Why Amazon’s Tablet Matters: It’s Not a Computer. It’s a Store.

9/28/11Follow @curtwoodward

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to foretell some kind of Prime bundling on a tablet too—which would create a strong link between consuming media and browsing the main Amazon store.

Music: Amazon has for several years maintained an MP3 store online, where shoppers can get albums or individual songs. It recently paired that up with Cloud Player, an online music player that makes a significant improvement over Apple’s iTunes by disconnecting music from individual computers or hard drives and making it accessible anywhere.

Storage: Paired with the music player was a bigger-picture “digital locker” service called Cloud Drive, that lets users store files—photos, videos, songs, documents, you name it. It’s a freemium model, with any Amazon customer getting 5GB free, and paid tiers that charge $1 per GB.

Books, Magazines, Newspapers: The Kindle, Amazon’s original electronic-ink reader, is supposed to be sticking around even beyond any experiments with tablets—Bezos has said as much. But the digital book downloads and subscriptions to other kinds of formerly printed media can easily come along to a new tablet. Reports this week have also indicated that magazine publishers are getting onboard with tablet-based subscriptions, different from Kindle versions, for the new tablet.

Apps: Amazon already has an app store for devices running Android, the mobile operating system owned by Google that is open to modifications by other companies. It’s pretty well established by the overall news reporting so far that Amazon is going to be running an Android-based operating system on its new tablet. And Amazon’s also fought Apple in court over the “app store” branding (and won).

Daily Deals: OK, so seemingly everyone has an offering in this sector right now. And Amazon’s Groupon clone, Amazon Local, is actually powered by the leading Groupon clone, Living Social, in which Amazon is an investor. But if you’ve got a device that is aware of its location (as a tablet can be), then you’ve got a pretty good reason to chuck the daily e-mail based subscription model for most daily deals services and pipe those suckers directly into people’s hands.

Shopping: Uh, oh yeah. The whole point of Amazon’s existence is to sell things to people. It’s done remarkably well at that mission over the years, and a big part of that is its ability to collect lots of data on shoppers and lead them directly to things they’re very likely to purchase. If the tablet is a new kind of store, then Amazon must have its own to control the data it needs to keep its position as the top online retailer.

Amazon Web Services: This is less about the consumer and more about the people who want access to them. But Amazon’s cloud-computing hosting service powers a large share of the startups and application developers who build things for consumers to use on tablets. If for no other reason than brand familiarity, the AWS penetration among developers helps give Amazon another leg up in getting people to make things for its device.

As a retailer, Amazon has never previously cared what kind of computer a shopper was using to buy stuff. With Apple leading the way, the smartphone and tablet revolutions have changed all of that. Apple’s soup-to-nuts control of the operating system, purchasing mechanism, delivery channel, and data dump suddenly became a threat to Amazon’s business.

The device was no longer a way to enter Amazon’s store—with the iPad, the device itself becomes the store.

You can see this conflict in the way that Amazon fought to get around Apple’s customary 30 percent cut by constructing its own Web-based Kindle app that worked within the device. But instead of playing whack-a-mole with Apple’s terms of service, which it could change at any time, why not jump into the device game?

With reasonably affordable manufacturing partners available in Asia and some in-house expertise based on the success of the Kindle, there’s really no good argument against it.

Curt Woodward is a senior editor for Xconomy based in Boston. Email: cwoodward@xconomy.com Follow @curtwoodward

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