Why did Nook Touch pull ahead of Kindle?

On May 24th, this was my assessment of Kindle vs Nook 2

With Nook 2, B&N has left the Kindle behind and temporarily won the Kindle vs Nook contest.

With a Nook 2 now in hand, that feeling is confirmed. Consumer Reports has also handed Nook 2 its Editors Choice award.

Have a pretty major Kindle vs Nook vs Kobo mega-review lined up. However, the early findings from that research only add to the raison d’etre for this post, i.e.

Pointing out that Amazon’s complacency is becoming a major drawback. Nook Touch pulled ahead of Kindle primarily because Amazon has become very complacent.

This is going to manifest in other ways. Consumer Reports listing Nook Touch as their #1 choice is a very big warning sign for Amazon to wake up and get both a Kindle 4 and a Kindle Tablet out. And more importantly – to realize that it hasn’t already won the eReader and eBook Wars.

Is Amazon really getting complacent?

If you consider individual areas in isolation it doesn’t seem that way. However, combine all the data points and it paints a pattern –

  1. Amazon didn’t really react to Sony Reader Touch Edition (the newer version that used IR for touch and didn’t mess up readability). Whereas Sony messed up pricing and gave Amazon a breather, B&N was aggressive on pricing and stole the #1 eReader crown from Kindle. Basically, Amazon has known for 6+ months that a touch based eReader could beat it, but it hasn’t reacted.
  2. Amazon hasn’t been aggressive with technological improvements in eReader screen technology. It could have pushed eInk and Qualcomm and Pixel Qi to develop screens faster – As far as we know, it hasn’t.
  3. Amazon hasn’t done much since Kindle 3 came out. Kindle 3 totally destroyed the competition – But what have we had since then? Sponsored Screensavers? A Promise of Library Book Lending? Pretend Lending? None of these are game changers (the promise isn’t a gamechanger – regardless of how important the feature itself is).
  4. Amazon has let the Kindle 2 and the Kindle DX 2 be ignored. Why aren’t all the software improvements in Kindle 3 added to these devices yet? It’s over a year since Kindle 3 came out.
  5. Amazon has assumed that its ‘devotion to reading’ means it can get careless in other areas.
  6. Amazon hasn’t responded to the colossal threat of the Nook Color.
  7. Amazon has become complacent with the Kindle App Store. It was in Beta in January 2011 and it’s in Beta in June 2012.
  8. Amazon is trying to find shortcuts – Building an Amazon Android App Store is potentially a good one; Depending on Apple for casual readers is potentially a bad one. Shortcuts don’t really work in the long-term.
  9. It had, at some level, assumed that B&N would just die and disappear. It didn’t plan for the contingency that B&N would find hidden reserves of strength.
  10. It had, at some level, assumed the fight was over. It had also assumed that the fight wouldn’t morph into something else (for example, Reading Tablets vs eReaders). Basically, Amazon was 100% unprepared for the Nook Color.
  11. It’s acting with the belief that incremental improvement by itself (without major leaps forward) is enough.
  12. Amazon is cutting ties with affiliates in various states even though B&N and Google are both making a major affiliate push. This is going to become critical down the line because websites will start sending people to Google to buy books (instead of to Amazon).

While there is still a lot that Amazon is doing right, it is making a lot of mistakes. All of the mistakes stem from the same thing – The complacency engendered by a feeling that the battle was won once Kindle 3 was released.

Amazon, quite frankly, expected/hoped Kindle 3 would be a death blow for B&N and Sony and would end the eReader Wars. It didn’t because Nook Color saved B&N and gave B&N the belief to launch Nook 2.

Why would you slow down when you’re ahead?

Amazon had the Kindle 3, it had all the momentum, and it had a fledgling Kindle App Store that it could have potentially turned into the sort of advantage that made the iPhone a monster and made Facebook the defining social network.

