Friday, October 28, 2011

Amazon Is The New Apple - The Experience and Ecosystem Matter

People often ask me:
"VC Whisperer, what do you think of the new Amazon tablets and e-readers (and the tablet market in general)?"

Amazon's announcement is now a few weeks old. The tablets are interesting but not ground-breaking. The Kindle Touch is a nice evolution of the Kindle readers that we've all come to know and love. The Kindle Fire looks like a very solid Android-based tablet, with good specs and an even better price-point.

At face value, the Amazon Fire doesn't seem that much different from the sea of Android tablets on the market today. However, if you dig deeper, I think Amazon is starting to get it. And many others (Samsung, Motorola, etc) just don't.

It's All About The Ecosystem
So far, only Apple has understood the key to tablet success. It's about the ecosystem. Apple understands the power of tying their hardware to music, movies, apps, and many of their other products (eg. via Airplay). Amazon also understands the ecosystem. And they have a huge library of content to support it. With the Kindle Fire, they have a decide that can tie the ecosystem together and give consumers a very slick entry-point to the Amazon world. For this reason, Amazon will likely be the only real tablet competition for Apple in the near future.

Android is Killing Tablets
While the lack of a substantial ecosystem is hindering most of the other tablet manufacturers, Android is also  a problem. How can you differentiate from one tablet to the next when Android is washing them all down with the exact same features and functionality? No wonder Apple is kicking ass, as they've got the only differentiated experience in the market. For this reason, Amazon is downplaying the fact that the Fire is Android-based. In fact, it's mentioned nowhere on the product page. And the user interface is definitely quite a bit different from a stock Android implementation. For this reason, Amazon will be able to compete as a differentiated experience with Apple, where most of the other manufacturers will see their margins dwindle (assuming they sell any substantial quantities in the first place) as the experience is completely homogeneous.

Connectivity is The Killer App
Finally, I believe Amazon is on to something big with Whispersync. Apple understood that connectivity and cloud-based storage (later) was an integral part of their tablet experience. With Whispersync, the Fire gives every user connectivity and access to their media, as well as the Amazon ecosystem. This is an important differentiator from the other non-Apple tablets on the market today.

I have been an iPad user since day one. Because of the strength of the Apple ecosystem, that will likely not change for the foreseeable future. However, I will likely pick up a Kindle Fire. Amazon is starting to understand what Apple has been doing right all this time. They have the ecosystem, and they're not just trying to duplicate the iPad and Android tablets out there. They understand that producing a nice piece of hardware just isn't enough anymore. It has to be part of an experience. It will be interesting to see how this space plays out over the next 12-18 months, but those who understand the end-to-end experience are the ones who will be successful.

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