Is Media the Gateway Drug to Commerce for Amazon?



Last month, Amazon’s new Fire Phone launched to a cautious reception, with reviews consisting of head scratching analysis about the user interface and design of the phone. While the device’s interface and design both admittedly need to be refined, the introduction of Amazon’s Fire Phone is an indicator of a much larger reality that’s not being fully explored:

The e-commerce behemoth is sitting at the intersection of media and mobility, and I think their entrance into the smartphone market could be a game-changer.

I have three sons, all of whom learned to navigate a mobile device before they figured out a TV.  Two of them literally don’t know how to turn the TV on, but they are all pros at loading up children’s programming on Prime Instant Video – my own little Amazon junkies! With this in mind, I’ve been following the hubbub about the new Fire Phone with a lot of interest. My sons’ habits, paired with Amazon’s growth, indicate a major shift in the way media is consumed and commerce is conducted. Here is why I think Amazon Fire Phone will be a game changer:

1. They are big but nimble. Amazon started as a seller of physical books and has transformed itself to one of the most important digital companies on the planet—it even sells groceries. Books…Ha! I’m not proud to admit it, but I have used Amazon to buy everything from boxer shorts to a $700 spin bike.

Amazon has proven time and time again that they can innovate and adapt to address larger opportunities and market changes. Their recent announcement on the acquisition of Twitch, a user generated video community for gamers, is an interesting example.  Unlike so many large brands, retailers and media companies Amazon sees a future with social media and UGC at the center and they are betting big. This innate ability to manage change well is what will make Amazon a frontrunner in the mobility business as well.

2. They can market well at low costs. Amazon defines an “active user” as someone who has made a purchase in the last 12 months. Last year, they added 30 million new users, bringing their total to 244 million active users in 2014. Let that number sink in for a second—that is equivalent to 77% of the U.S. population. Granted, it’s not as impressive when compared to Apple’s 800 million iTunes accounts, but also note that the average user spends a lot more money on Amazon than he or she does on Apple—$1000 / year on the former compared to a paltry $23 /year for the latter.

As I write this, the Fire Phone is featured prominently on Amazon.com, which its active users visit with some sort of regularity. Whether or not they’re coming to the site for the phone, they’re definitely going to see it. Amazon can market to a massive and qualified user base – that’s ready to spend – at almost zero cost.

3. It costs money but it feels free.  As every drug dealer knows, it makes sense for the first one to be free. Amazon has accomplished the sleight of hand where media (music, TV and movies) are free to watch on Amazon Prime; plus, anything you order on Amazon comes without a shipping cost. And now,the Amazon Fire phone offers unlimited free storage of media in the cloud.

This phone is part of an exclusive ecosystem that is designed to make users feel like VIPs. And the Amazon state of mind can exert a powerful pull when you are never more than a click away from buying something, which brings me to my next point.

4. They can make purchases super easy. Amazon has a credit card on file for most of those 244 million active users. Much the same as they have done for boxer shorts and spin bikes, Amazon can make it stupid easy for their customers to order an Amazon phone in a few simple clicks, both online and via their app—which, by the way, was used by 53% of all smartphone / app users as of late last year. I can only imagine that this number will go up as the Fire phone penetrates the market, making Amazon a natural choice for increasingly mobile-savvy shoppers. 

5. They have a proven track record. Amazon has proven that they can bring hardware to market successfully—the Kindle is, by all measures, a raging success.  For the Kindle, the value proposition is pretty simple—read books, newspapers and magazines digitally—but the mobile phone offers a much broader opportunity.

Apple, Samsung, and their existing competition make great products.  I’m not predicting the next Blackberry-like take down, but I am betting on Amazon being a force in mobile computing and smartphone sales.

Image credit: CC by [puamelia]

About the author: Reid Genauer

Reid Genauer is Chief Marketing Officer at Magisto.

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