Amazon could cut Google out of the Android party

September 10, 2012
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    Google’s hold on the Android platform in the tablet space may not be very secure. Could Amazon cut it out with a string of tablets and a tempting content package?

    The original strategy Google adopted with Android was very clever. It took an open source route and enabled manufacturers to use the platform without having to license it. It allowed them the freedom to build upon the platform with no restrictions in terms of software or hardware. This led to the Android platform taking a healthy lead in the mobile market.

    Even with Microsoft applying a licensing tax through its patent portfolio and threats of legal action and Apple weighing in to sue over patent infringements, manufacturers that adopted Android have done well out of it. Whether that will continue to be the case is debatable, we think it will, but Samsung’s court loss to Apple was a sore one and HTC is starting to struggle.

    One of the problems with the open approach Google chose is that a company like Amazon can come along and cut it out entirely.

    How does Google make money from Android?

    Google is primarily an advertising company. Take a look at Google’s financials. It makes money by serving ads and it serves ads so well because it controls the medium of searching the web. The Android project is driven by a realization that much of our web browsing is moving on to mobile devices and Google needs a slice of that action to remain successful. In return for some awesome services, which are ostensibly free at the point of delivery, we allow Google to compile information on us and to use that information to serve us ads. It’s a mutually beneficial arrangement.

    If people use Android, but not Google services and search, then that advertising revenue is going to dip. Apple is already working to cut Google out of the iOS platform, now Amazon is doing the same thing with Android.

    The potential success of Motorola and its new Android line-up could be very important for Google. The acquisition was talked about as a way of building a patent portfolio for the legal war that has been raging, but Google could use a more varied income stream. Control of some Android hardware ensures a close partnership with Google services.

    What is Amazon doing?

    Amazon has caused quite a stir with its new line of tablets. The flagship 8.9-inch Kindle Fire HD with LTE leads the charge and could challenge Apple’s iPad at the premium end of the market. At the budget end we can see the 7-inch Kindle Fire HD vs Nexus 7 is going to be a battle. Then there’s the updated Kindle Fire, which, at $159, undercuts the Nexus 7 significantly and will tempt many people, even if the specs are less impressive.

    What we have here is an attempt to provide people with an Amazon tablet option no matter what their budget happens to be. These Kindle Fire devices are Amazon’s storefront on its content range. The company will happily sell hardware without turning a profit on it because the aim is to secure a captive audience for content sales which will continue over months.

    What do people really want tablets for? They are all about consuming content.

    So who cares about specs?

    When it comes to the mainstream market most people don’t care about specs. They want something good that works well but it doesn’t have to boast the highest specs around. The success of Apple’s iPhone is all the proof you need. In the tablet space Google offered a great device in the Nexus 7 and it got a lot of praise in the tech world because it represents value for money in terms of specs. The majority of consumers aren’t going to decide on a tablet purchase because of hardware. They want something that brings them easy access to content.

    Who has the best content?

    It really depends on what you are looking for. When we look at apps there’s no doubt that Google Play is the Android leader, but the Amazon App Store is a carefully selected subset of the best apps and games. Most people will be content with 30,000 to choose from. That’s how many of the 50,000 on offer will work with the Kindle Fire range. Then there’s the popular free app of the day promotion. It boils down to a wider choice versus greater quality control.

    When we look at movies and TV shows, which are definitely a consideration for most tablet buyers, we can see that Amazon is offering over 25,000. Google, and for that matter Apple, have a much smaller selection. The music services are comparable and on ebooks Google actually has the lead with over 4 million versus Amazon’s 1.5 million, but Amazon offers a smother user experience.

    Simplicity and price

    You can argue about who has the best content selection but when it comes to simplicity and pricing it’s tough to see past Amazon. For $79 a year, in the US you can sign up to Amazon Prime. That gives you access to loads of content. You can stream all the movies and TV shows, commercial-free. You can also borrow a book a month from the Kindle Owners’ Lending Library with no due dates. You even get free two-day shipping on Amazon purchases to addresses in the contiguous US. Beyond Amazon Prime you also have standard rental options and new models like Kindle Serials.

    Google Play doesn’t compare well with that. Neither does Apple’s ecosystem.