Instead, it’s done little in the last 1 year. It makes no sense – All it had to do is push hard and hit $100 last Holiday Season and release a Kindle Tablet last holiday season and release a Kindle 4 in February 2011. It would have extended its lead and pretty much wiped out B&N.

Now it’s created a monster – A B&N that is hardened from the pains of near-bankruptcy and battle-tested from its experience of surviving as the fringe #2/#3 eReader maker. Kobo too is turning into a little Godzilla with its ridiculous ability to keep up with billion dollar companies.

How could Kobo come this close to Kindle?

At this early stage of my experience with Kobo Touch and Nook Touch, there’s a very simple question I couldn’t answer –

Is Kindle at least better than one of them?

That’s a scary thought. Both Nook and Kobo have pulled so close to the Kindle that you can’t tell in 15 to 20 minutes which is the best eReader. That means – Everyone making the Kindle vs Nook vs Kobo purchase decision will be confused.

How can the clear #1 eReader company let the #2 company beat it? How can it let the #4 company pull so close?

When Publishers brought out the Agency Model and killed Amazon’s ability to compete on book prices – It should have focused on every other area and won all those battles. It hasn’t and we’re beginning to see the consequences.

Where is the Kindle Book Deals section?

Kobo hands out coupons like its Groupon. B&N has a clear section for Bargain Books. Amazon has done only two things – run a Sunshine Deals promotion in June and run a short-lived Kindle Deal of the Day promotion in January.

That’s just not enough. If Publishers have taken away your ability to cut prices, then at least build up a deals section and compensate to an extent.

Incremental Improvement cannot beat Leaps in Technology and Thinking

You could joke that the only reason Kindle doesn’t have touch yet is that there was no incremental way to get to a touch screen from the Kindle 3. Except – it probably is the real reason Amazon never added in touch.

You improve every area of the Kindle 10% and it adds up to a big gain. The problem is that there’s a competitor who improved its device’s user interface 100% by replacing a kooky eInk-LCD dual screen design with a simple touch eInk screen. It then improved its battery life 100%. Add up a few big jumps like these and 10% incremental improvements can’t compete.

At some point Amazon needs to add huge jumps. Things like Color and Touch and full-blown features – as opposed to 15% better this and 20% better that.

How difficult is it to make Custom Screensavers?

The two biggest pain points for Kindle owners (apart from the really big stuff) have been Folders and Custom Screensavers. Amazon took 2 years to add Folders and still hasn’t added custom screensavers.

Even Kobo Touch beats the Kindle’s Dead Authors Society by using the book cover as the screensaver.

How many more warning signs does Amazon need?

Here are a few –

  1. August/September 2010 – Sony releases the IR touch powered new Sony Reader.
  2. December 2010 – Nook Color comes out and creates the Reading Tablet market. Selling nearly a million units a month.
  3. January 2011 – Both B&N and Kobo start talking about 1 million+ customers and 1 million+ books sold in a day.
  4. Early 2011 – Apple does its whole ‘pay us 30%’ dance.
  5. June 2011 – Consumer Reports gives Nook Touch its Editor’s Choice Award.
  6. June 2011 – Kobo, a small start-up, releases a touchscreen eReader before Amazon.
  7. June 2011 – In 2 months Nook App Store is up to 254 apps.

The warning signs are coming up faster and faster. Whatever room for complacency Amazon earned with the release of the Kindle 3 – it disappeared long ago (in 2010 itself). Now Amazon is just surviving on momentum. It’s probably got 6 months left to turn things around. If Nook Color 2 is as impressive as Nook Color (and as much of a jump), and if iPad 3 launches in October, then Kindle Tablet won’t have the ‘guaranteed hit’ Christmas Season Amazon is probably counting on.

Most interesting is what Kindle vs Nook will look like for the rest of 2011. Firstly, it’s now Kindle vs Nook vs Kobo – which should be very worrying for Amazon. Secondly, Amazon is no longer a clear 1st choice – It isn’t even the 1st choice. If Amazon doesn’t have a Kindle 4 lined up for second half of 2011 then $99 might be its only savior.