires they are helping sell, then hopefully retailers can avoid the Inflection Point.

A state of equilibrium, where Physical Retailers and Amazon keep competing without killing each other, would be nice. A LOT of people assume this is what’s going to happen. Actually, it’s very unlikely. If you think about the advances that are happening, and think about the 10 to 20 year scenario (instead of 2 to 4 years out), then it becomes evident that physical retailers need to BOTH lock online reatilers out of their stores AND create their own online presence. If that doesn’t happen, Amazon will dominate ALL of retail in the US within 20 to 25 years. Then all the retail battles will be fought only between online retail giants like Amazon and Rakuten.

Filed under: thoughts | Tagged: , | 8 Comments »

10 Thoughts on Amazon’s handicapping of $1 Kindle Books

Posted on July 26, 2012 by switch11

Update: Added some data points from 2011 to better explain why the disappearance of $1 Kindle books from the Bestsellers List is so strange.

First, let’s look at how many $1 books there are in the Kindle Store Top 100 right now -

  1. The highest selling one is at #17.
  2. The second highest selling one is at #28.
  3. A cluster of three at #34, #36, #38. Including one by Paulo Coelho.
  4. One at #48. That’s 6 $1 books in the Top 50.
  5. Another at #68.
  6. One at #95.
  7. One at #98. That’s 9 $1 books in the Top 100.

The highest selling $1 book is only at #17. There are only 9 $1 books in the entire Top 100.

This is very interesting for a few reasons:

  1. In 2011 $1 books were beginning to really take over. We had lots of independent authors releasing books at $1 and hitting the Top 100. We had indie authors who at various times had one or two or three $1 books in the Top 10 (Amanda Hocking, John Locke).
  2. In 2012 this suddenly grind to a halt. Lots of indie authors have covered this and talked about a shift to ‘Top Grossing’ instead of ‘Best Selling’. I didn’t know what to make of it, or how to write about it. Still don’t. But it’s something more people should be aware of.
  3. The natural progression would have been – A few $1 books in the Top 100 in 2008 and 2009, 10 to 20 in 2011, 30 to 40 $1 books in the Top 100 in 2012. To see how natural and inevitable this is in a digital store environment, consider this – 36 of the Top 40 bestselling iPhone Apps of all time are priced at $1. In a very competitive market, prices go to $1 or $0. The Kindle Store is that rare infinitely competitive market which has seen prices go UP instead of down?

It’s all very strange.

For what $1 kindle books were doing in 2011 please see:

  1. The Inevitable Rise of $1.

And this is what the Top 10 looked like on March 15th 2011:

  1. Saving Rachel by John Locke at $1.
  2. Scrabble by EA at $1.
  3. Mahjong Solitaire by Mobigloo at $1.
  4. A Girl Like You by John Locke at $1.
  5. Water for Elephants by Sara Gruen at $6.39.
  6. Unbroken by Laura Hillenbrand at $12.99.
  7. Love You More by Lisa Gardner at $12.99.
  8. Wish List by John Locke at $1.
  9. EA Solitaire at $1.
  10. Lethal People by John Locke at $1.

Since March 15th, 2011 Amazon has sold a TON of $79 and $99 and $139 Kindles. It’s added lots of Kindle Fires and reached casual readers. That should suggest a FURTHER drop in prices and a rise in the number of $1 Kindle Books in the Top 100.

But it didn’t happen. We had 4 $1 books in the Top 10 in March 2011. In July 2012 the highest selling $1 book is only at #18. We had 23 books priced at $1 in the Top 100 and 11 apps priced at $1. Now we have just 9 books priced at $1 and no apps.

As Amazon is adding more and more cost-conscious customers and more and more casual readers, it’s somehow managed to reverse the decline in ebook prices. Really?

Here is what Roger Knights suggested in March 2011:

If this continues, and Amazon still wants to encourage books being priced at $3 or more, it might set up a separate best-seller list for books under that level. That would give more higher-priced books visibility.

Amazon didn’t have to. Magically, the main bestsellers list automatically somehow kicked out all the $1 books.

