Is Amazon the next Apple?
Amazon and Apple are both companies who have embraced the post-PC digital world. Although Apple reigns in the mobile ecosystem, Amazon is quickly picking up steam and may pose a threat to the manufacturing giant.
Both companies are extremely strong in the mobile ecosystem. Additionally, mobile experts agree that both Apple and Amazon are increasingly competing in three key areas ? media, devices and selling directly to consumers as digital retailers.
?Amazon and Apple are both executing extremely well when it comes to mobile, both in terms of devices and content,? said Anne Frisbie, vice president and managing director, North America at InMobi, San Mateo, CA.
?These two companies are approaching mobile from very different sides of the fence, but there is clearly increasing overlap in business models across media, hardware and software manufacturing and retail,? she said.
Last week, Apple unveiled its new iPad 3.
The tablet includes several new features such as a high-resolution display and 4G access.
Additionally, the manufacturing giant also announced a price reduction for the iPad 2 ? a move that shows
Apple still leads the pack in the high-end of the tablet market, but also addresses the lower-priced segment as well.
However, while there was no clear competition when Apple announced the iPad 2 last year, there is stiffer rivalry now with Amazon?s Kindle Fire in play.
The Kindle Fire launched several months ago and is causing the tablet market to grow at a faster pace than previously expected, according to Forrester.
Not only is the Kindle Fire?s screen size relatively smaller than the iPad, but the price point is a lot less.
Amazon sells its Kindle Fire for $199 in hopes of gaining most of the money back through media consumption purchases, while Apple?s iPad 3 costs $499 and the iPad 2 costs $399.
According to Ms. Frisbie, the Kindle Fire, despite only launching recently, is already in second place behind the iPad, which has a significant lead.
?Above all, the most exciting trend we are seeing is the increased adoption of tablets,? Ms. Frisbie said.
?This increase aligns with the results of our recent Mobile Media Consumption Study, which unveils that North American mobile consumers are already spending more time on mobile connected devices than TVs or PCs,? she said.
The new Apple?
Amazon and Apple are both companies who have embraced the post-PC digital world, per Chia Chen, senior vice president of the mobile practice at Digitas, Boston.
?In fact, they are both focused on accelerating the arrival of the post-PC digital world as well as profiting from it,? Mr. Chen said. ?But they are profiting from it in different ways.
?Apple profits from selling devices,? he said. ?Amazon profits from selling digital goods.
?They happen to have ended up building similar ecosystems of hardware, software and content, but the parts of the ecosystem that derive their profits from are very different.?
Amazon?s Kindle Fire competes with Apple?s iPad for content consumption.
However, the iPad is not just a content consumption tablet ? it provides a bigger experience for users.
The device?s hardware and apps such as iPhoto, Garage Band, Key Note and Pages, provide a more complete experience as an everyday replacement for the PC, per Mr. Chen.
Additionally, with their similar post-PC digital ecosystems, Amazon and Apple are definitely competitive and thus threaten each other.
?The interesting thing is going to be seeing how Apple's hardware-centric business model competes with Amazon's content-centric business model,? Mr. Chen said.
?And what is really interesting about that is that they are both companies who are incredibly focused on creating and sustaining high quality across all aspects of the ecosystem of hardware, software and content,? he said.
?That means that Apple seems to work very hard to ensure that there is great content for their devices and Amazon works very hard to create great hardware to display their content.?
According to Wilson Kerr, vice president of business development and sales at Unbound Commerce, Boston, Amazon poses a threat to traditional retailers and is doing a great job at consolidating Web traffic for those looking for one stop online shopping.
?That said, they are a reseller and take a percentage of the majority of what they sell,? Mr. Kerr said. ?They manufacture very little of what they sell.
?As such, like any retailer, they operate on low margins,? he said. ?Apple on the other hand, is highly profitable because they sell products they manufacture consumer-direct.?
According to Mr. Kerr, Amazon and Apple are two different companies.
Aside from the recent Kindle-iPad cross-over, they have two very different business models.
?Amazon is an online superstore reselling other companies' products, while Apple is a device manufacturer that sells consumer-direct,? Mr. Kerr said. ?As such Apple is vastly more profitable than Amazon and far larger.
?Apple reported in the first-quarter of 2012 revenues of $46.33 billion with a net quarterly profit of $13.06 billion,? he said. ?Amazon, in the last quarter I could find, reportedly lost money on sales of $17.43 billion.?
?The Kindle Fire is a low-cost vehicle for displaying the emedia that Amazon sells and it is manufactured by Quanta, for Amazon. The iPad is a powerful tool designed and manufactured by Apple to provide the best user experience and technical platform. According to the New York Times, about 27 percent of the reviews for the Fire ? on Amazon?s site ? convey mixed to negative feelings about the device.?
Noah Elkin, principal analyst at eMarketer, New York believes that Amazon is nominally competitive to Apple.
?Anytime a consumer considers buying a tablet and they choose between the Kindle Fire and iPad, that makes Amazon a competitor to Apple,? Mr. Elkin said. ?But, the two devices and companies represent different value propositions to the same market.
?Apple is at heart a hardware company. It sells digital content because it helps support their hardware sales,? he said. ?Amazon goes out from the opposite perspective ? they are not trying to make money from the hardware, but from the content they sell.
?Amazon?s model is the razor blade model ? buy one device and keep feeding it more razor blades ? with the expectation that they will recoup the cost of the hardware over the lifetime that the consumer owns the device based on how much music and books the consumer buys.?
According to Mr. Elkin, Amazon is currently the only other company out there that has the same kind of vertical integration that Apple has.
?Google is slowly organizing the content and software side to it, but I do not see it unless Google makes a change on how they position Motorola,? Mr. Elkin said.
There is no competition between Amazon and Apple, according to Rhoda Alexander, senior manager of tablet and monitor research at IHS iSuppli, Englewood, CO.
The executive believes that Apple is the clear winner.
?It is competition in the same way that all the tablets are in competition with each other,? Ms. Alexander said. ?If you are asking if it a particular threat to Apple, we do not see it in the category.
?This has been a very strong year for tablets and it continues to grow,? she said.
Although Ms. Alexander believes that Apple currently dominates the tablet market, Amazon is one to watch out for as well.
?Amazon is definitely a strong player to consider,? Ms. Alexander said. ?They addressed a willingness with the price comparison.
?The one real hurdle that we see is that they are not a true international player at this point,? she said.
Rimma Kats is associate editor on Mobile Marketer