Dave Lee

Jeff Bezos is a fantastic presenter and innovator.  Yet, yesterday at the Kindle 2012 lineup event he made two major arguments that I have a difficult time agreeing with.  (Watch full event on YouTube)

First, Jeff Bezos argued that Android tablets haven’t taken off because they’re “gadgets,” while the Kindle Fire sold well because it had better “services”.  Bezos spent a large majority of his presentation describing the current and new “services” for the Kindles and Kindle Fires (all which are quite impressive: tons of content, exclusive books, whisper sync, dual-sensory reading, x-ray for movies, FreeTime for kids, etc).

In essence, Bezos is saying that Amazon’s Kindle Fire has better services than Android tablets and that’s why Amazon is winning.

But if you take a look at the Google Play store, you’ll notice that Google has been doing an impressive job of amassing a lot of content themselves.  Also, Google has tons of services that Amazon can’t offer (search, gmail, calendar, docs, maps, google+, single sign on to all google services, etc).  

I just don’t buy that Amazon has better services than Google and that’s why Kindle is winning.  I think a better narrative is that there’s been a lack of a strong market leader in the 7-8” tablet space and as a result consumers have reluctantly purchased the Kindle Fire more than other android tablets, but it’s not a sign that the people are happy with the Kindle Fire or that it has better services.  Maybe it’s because of price and convenience (ie., amazon.com).  (note: I purchased a Kindle Fire 2011 when it first came out and was disappointed at it’s clunky and choppy software.  It basically was unusable to browse the web compared to an iPad.)

I think when Apple enters the 7-8” market, there will be a clear and strong market leader:  Apple.  Then, we’ll see if Kindle Fire’s great “services” can compete with Apple’s complete package: beautiful hardware, great UI, the best apps, etc.

Also, I think Google is just getting going in the tablet market.  The Nexus 7” is an impressive tablet and Android 4.1 with project butter is a vast improvement over all other android versions.  I also think Google’s purchase of Motorola will allow Google to produce some impressive devices in the future.  I was skeptical of the purchase initially, but was super impressed that Google hired Regina Dugan (formerly of Darpa) to head innovation at Motorola (check out Regina Dugan’s TED talk and be blown away).  

Case in point:  Kindle Fire might be the market leader in the 7” tablet space, but it’s not a strong market leader and Apple has yet to enter the market… and Google is just getting going.

The second Bezos argument that I’m having a difficult time digesting is his critique that Amazon is better aligned with customer’s interests than Apple because Amazon is making most it’s money on the ongoing use of the Kindle (ie., purchasing ebooks, etc) vs Apple is making most it’s money on the initial purchase of the device.

I appreciated Bezos laying out the Amazon Doctrine:  “Above all else, align with customers.  Win when they win.  Win only when they win.”

To paraphrase Bezos:  ”We want to make money when people use our devices, not when they buy our devices.  If someone buys one of our devices and never uses it, we don’t deserve to make any money.”

That’s a noble goal but it doesn’t necessarily mean that Amazon is better aligned than Apple, which Bezos asserts.  Apple also is motivated to have customers use their devices because if they don’t continue to user their devices they aren’t going to upgrade to the next, newer device.  So Apple has a vested interest in making sure that users enjoy their current experience and receive value.  Apple also has interest in ongoing usage with the AppStore and iTunes stores.  (side note: I do find the pay-for-what-you-use is a really interesting business model)

Overall, I think Amazon’s ambitions are noble but they’re going against two companies that alsoa very aligned with the customer.  So, it’s going to be tough.  I don’t think Amazon is going to overtake Apple in the tablet market any time soon.  And I’m not sure if then can fend off the upcoming Android tablets in the 7-8” or 9-10” tablet space either.  But I think Amazon will have it’s place.  I still buy most of my ebooks on Amazon, am a huge Amazon Prime fan, and have a lot of loyalty toward Amazon.  Amazon has proven it’s Amazon Doctrine through amazon.com, EC2, and it’s other services.  They give good value to the customer without trying to take advantage of the customer.  And customers appreciate that kind of treatment.

That said, it’s going to be an interesting next few years in the tablet space - Apple vs Google vs Amazon… and Microsoft trying to get into the game.

Who do you think has the best chances?