Selling Amazon’s Upcoming Smartphone: A Challenging Task

If rumors are to be believed, Amazon are set to unveil their very first smartphone very soon – this June 18, to be precise – with what seems to be a head-tracking system powered by four front-mounted infrared cameras, which are going to be used not just for 3D effects but also for gestures such as screen switching and contextual menus.

There’s actually been a fair bit of excitement about the smartphone, although it’s mostly centered around the aforementioned 3D capabilities. That said, Amazon shares rose 5.4% after the announcement, which says quite a bit about the climate surrounding the smartphone.

But hold up, before we get carried away, it’s probably a good idea to bring in some perspective by taking a look at some issues Amazon might have in trying to push their flagship smartphone to compete in an already-saturated smartphone market.

Lackluster Phone Specs

Despite the looming deadline, days away, the most we’ve heard about Amazon’s debut smartphone is that there may be two, instead of one. A Boy Genius Report post from April indicated that at least one of the two smartphones looking to be launched this week will be targeted at entry-level users. The other, a higher-spec phone will apparently be powered by a Qualcomm Snapdragon processor with 2GB of RAM and a 720p, 4.7-inch screen. Little else is shared.

Amazon Smartphone (Image Source: Boy Genius Report)

The leaked specifications aren’t exactly stellar, and even the higher-end variant seems to be targeted at the mid-lower-end of the market. The choice in resolution, if the leaked details are true is also more of a setback considering media content would benefit more from a higher pixel density a 1080p display would provide. For a phone that’s ostensibly about encouraging consumers to buy media from Amazon, the combination of resolution and screen size might be a bit of an issue.

It does come with some nifty features such as Prime Data and head tracking (more on these two later) but first let’s take a look at why this upcoming smartphone may not carry a high price tag.

A Low-Pricing Strategy…

If you are familiar with Amazon’s mobile devices, you would notice that they are available at relatively low prices: for instance, the 7-inch variant of the Kindle Fire HDX retails for less than half the price of the equivalent iPad Mini with Retina yet boasts an almost identical PPI – 323 for the Kindle, compared with 326 for the iPad Mini.

There’s no reason to expect the Amazon smartphone to buck this trend of offering great bang for buck because that’s not how Amazon makes its earnings. Amazon’s devices ensure that buyers get locked into Amazon’s ecosystem, without having any access to the Google Play Store or any of the other Google-branded features that you might admire about Android. This is how Amazon can afford to sell their devices so cheap: they make most of their money from product purchases.

According to Business Insider, Kindle-owning Amazon users spend, on average, $443 more than Amazon users who don’t own Kindles: $1,233 per year as compared to $790 a year. The lack of profit on devices is made up for by the increased profit made off of Amazon purchases. Overall, estimates peg Kindle profit at $565 million, which is a pretty big amount. Imagine the sort of surge in buying if Amazon users have a pocket-sized Amazon device on them all the time.

Amazon Kindle Profit (Image Source: Business Insider)

… That Goes Against The Grain

Then again, while this pricing strategy may have worked out for the Kindle Fire, Amazon may face a bit of a resistance from the smartphone. The thing is, at least in the US, nobody pays full price for a smartphone; most consumers buy their phones on contract.

On top of that, getting users to buy an Amazon smartphone will be tough, seeing as how there are plenty of competition coming from lower-priced phones such as the Moto G, Moto E and Nokia X. They’ve also had a pretty good headstart. Safe to say that this means that the Amazon smartphone can’t compete on price alone. It’s going to have to be a combination of price, specs and features, speaking of which…

Do You (Really) Need These Features?

The thing that is making headlines when it comes this Amazon smartphone is the head-tracking functionality, achieved with four infra-red cameras positioned at the front of the smartphone. Potential uses for this head-tracking technology include 3D effects and gesture-based navigation. This head-tracking will probably be complemented with a novel tilt-to-control interface, letting you navigate by tilting the phone in certain directions.

Until the phone is launched though, most of what is out there are at best rumors of of how this head-tracking feature can really relate to smartphone user habits.

What does show better promise however, is a special wireless data plan offered alongside the smartphone. Known as Prime Data, this service is going to be a Sponsored Data-type service. Basically, if you use Prime Data to consume Amazon content, the mobile data used will not eat into your monthly data cap. The downside is that this may mean that the smartphone will be exclusive to AT&T.

Nonetheless, what this means it that you won’t have to worry about streaming full albums or a movie purchased from Amazon, since that won’t count towards your mobile data cap. If you’re a media fiend and a big fan of Amazon’s offerings, this is definitely something that’s going to be up your alley.

Amazon Smartphone (Image Source: Boy Genius Report)

It’s more likely that Prime Data is going to have a bigger effect than the head-tracking feature to make consumers opt for Amazon’s smartphone over competing devices. And don’t forget, this will benefit only users who buy Amazon products.

Breaking Into Saturated Emerging Markets

In order to be considered a success, the Amazon smartphone is going to have to make a splash outside the US, which opens up a different set of obstacles, altogether. It’s impossible to deny that Android is the leader in emerging markets, which is going to make it tough for the Amazon smartphone to compete.

For instance, trying to add value to the smartphone with Prime Data, so far the strongest feature that would make you even consider the smartphone, may not be as successful outside of the United States.

Telecommunications work differently across borders. Amazon might face difficulties in negotiating Prime Data deals with service providers, which in turn will put a dent in Amazon’s strategy of making money off the locked-in ecosystem it is trying to build up. Apart from the lack of a sponsored-data mechanism, slower, and less reliable mobile Internet connections found in emerging markets may stop users from consuming Amazon’s media content.

Smartphone Use In Emerging Markets (Image Source: STBY)

There are perks of the fact that Fire OS is fundamentally Android – it’s going to be easy to root, which allows users to break free of the locked-in ecosystem. Then again, it is hard for the Amazon smartphone to escape from the looming spectre of other low-cost Android smartphones, which are already in these markets and does not require root access to use Google Play Store.

Also of unrelenting significance, peer pressure particularly in smartphone ownership is hard to ignore. Consumers will want to have access to all the stuff their friends and family are using, and if they all happen to be using Android phones – the smartphone market is incredibly crowded – then the cheaper, more accessible Android phone may trump Amazon’s latest offering, without even trying.

Final Thoughts

A lot of non-Amazon users are attracted to the Kindle Fire tablets because on top of the low prices, and respectable hardware, it’s generally quite easy to unlock the bootloader and flash a “pure” Android OS installation onto the Kindle. It will be possible to do this with the Amazon smartphone too, of course, but that’ll probably totally break the head-tracking functionality and any other features that come with.

Of course, it’s been a couple of months since the specifications leaked, so it is possible that there may be a couple of surprises the launch will unveil. And depending on how Amazon prices it its debut phone it could be the difference between a calculated success that puts Amazon on the smartphone market, or a device that only Amazon fanatics will even consider.