    Cutting Google out

    Amazon is a serious threat to Google in the tablet space on Android. It’s not even just about the fact that you can get easy access to lots of content at great prices; it’s also about the retail angle. Google’s ad revenue is heavily bolstered by people searching for things to buy and being served relevant ads. Amazon cuts out the middle man completely, you don’t even need to use Google’s search engine. If you already have an Amazon device and the delivery benefits of Amazon Prime then why bother to search online? You may just go with the brand you trust and buy direct from Amazon. Especially since it will be serving ads direct on the Kindle Fire lock screen.

    This isn’t just about tablets either. The company may have stopped short of announcing an Amazon smartphone, but it did strike a deal with Verizon to pre-install a bunch of Amazon apps on a number of Verizon Android phones, including the new Motorola Droid Razr M.

    Google needs to maintain some control over Android and it looks like more movement in the hardware market is going to be vital. Amazon looks like a serious threat. What do you think? Should Google be worried? Can Amazon usurp the platform?

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    Comments

    • bungadudu

      WOW

      Superb article !

    • http://www.facebook.com/ngomac Chisanga Ng’oma

      I was planning on getting a Nexus 7 sooner or later but after this article I am tempted to get a Fire HD now, great article, although you may not have intended selling the Fire HD as well as it turned out.

      It really is a tragic irony that Amazon have used Google’s playground that’s open for everyone, to make a walled garden.

      • Southrncomfortjm

        The restrictions on the Kindle will irritate anyone that knows better. Aside from Amazon Prime the Fire doesn’t offer anything that the Nexus 7 doesn’t and the Nexus 7 doesn’t restrict you. I’d rather have the basic streaming subscription to Netlfix than Amazon Prime.

        • http://www.facebook.com/ngomac Chisanga Ng’oma

          What we’ve all quickly learnt about tech is that the average Joe doesn’t always know better. Amazon has a strong brand a comprehensive service, I’m inclined to think for someone not “in the know”, the brand must be reassuring.

          And, I live in the UK where Amazon owns Lovefilm, if they can bring that humongous catalogue of video to the tablet market, the play store looks lame.

          • tBs_Battousai

            I’ve just looked at LoveFilm and in the “Anime” category they have three titles, Not sure I’d call that ”
            humongous”….

            • http://www.facebook.com/ngomac Chisanga Ng’oma

              That’s rather embarrassing, seems my faith was misplaced. There goes my Naruto marathon.

    • Blaine Magee

      I think what Amazon is doing with Android for their environment is a great thing. However people that want to use actual Android and not a heavily skinned version will stick with non Kindle devices. I think that Amazon will corner quite a few people with the Kindle’s for ease of use and and content streaming. It’s the same thing with iOS once you have all your content in a certain area you don’t want to leave it. However I really doubt Google is in any danger of losing control of Android on tablets.

      • http://www.facebook.com/profile.php?id=80202342 Chris Hall

        I agree. Amazon and their version (along with B&N and the Nook) and iOS are great for a lot of people, but primarily for people who aren’t wanting customization or to toy with their device. Older people, casual users, people who just aren’t into tech, generally aren’t going to care. They think it is cool, useful, and without the bells and whistles and open-ness… it just works!

        Think of it as this. A study done a long time ago had shown that children left in a great open space with a bunch of toys and playground equipment strewn over a large borderless lot tended to stick together in the circle, the majority barely venturing out and playing with the further pieces of equipment even though they knew it was safe. A fence was added to that same area and the toys where brought in closer together. The children, knowing they where walled in and had a particular boundary, were happier, especially when given more structure in their play. Yes, some children were saddened by the sudden shrinkage and collapse of the grand open lot, but on the whole there was more happiness. This also applied to home life when rules where put in place… but that’s a whole ‘nother study.

        My point with that story is thus: when a user knows the short yet full extent of what their product can do, they are content. There will be that group that shouts that it can be more, and that shouting is getting louder, but people do like their walls and fences and rules. Android scares a lot of people with how open it is. My grandmother still insists her android phone is just a phone and cannot do all the cool things my phone can. She has a Droid Incredible… it can do just about all of the things my Skyrocket can do. But to her, she has had to set up an artificial barrier of “it is only a phone” because otherwise she’d be scared to use it as it would be “too much and too complicated” for her. I want to kick my uncle for telling her to buy it as a result.

