Amazon.com's (AMZN +0.34%) penchant for disrupting industries has led to terrific financial growth over the years. From the cloud to groceries to e-commerce, Amazon has and is still trying to make a dent in a number of multibillion-dollar markets to secure its future.
So it wasn't surprising when the e-commerce giant decided to bet big on the smartphone market in 2014 with the Fire Phone. However, Amazon got burned by this venture and killed the device just one year after launch.
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The Fire Phone was a flop, as the company had to write down $170 million worth of inventory just three months after launch, while another $83 million worth of phones were left unsold during that period. But Amazon has decided to take another plunge into smartphones, according to a report from NDTV Gadgets 360.
The second coming
Gadgets 360's sources indicate that Amazon is working on an Android-powered smartphone internally code-named "Ice." But the differences run deeper than the name. Amazon had made a big blunder with the Fire by making a premium device with an off-contract price of $650 three years ago, a time when Samsung and Apple were ruling the market with their flagship phones. Not surprisingly, the device failed despite innovative features such as 3D screen simulation that was achieved with the help of four front-facing cameras, and object scanning to help identify a wide range of items.
Users saw through Amazon's gimmicky features and instead focused on the device's shortcomings. The company used its own version of Android software, known as Fire OS, so it lacked important apps such as Google Maps and Mail. Amazon was hoping that developers would start making apps for the Fire OS, but this dream died after the company moved just 35,000 units of the device in its first month.
But Amazon seems to have learned from its mistakes. Reports indicate that the Ice smartphone will mainly target emerging markets, so it will be priced at less than $100. More importantly, Amazon won't be skipping any important features this time, as the device will run the latest version of Android and will offer the full suite of Google services.
Additionally, the Ice smartphone could also come equipped with a fingerprint scanner, a 13-megapixel primary camera, and a screen size of 5.2 inches to 5.5 inches. The specs indicate that Amazon is working on a budget device that can move substantial volumes in emerging markets such as India, where 80% of the smartphones sold are priced below $150 as per Bloomberg.
By comparison, the Fire Phone mainly targeted developed markets where established smartphone makers already had a commanding position. Amazon seems to be drawing up a smarter strategy for its next smartphone venture, which could help amplify its overall sales.
Why smartphones could be important for Amazon's growth
By selling a sub-$100 device in emerging markets, it is clear that Amazon doesn't intend to make a lot of profit from smartphones. Instead, the company can focus on enhancing its ecosystem by tightly integrating its own apps into Google's existing operating system.
The company could strategically place the Prime Video app or the Amazon mobile shopping app in the Ice smartphone so that they become the go-to apps for users, instead of Netflix or Flipkart. This could pave the way for Amazon to get more users onto its e-commerce platform, while also boosting Prime subscriptions.
Amazon will be able to lay its hands on a huge amount of user data that it can channel to improve its artificial intelligence (AI) platform, according to Counterpoint Research. For instance, the company can collect data regarding the shopping or video streaming habits of consumers, which it can then use to provide recommendations using its AI engine.
Additionally, Amazon can use the collected data to add more skills to its AI-enabled Alexa virtual assistant platform, which could help it sell more of its Echo smart speakers.
Though still a rumor, the Amazon budget smartphone would be a shrewd strategy to capture a bigger slice of the e-commerce market, which could potentially boost the company's revenue in the long run.
