After several weeks of rumors, Amazon formally plunged into the tablet market by announcing the Kindle Fire tablet device and a few cheaper models of its Kindle e-Reader. With the iPad, Apple virtually invented the Tablet market and pitch-forked it into the mainstream, despite a fairly high price tag. The iPad at its current price point, is viewed by many as an alternative to a laptop or a PC. A typical buyer of an iPad is one who might have otherwise purchased a PC. The drop in sales of PCs to some extent is a confirmation of this trend.
In an attempt to counter the phenomenal success of the iPad, Google launched the mobile OS, Android, as an open source product. Attracted by the success of the iPad, several manufacturers jumped on the tablet bandwagon with Android-based tablets. Unfortunately, Android tablets from the likes of Motorola, Samsung, and Asus were way too highly priced. While they were "somewhat" comparable in usability to the iPad, they are simply way behind on the number of available applications, and just marginally cheaper than an iPad. So they have barely made a dent on Apple's lead in the tablet market.
Amazon, on the other hand, has plenty going for it and is better equipped to take on the tablet market. It is essentially a retailer, and so its end-game is really in driving adoption of the Kindle in order to further simplify and accelerate online purchases. The more Kindles are sold, the more retail sales Amazon is likely to garner in the form of movies, books, music, magazine subscriptions, etc. In other words, Amazon could even afford to take a "hit" on the price of the Kindle and more than recover its losses through the sale of content. So,Amazon has very cleverly leveraged Android and launched a compelling product that is far cheaper than an iPad, albeit with a slightly re-defined focus. The Kindle Fire is primarily meant to encourage and simplify content consumption. At the same time it also lets you perform simple communication tasks like email. To further simplify things, it does an automatic free backup to the Amazon cloud. The Kindle Fire also closely monitors your browsing and purchasing habits through its new Amazon Silk browser, giving Amazon plenty of data to mine to it's heart's content.
Amazon appears to have almost everything chalked out to "take over the universe." It sells pretty much anything and everything online, thereby reaching out to all and sundry. With the Kindle Fire, it has attempted to strengthen this reach even further. For the techies, Amazon provides a phenomenal cloud service that is way ahead of its competition and includes everything from storage and backup, to mass email, to hosting of web sites and web applications, with a unique "pay for what you use" pricing model. On the operations side, it seems to have optimized its resources and distribution outlets to such an extent that it has drawn the ire of folks on the left, who typically accuse Nike, WalMart and the like of poor working conditions, worker exploitation, etc.
With the Kindle Fire, Amazon has struck a sweet spot in terms of functionality, price and performance and created a whole new market where it is likely to almost have an unfair advantage. It seems to have adopted an Apple-like approach where everything on the Kindle is controlled through the infamous "walled garden" of its app store.
It will be very interesting to see the moves of the competition over the next several months. For the moment, Amazon seems to know exactly what it is doing and where it is headed. With the acquisition of Motorola, Google tablets and phones are certainly on the cards. But with an open source Android for the moment, others like Amazon seem to be making the most of it. Apple, on the other hand, which has repeatedly proven to be an innovative company, has to deal with the leadership transition from its iconic leader, Steve Jobs. So it remains to be seen what it has planned down the pipeline. Apple can try and compete at the low end by launching a 7-inch iPad to counter the Fire or it can ignore the low end of the market and continue to focus on its high-end, high margin business. Will Apple choose to try and douse Amazon's Fire?
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