        • Blaine Magee

          I tip my hat to a fellow Skyrocket owner.

    • http://profiles.google.com/naval.m.gilles Naval Gilles

      This only happens if amazon decides to makes it content dependent on hardware. And Amazon will never do that. Google android has the same advantage over ios that it will have over amazon android. its more open.

      Amazon android is trying to be Apple ios, except it can’t be or it will kill the amazon business model.

      So where does that leave android amazon? No where. You lose a lot by buying it. Google play store, ios app store, itunes. And you gain basically nothing by buying it. Amazon content can be had on google android and ios.

      This is the hype that goes on after a new product. Not to mention outside of U.S amazon doesn’t exist. Amazon business model is nearly impossible to expand across country lines (cost, laws, taxes, infrastructure).

      Amazon is great at what it does, online distribution of goods and servers, don’t let a few tablet releases confuse you. Amazon will never be a hardware behemoth like Apple and Samsung, or a software power like Google and Microsoft. Amazon is not transforming anything its just taking a a market that is great tool for what they do (sale things) and expand it.

      • http://www.facebook.com/ngomac Chisanga Ng’oma

        I’m sorry but, you must be from the US. I’m not sure how it works out in relative terms but to misquote Ron Burgundy Amazon is kind of a big deal, over in Europe. And they own the largest film rental company in the UK, Lovefilm, which has a much larger back catalogue the Netflix over here at least.

        The Kindle HD like the article says is a content delivery device, and speaking from a UK pov, they pretty much own the ebook market, a monopoly on film rental (digital and physical) and can sell you pretty much anything else.

        • http://www.facebook.com/profile.php?id=80202342 Chris Hall

          What he meant is before this, according to Amazon most of the Fire related services couldn’t be had outside of the US. This may be changing with this iteration of the Fire though.

    • http://profiles.google.com/naval.m.gilles Naval Gilles

      Actually the best content belongs to Apple and Google android. Because they have their content + amazon’s. And that will always be the case unless amazon wants to commit suicide. And Apple is winning by content war and its not even close. Apple has enough market share and a business model (hardware profits) where others have to provide content to them, but they don’t have to provide any to others.

      The only company that can do what Apple does without killing their business model is Samsung They just need their own software first.

      • Simon Hill

        Another way to look at that is that Amazon gets to sell its content on every device but Google and Apple don’t.

    • Southrncomfortjm

      Amazon will have to make its own complete eco-system for that. For now, they still rely on Android as the base for its OS. If Google ever stops providing Android free of charge ( I think they only promised to keep it free for seven years) then Amazon will either have to pay up or move on. I’m also wondering if Google could leave Android open for the most part, but require that anyone using Android leave the Play Store as the main App purchasing service.
      I’ve got to wonder if Amazon feels a bit dirty creating the Kindle Fire and taking a base that they didn’t create and snubbing the creator. Yes, perfectly allowed under Google’s rules, but still kind of a dick move. Yes, its also how business works, but still, kind of a dick move. That said, I only use the Amazon App store for the occassional free app of the day.

      • Simon Hill

        I don’t think Google will ever try to charge for the platform and if they were going to try and insist on Google Play they would have done it already, but I agree Amazon is taking advantage and sticking it to Google at the same time.

        • DrCarpy

          This is why I won’t support Amazon by purchasing a Kindle product. As well, all the feature things like app of the day doesn’t work in Canada.

    • Nic Gillespie

      I take it the writer of this post has never used and android 4.x device.

      • Simon Hill

        Why would you think that?

      • http://www.facebook.com/profile.php?id=80202342 Chris Hall

        I fail to see your point. I have a skyrocket running ICS that I just installed AOKP on. I can still access all of my Google Services as well as Kindle and Nook content. So again, your point is a bit of a snark; I’m looking but I’m pretty sure there isn’t anything to be found.

    • tBs_Battousai

      “For $79 a year, in the US you can sign up to Amazon Prime” so the only market in the world that matters in the US?

    • Jamie Cottrell

      this is good, it means google will provide more content. thats a good thing

    • Lee Mockton

      This is biting the hand that feeds them. Amazon must be stopped! Consumers, don’t settle for a walled garden! Don’t let them take your digital freeeeedoooom!

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