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Amazon's expected smartphone already faces skeptics

Matt Hamblen | June 17, 2014
If Amazon announces a smartphone on Wednesday, as is widely expected, it will face an avalanche of skeptics.

Further complicating the challenge Amazon faces, both Llamas and Ask noted that buying things with smartphones is far down the list of things people say they do with their phones.

Customers said in various surveys that their top use of a smartphone is voice and written communications in text, email or instant message, followed by consumption of media, including songs and videos, sports scores, stock market reports, weather and maps.

"Transactions and shopping is still a distant third" in the ways smartphones are used, Ask said.

"Shopping is not today a central feature of a smartphone and because this is an Amazon phone, the central core value is going to be shopping," Llamas added. "With that kind of setup, I wonder if the masses will flock to this device."

Tablet users, including those with Amazon's Kindle tablet line, make purchases, but that's because their screens are bigger than smartphone displays, Llamas said.

"Amazon is going after its customer base, much as they have with Kindle tablets, to make Amazon sticky with its users," said Jack Gold, an analyst at J. Gold Associates. "If they can accomplish this goal with a smartphone as they have with Kindle tablets, then Amazon doesn't have to make any money off the devices, nor do the devices need to be bleeding edge. Any evaluation of an Amazon phone should be along the lines of what advantages it brings to Amazon's business model and not how it stacks up with the general market for phones."

Gold, and just about anybody following the smartphone market, is curious about what compelling services Amazon will offer with the device. Some have suggested Amazon will double down on its Mayday button — introduced with the Kindle Fire HDX tablet last year — that provides 24/7 live tech support directly on the device.

But a Mayday button doesn't seem like enough to lure customers away from other platforms. Ask suggested that if Amazon is planning to offer plenty of free video and other content with the device, it should heed the lessons learned by ESPN years ago.

In a well-documented failure eight years ago, ESPN abandoned its Mobile ESPN initiative just seven months after launching it.

ESPN tried to sell customers an ESPN-branded phone made by Sanyo for $199 that was complete with sports menus and news that cost $65 to $225 each month. The sports network found it was hard to get customers to switch from their existing carriers, and to pay that much for the premium content. Some reports, including one in BusinessWeek in 2006 put ESPN's loss at $150 million after signing up just 30,000 customers, but Ask believes ESPN's loss on the project was many times higher.


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