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Amazon vs. Facebook: Which has the stronger smartphone use case?

Kindle Fire HD 4G

Other retailers look to repeat Amazon's Kindle Fire strategy

The rumors mills are in overdrive, with industry watchers predicting that Amazon and Facebook are both planning to bring out smartphones. The use case for a Facebook phone is the most questionable, while Amazon’s biggest hurdle with such a strategy is likely to be getting the device on retail shelves.

Shopping and social networking are popular activities on smartphones, with each continuing to grow. Being able to further drive shopping or social networking activity would be one reason why Amazon and Facebook could decide to develop their own smartphones.

“Could either of those companies make a smartphone - yeah, they could,” said Michael Morgan, analyst at ABI Research, New York. “But I think when they start to look at the potential costs, the difficulties of success, it is tough for them to go ahead.

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“They are software companies that are used to software margins. It is tough for them to get into the pure play hardware business,” he said.

“Sure Amazon has put out its tablets, but the purpose of those tablets was to make people shop on their Web site - that would be a tough sell for them on smartphones. In the case of Facebook, what could Facebook bring to the smartphone world when it is essentially already on every handset?”

Integrated shopping
The possibility of an Amazon or a Facebook smartphone has been bandied about for a while. The rumors picked up steam last week when it was reported that Amazon would be introducing a smartphone in the second quarter of this year, and Facebook announced an event this week that will focus on Android.

Amazon may have the stronger use case for a smartphone compared to Facebook.

While nothing has been confirmed at this point, Amazon could be looking to extend its success with the Kindle Fire tablet into the smartphone space.

While tablets are typically better at capturing online shopping and content consumption, the use of smartphones to shop and engage with content is on the rise and most would agree that the user experience for these activities on smartphones is still lacking.

By offering a more integrated shopping and content consumption experience on a smartphone, Amazon could be looking to drive consumer usage.

Retailers balk
Amazon would likely to face a difficult time convincing bricks-and-mortar retailers to carry such a device on their shelves.

The problem is that retailers are concerned over how smartphones are driving showrooming, with shoppers visiting physical stores to look at an item and then comparing prices online using their smartphone. Ultimately, many of these shoppers will purchase the item from an online retailer such as Amazon.

“Could Amazon bring together an integrated shopping experience on a smartphone – absolutely,” Mr. Morgan said. “And in doing so, they would be destroying the stores at which those smartphones are being sold at.

“Those stores know what Amazon is about,” he said. “It would be really tough to get people to commit to putting those smartphones on retail shelves.”

“It was the fear of this kind of thing happening that started to have retailers not wanting to carry Amazon tablets because they were essentially selling the products that was making their customers buy something else out of the store.”

Still, Amazon could sell a smartphone from its ecommerce site. However, it might be hard to move smartphones this way since consumers want to pick up and look at a smartphone before purchasing it.

The Facebook experience 
The case for a Facebook smartphone is not as strong because Facebook is already on nearly every phone via the social network’s apps. Additionally, HTC offers a phone with a dedicated Facebook button.

While these user experiences may not be perfect, it is not clear that the experience on a smartphone from Facebook would be sufficiently improved to make it worth it for the company or for consumers.

Facebook could try to gain better control of user data by bringing out its own phone. However, this is unlikely to be a strong enough reason to make the significant investment needed to develop a smartphone, per Mr. Morgan.

Since Facebook has already revealed that the upcoming event on Thursday will be around Android, one possible scenario is that the social network will unveil its own version of Android.

“They could open source it if they want to, they could use it as a revenue stream, but they could tailor it so that that OS now delivers an experience where Facebook operates better,” Mr. Morgan said. “You could have more access to different parts of the handset to allow them to better collect information, to better integrate the Facebook experience.”

If either company were to come out with smartphone, they would also face significant competition from Apple and Samsung, with consumers enthusiastic about their smartphones.

“I don't honestly see either of these companies posing a serious threat to Apple or Samsung in the short run,” said Carl Howe, vice president of research and data sciences at Yankee Group, Boston.

“As an example, Amazon's Kindle Fire is barely at the 10 percent mark in ownership against iPad, and that's after two years in the market, and the smartphone market has more barriers to entry than tablets,” he said.

“While both companies trying out the smartphone market are interesting developments, I don't think either will fundamentally change the landscape – yet.”

Final Take
Chantal Tode is associate editor on Mobile Marketer, New York

Associate Editor Chantal Tode covers advertising, messaging, legal/privacy and database/CRM. Reach her at chantal@mobilemarketer.com.

 
Related content: Manufacturers, Amazon, Facebook, smartphones, ABI Research, Michael Morgan, Yankee Group, Carl Howe, mobile marketing, mobile

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