It’s the latest sign that the world’s largest e-retailer might be prepping for a smartphone.
Katie Evans , Managing Editor, International Research
Rumors have swirled for months that Amazon.com Inc. might be launching its own phone. Now the hiring by the world’s largest e-retailer of a Microsoft Corp. executive is bringing the chatter to the surface once again.
Amazon has pegged former Microsoft phone executive Robert Williams to head up Amazon’s Appstore. Williams announced his new post on LinkedIn and Twitter.
In November, Internet Retailer reported on rumors that Amazon might be prepping to launch its own smartphone to follow its successful Kindle Fire tablet.
The potential Amazon smartphone is getting mixed reviews from experts. A research note from analysts Colin Sebastian and Gregor Schauer of investment firm Robert W. Baird & Co. says an Amazon phone would be a risky move for the retailer.
“Understandably, Amazon is concerned about Apple and Google's platform dominance in mobile devices; however, it should be able to leverage its e-commerce powerhouse, loyal customer base, traction in digital media and mobile commerce apps to profit from smartphone growth,” the note says. “If Amazon launches a standalone smartphone, we would likely view this negatively, given the margin pressures and significant competitive issues.”
A tablet makes sense for Amazon, but a smartphone does not, the analysts say, as it would require Amazon to develop costly native apps such as mobile maps, voice-enabled search and e-mail. They say Amazon would do better to stick to tablets because those devices skew more heavily towards media consumption and are a more natural fit for Amazon’s e-commerce and media offerings such as books, video, music and software through its Kindle and Appstore.
In addition to the significant money it would take to develop native apps and to design and launch a phone, Amazon would also have to get carriers on board with its phone, another potentially costly expense. What’s more, the research brief notes that consumer response to the potential phone has been tepid. A Baird poll conducted earlier this year suggests lukewarm interest in an Amazon smartphone compared with other platforms and handset makers—only Facebook ranks behind Amazon in consumer interest for a smartphone, according to the survey. 42% of respondents said that they are interested or very interested in an Amazon phone, while 29% of respondents indicated they are not interested or probably not interested.
“Low consumer interest in a mobile platform is a good recipe for failure,” Sebastian and Schauer write. “On one hand, Amazon is already an active participant in the platform battle, with Kindle e-readers and Fire tablets competing against Apple, Google and Microsoft. On the other hand, there is a difference between the consumer tablet market, which is driven by content consumption and e-commerce, and the smartphone market, which is more centered on communication and utility.”
Amazon should focus on mobile apps that integrate well with existing hardware and operating systems, the analysts advise.
Avi Greengart, research director, consumer devices, for Current Analysis Inc., a mobile hardware and telecommunications research and consulting firm, says he isn’t convinced Amazon has a smartphone in the works, though he adds it’s a possibility.
“It isn’t clear whether Amazon is hiring for a secret phone project or just for its existing Kindle line, but it would not be shocking if the company decided to enter the hyper-crowded smartphone market,” Greengart says. “It already has a broad array of content, significant investments in cloud services and relationships with developers.”
Amazon is also known for having a CEO who does not shy away from placing huge bets to shape its own future rather than find itself at the mercy of others. Amazon’s Kindle Fire and the launch of its own Amazon Appstore for Android are just a couple of examples.
If Amazon does get into the smartphone market, Greengart, like Sebastian and Schauer, says it may have a tough time convincing consumers to go for an Amazon phone over the newest iPhone or a highly refined Android device from a handset maker like Samsung or HTC.
“Unlike tablets, consumers buy their phones from carrier retailers who subsidize the device heavily, masking much of the difference in the actual price,” Greengart says. “Consumers also prioritize apps over content on phones, and Amazon is far behind other Google licensees and Apple on that front.”