10 thoughts on the ‘handicapping’ of $1 Kindle Books

  1. There is, in my mind, no doubt whatsoever that Amazon is using some weighing algorithm to promote $3 and $10 books over $1. It’s disconcerting that there is no public mention of this. There have been a few people who have floated the ludicrous idea that users have stopped buying $1 books because of ‘quality’ issues. No, people buy what they can see/find. The #1 place for that is the bestseller lists and Amazon’s recommendations. Amazon can choose to promote $10 and $3 books over $1 books. Those 9 books in the Top 100 are there DESPITE the weighing algorithm being against them.
  2. Amazon should rename the list ‘Top Grossing’ instead of ‘Bestselling’. It’s disingenuous to call it Best Selling when $1 books from indie authors are ‘handicapped’ by a weighing algorithm that factors price into the equation. It might be too much to ask Amazon for a separate ‘Bestselling’ List that gives $1 books a fair chance. That would defeat the whole purpose of this weighing down of $1 books.
  3. Amazon wants to have its cake and eat it too. It wants to promote free books to get people to subscribe to Prime, it wants to use free books to get people to buy Kindles and Kindle Fires. And then it wants to turn around and promote $10 and $3 books over $1 and make money from books too. It’s rather strange – you can’t have a loss leader double up as a profit maker.
  4. The bestseller lists are way too powerful. While this is true in any digital store, it’s even more so in books because the number of options is higher than in every other store. When people are presented with too many options, they are overwhelmed and go to the safe bets i.e. The Top 100 and the Genre Top 100s.
  5. The situation is the same in genre lists. The Science Fiction Top 20 used to be mostly $1 books. Now there are ZERO $1 books in the Top 20. How could really good indie Science Fiction books that were Top 20 for years suddenly have stopped selling?
  6. In a way it’s good. It’s an attempt to bring back the value of books. However, you can’t put the genie back in the bottle. Amazon either didn’t think things through, or it didn’t realize what impact allowing every single aspiring author to self-publish would have on ebook prices. There is no value of books any more. The Agency Model is about to die a death and that will accelerate things.
  7. It’s unfair to indie authors. With $1 they could compete. At $3 it’s not the same because lots of established authors bring in backlist books at $3 and $5.
  8. It reduces the incentive for Publishers to go down below $9.99 for new releases. If they see everything going to $1 and $2 they will eventually be forced to release new releases at $5 and $7. On the other hand, if they see 50% of the Top 20 at $9.99 and $12.99, they will feel they can get away with $12.99.
  9. It’s not sustainable. There is no way Amazon can continue to pull this off. It’s a short-sighted way to fight the inevitable.
  10. Thankfully, there is competition. Amazon needs B&N and Kobo and Apple iBooks to counter whatever ludicrous strategies it comes up with. This whole weighing down of $1 books and ‘unlevelling the playing field for indie authors’ thing really bothers me. Do we really need to give Publishers who gouge us for $12.99 one more advantage?

Coming back to the power of $1.

There is no Escape from $1

There just isn’t.

You create a very competitive market where everyone can compete and eventually people start competing on price. And then it either goes to ZERO or to $1.

The only way you can make money off that is by making money on the device, or by selling something else that is LIMITED and CONTROLLED. Apple doesn’t try to make money from apps. It’s paid out developers something like $5.5 billion. Which means it earned something like $2.357 billion. Take out the costs of running the store and credit card charges and other costs and it’s probably less than $1 billion in profits. Apple makes money from the devices – $8.8 billion profits in the last quarter alone.

That’s the way to do it. Let the developers and authors devalue their work. You make your money from the devices or from some other product (the supply of which you keep limited and whose value you do not destroy). Let all the value from books and apps flow to the device and profit from that.

Amazon is stuck because it’s made both the device and the content loss leaders. Perhaps people aren’t buying very many kitchen sinks and it’s decided to try to turn books back into profit machines. Not going to happen. You blew up the entire book market. You’re sending out thousands of free books every month. You’ve created a ‘Free Lending Library’. You’re completely devaluing books. How on Earth do you expect to also make huge profits from books?

Eventually, someone is going to figure out how to give authors and indie authors 70% of the take from $1 and $2 books. That ebook store is going to win out.

  1. We have hundreds of thousands of authors desperate for their books to be read. Most will take whatever they can get for their books. Some will even pay for people to read their books.
  2. We have readers who are increasingly realizing that any ebook priced over $4.99 is unfair to readers. The savings in ‘produce once, sell to everyone’ are not being carried over.
  3. We have such large numbers of sales that even $1 books can make large profits for authors.
  4. We have indie authors getting better and better. Indie authors who don’t have to support Dinosaur Publishing Companies with their archaic methods. Indie authors that can be nimble and can just destroy the Publishing Houses by using quality $1 books.
  5. We have smarter and smarter readers who can get information from a thousand different sources. So they KNOW that ebooks should not be $12.99.

There’s just no way you can go back to $9.99 and $12.99 books. It’s a testament to the stubbornness of Publishers and Amazon that they’ve managed to keep things going in such an unnatural direction for so long.

But it’s just a temporary blip. eBook companies will rise that aren’t afraid to both embrace $1 and $2 books and also give authors 70% of the cut. And they will, sooner or later, get enough awareness amongst customers that customers start switching.

$1 ebooks might be 9 out of the Top 100 right now. However, within a few years they will be at least 40% and probably 80% of the Top 100. Additionally, if the authors of those ebooks are self-published indie authors, then they will be making out like bandits. In most cases they will be making more than they would have from contracts with Publishers. If Rovio (Angry Birds) can make $100 million in a year selling $1 and $3 games, then it’s a given that there will be authors who will make tens of millions of dollars a year from $1 and $3 books.

One million ebooks sold in one year at $1 with a 70% cut translates to $700,000 a year. There are hundreds of authors who can hit that milestone. There are already 10+ indie authors who are on-track to sell a million ebooks in 2012. Despite all the obstacles (natural and man-made) in their path.

We just have to wait for one of the big stores to realize that $1 ebooks are inevitable, that $1 ebooks are a big, huge competitive differentiator (if you embrace them first), and that readers want $1 ebooks.

Filed under: thoughts | Tagged: , | 46 Comments »

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