Jeff Kagan: Why Amazon.com Fire Phone Looks to Be a Success

Jeff Kagan |

Amazon.com (AMZN) announced they are getting into the smartphone business with their new Fire Phone. This is big news for Amazon.com, AT&T Mobility (T) as the exclusive carrier, and the wireless marketplace as a whole. However after the excitement of the announcement passes, the single question we all have is simple. Will the Fire Phone be a success?

Let me first answer the question, then explain why.

It’s important to note that this Fire Phone does not have to win the competitive battle with the Apple iPhone or Samsung Galaxy. That’s not its purpose. Its purpose is simply to give customers more ways to buy stuff from Amazon.com, like the Kindle does.

So even if the Fire Phone only sells a fraction of what Apple and Samsung sells, it can still be very successful for Amazon.com. The reason is they use it, like the Kindle, to get customers to buy more stuff on Amazon.com. Period.

Looking at it through that point of view you can see how successful they really can be without having to sell a gazillion devices. Of course if they could sell a gazillion devices they would not complain. 

Amazon is successful with their Kindle tablet, which they have sold tens of millions of devices over the last several years. That does not mean they have tens of millions of separate customers, since customers will typically upgrade devices over time. However it’s still a big number.

Fire Phone Will Succeed Where Facebook's Didn't

A percentage of the Kindle users will be interested in seeing and trying this Fire Phone. That’s why I think Amazon.com will be more successful than the Facebook smartphone flop from last summer.

However there are no guarantees. I have not seen or used this Amazon.com Fire Phone yet so I can’t offer any insights yet. I will after I get one to use.

Success in smartphones is much different than success with tablets. So just because you are a success with one does not mean you will be a success with the other.

You have to effectively market smartphones. Smartphones are a very hot device. They are the center of the universe for users and carriers. However they are also one of the most hotly marketed and advertised devices we have ever seen. Success means you understand what your customers want and give it to them.

AT&T Mobility will be the exclusive provider of wireless service for the Fire Phone. This is good news because they have quite a bit of experience with these kind of launches. Remember, AT&T Mobility was the exclusive provider for the Apple iPhone for three years. And they haven’t lost their customers since that time.

Of course they were also the exclusive provider for the Facebook smartphone flop, but that was Facebook’s fault. It was a boring device that could not connect with users.

There are many smartphone makers, but there are only really two big success stories in mobile, Apple (AAPL) and Samsung. The others are a very small slice of the pie, even Microsoft (MSFT) with Nokia (NOK) which is number three.

Amazon Phone Looks to Reward Loyal Customers

So with this high level of competition in smartphones, why do I think Amazon.com could be successful with their new Fire Phone? Two reasons. One, they already have experience with devices like their Kindle. Two, they don’t have to score as big a hit as Apple, Google, or Samsung with their devices to be successful.

In fact Amazon.com is not getting into the smartphone business to do better than Apple and Google. They are simply getting into the smartphone business to sell more of their online stuff. That’s the point of the button to call up Amazon.com on screen.

It’s not about numbers of customers. It’s all about loyalty for Amazon.com. It’s all about Prime. It’s all about keeping customers happy and getting them to spend more money on Amazon.com.

So as exciting as this smartphone sounds, it is less about the device and more about another technology to let customers shop on Amazon.com.

Amazon says they have tens of millions of Prime customers. They say they have tens of millions of Kindle customers. Those are the customers they want to get a Fire Phone. They want to cement the relationship.

Amazon.com has a universe of customers they can sell this device to. The next question is can they sell more to expand their universe? We’ll see.

CEO Jeff Bezos doesn’t have to worry about competing with Apple and Samsung. He just has to give the customer another channel to shop on Amazon.com. And that’s exactly what this Fire Phone will do.

So will the Fire Phone be a success? Don’t know yet. We’ll have to wait and see. However looking at it from this perspective, I think the chances are strong it will indeed be.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
FB Facebook Inc. 117.95 0.64 0.55 21,913,658
AAPL Apple Inc. 111.03 1.08 0.98 29,998,719
AMZN Amazon.com Inc. 770.42 5.70 0.75 3,684,906
MSFT Microsoft Corporation 61.37 1.42 2.37 30,808,969
FREWF Far Eastern New Century Corp. 7.77 0.00 0.00 0

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