Amazon.com, Inc's New Phone Is Built Around Selling Stuff

Amazon.com  (NASDAQ: AMZN  ) has finally introduced its long-awaited Fire smartphone in a media event Wednesday.

The key feature on the Fire smartphone is Firefly, which can recognize over 70 million items using a variety of methods. It's as simple as using the microphone to let the phone "hear" a song and then have the device direct you to it on Amazon. It even works by inputting pictures, QR codes, and Web URLs. The song recognition feature also works on movies and television shows.

Firefly has a dedicated button, which allows for the various inputs. Though the service does seem primarily linked to making it easier to buy things through Amazon, it also has other uses.

Hold the phone up to a piece of well-known art, for example, and push the Firefly button and you will be connected to the Wikipedia entry for the artwork. Of course if a print is for sale on a T-shirt, mug, or anything else, you will likely be given those buying choices as well.

The basics on the Fire smartphone
The Fire smartphone has a 4.7-inch LCD screen, with a 2.2 GHZ processor, 2 GB of RAM, and a 13 megapixel rear-facing camera. That's a smaller screen than the biggest Android phones but a larger one than Apple's  (NASDAQ: AAPL  ) current iPhones. Rumors persist that Apple plans an iPhone with a larger screen for release this fall.

At the press conference, CEO Jeff Bezos specifically touted the camera specs of the Fire phone and said users of the device would get unlimited photo storage on Amazon's Cloud Drive. 

In addition to Firefly the phone will also offer the Mayday service. This service offers push-button customer service with a live person. That could make the Fire phone a big seller with older users, who have clung to non-smartphones due to their severe learning curve. With Mayday, those users won't be stuck in the past.

One feature the phone will not have was the heavily rumored 3D screen. Instead, it will have what Bezos called "dynamic perspective." This option lets people rotate the phone to get a different view depending on your angle. He explained that the phone is basically redrawing the image 60 times per second.

Pricing quirk makes the phone attractive to Amazon's best customer
The Fire Phone will be sold in partnership with AT&T  (NYSE: T  ) starting at $199 for a 32GB model with a two-year contract. It can be pre-ordered now for a July 25 ship date. People who buy the phone will get 12 months of Amazon Prime for free and existing Amazon Prime customers will have a free year tacked onto their current subscription. 

Offering Prime for free may tip many on-the-fence customers into buying it. For existing Prime users who intend to keep the service, the perk is essentially a $99 rebate. For those who don't already have Prime, getting a year for free is a value that might help make the idea of switching phones more palatable, especially when most premium phones sell at $199 with a two-year contract.

Keeping Prime users happy and getting more people to subscribe is key for the company. Prime subscribers spend almost $538 a year versus the $320 per year spent by non-subscribers, according to a study conducted by RBC this month.  

How big is this for Amazon?
Bezos thinks the company will be able to win a user base for the Fire smartphone because it has a loyal following. "The most important thing we've done over the last 20 years is earn the trust of customers," GeekWire transcribed from his speech. "How do you earn trust? You don't ask for it, that never works. The simple recipe: 1. Do hard things well. 2. Repeat."

That model has proven successful with the company's Kindle tablets. Though the Kindle has not supplanted iPads or Android devices, millions have been sold. Many of which, have gone to the 244 million active users whose credit card information is already on file. 

Robert Peck, an analyst with SunTrust, believes the phone will be a hit for Amazon that should make a huge impact on the bottom line, to the tune of $2 billion, USA Today reported. Peck estimates sales of 2.7 million phones, mostly to Amazon's Prime customers. "We assume that each new customer buys 10 items per year," from the phone, Peck said, at $50 each.

Will people buy it?
Amazon won market share in tablets because the Kindle Fire was much cheaper than an iPad or comparable Android device. That advantage is not there with the phone, though the free year of Prime is pretty sweet. Customers will still have to shell out at least $199, about the same price as a new iPhone.

Firefly seems like an incredibly convenient service, but it's not hard to buy music, movies, and groceries on a competing device. Adding Mayday may give the phone some appeal to those who are frightened by technology, but at this point, that should be a relatively small audience. 

In my opinion, nothing Amazon showed at the press conference was revolutionary enough to make an iPhone or Android fan feel like they should switch. The success of the Fire phone will be determined by Amazon's existing customer base. To me, they need to be dedicated because the main draw of the phone is to make spending money at Amazon easier.

I think the Fire phone is a neat mobile device with innovative features, but Amazon might have trouble convincing people to buy it. 

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  • Report this Comment On June 23, 2014, at 3:53 PM, BigTimeRook wrote:

    I'd give it a try if I was using a work supplied iPhone. I LOVE Amazon and shop there many times per week. I'm buds with our UPS driver :-)

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