It is no secret that the tablet market is one of the fastest-growing markets in the world. In 2013 alone, the tablet market is projected to grow 53.5% to 221.3 million units according to IDC, the leading tablet industry research firm.
In this report, IDC also says that it expects 22.2% growth in 2014, which will bring the market to 270.5 million units. By 2017, when the market is projected to reach 386.3 million units, the growth rate will dip down into the single digits. Nevertheless, this stretch of growth is truly mind-boggling, especially considering that before 2010 the tablet was not even a major thing.
It is also no secret that several major companies are jockeying for market share in this cut-throat industry, and among the most prominent are Apple (NASDAQ:AAPL) and Samsung. These two companies together dominated half of the market in the third quarter (29.6% and 20.4%, respectfully), while the remaining 50% was controlled by a broad array of companies including Asus, Lenovo, and Acer, none of which held more than 7.4% market share.
In reality, the tablet market is Apple, Samsung, and everybody else, yet Amazon's (NASDAQ:AMZN) recent major strides in product innovation could make the Kindle Fire a force to be reckoned with in the tablet market.
The "mayday" button could change everything
Each quarter, IDC breaks down the tablet industry into the top five and then everyone else. In the first quarter of 2013, Amazon was No. 4 on this list with 3.7% market share. In the second quarter of 2013, Amazon fell out of the top five and into the "others" category. In the third quarter of 2013, the most recent release, Amazon was once again lost in the "others" category. However, with Amazon's newest tablets equipped with the revolutionary "mayday" button, it is very likely that Amazon will once again claim a top five position in the fourth quarter.
What is the "mayday" button? It is "revolutionary on-device tech support" that comes on Amazon's new Kindle Fire HDX tablets, which were released on Oct. 18 and Nov. 7.
In a nutshell, the user is supposed to hit the mayday button and within 15 seconds will be connected to an Amazon expert who can "co-pilot you through any feature by drawing on your screen, walking you through how to do something yourself, or doing it for you." As Amazon has no physical locations, this is the equivalent of Apple's genius bars, except that the user never has to leave the comfort of their own home and the service is available 24 x 7, 365 days a year.
Nothing else like it has ever been put on a tablet. Jeff Bezos, Amazon's CEO, called the mayday button "the greatest feature we have ever made."
Customer response to the new feature has been overwhelmingly positive, and on Christmas Day the average response time was just under nine seconds. One customer remarked:
Just tried the mayday button on my hdx. 15 second response time...amazon has done it again. Thoroughly impressed.
Thus, it comes as no surprise that the Kindle Fire HDX was the best-selling item on Amazon over the Black Friday weekend.
Amazon's revolutionary "mayday" button should at the very least secure the company a top five position for in the tablet market. While competitor innovation is always a major threat in the tablet industry, Amazon, at least for the moment, has a major leg up on the rest.
What is this likely success in the tablet market going to mean for Amazon overall?
At least at first the direct impact will be relatively small, as in 2012 Kindle hardware sales only accounted for 8.38% of overall revenue for the company. Yet as iPad owners know all too well, when someone buys a tablet from a company, they become effectively locked into that company's ecosystem. More sales of Kindle Fire HDX tablets translate into more sales of music, apps, and Amazon Prime subscriptions.
As an overall investment Amazon is a tale of two perspectives. For value-oriented investors the stock is a nightmare waiting to happen. With a P/E currently sitting over 1,000 and a CEO who is disinterested in turning a profit today if that means sacrificing investments in the future, Amazon is an overvalued mess.
For longer-term growth investors, Amazon is a darling. The company is expected to grow revenue from $61 billion in 2012 to more than $226 billion by 2020, and it has a CEO who understands that fueling tomorrow's growth requires investing today.
My Foolish conclusion
Personally, I believe Amazon is a tremendous long-term investment, as the company is transforming the way the world shops. I believe that sometime down the road Jeff Bezos and the Amazon team will use the company's massive power to turn massive profits, but until then I just have to deal with no to very little actual profit.
On Jan. 30, IDC is expected to release its fourth quarter 2013 tablet report. Investors should look to this as an indicator of the success of the mayday button, as well as Amazon.
Ryan Guenette owns shares of Apple. The Motley Fool recommends Amazon.com and Apple. The Motley Fool owns shares of Amazon.com and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.