Amazon.com (NASDAQ:AMZN) is likely to announce a smartphone on June 18. The phone has been anticipated for months, has been the subject of numerous leaks, and has even appeared on screen (maybe) in a promotional video Amazon released ahead of the event.
Amazon's phone will enter a crowded market place, going up against numerous devices running Google's (NASDAQ:GOOG) Android as well as Apple's (NASDAQ:AAPL) various iPhones. This is no different from the tablet market, where its Kindle Fires have attained some level of success. But the tablet market and the phone market are quite different, and in order to compete, Amazon could use a variety of radical features to sway buyers.
Amazon could pay for data
In the tablet market, Amazon has competed on price, offering devices that are typically much cheaper than its competitors. The 7-inch Kindle Fire HDX, for example, retails for just $229 -- Apple's comparable iPad Mini with Retina display is almost twice as expensive ($399).
But Amazon can't so easily rely on this tactic to win over smartphone buyers.
In the U.S., most smartphones are purchased on two-year contracts, which result in consumers paying just a fraction of their device's total cost. Phone financing, a new trend that has emerged, is even worse for price discrimination, as consumers aren't even required to pay the up-front down payment. Although Apple officially charges $649 for its basic iPhone 5S, virtually no Americans pay that, instead forking over a $199 down payment or $27 monthly fee.
To compete on price, Amazon could use a completely new tactic, offering owners of its smartphone free data. Prime data, as a number of reports have suggested, will see Amazon pay carriers for some of the data its customers use.
Amazon may not be able to win by offering a cheap device, but it could sway some buyers with the prospect of reduced monthly bills. With Amazon paying for some of the data, owners of its phones would be able to choose cheaper plans with lesser data caps.
Tracking your head
Amazon's phone is also expected to include technology that would allow it to track a user's head. Leaked images have shown a device with multiple front-facing cameras, presumably to facilitate this feature.
Samsung, Google's biggest hardware partner, has implemented head-tracking to some extent in its phones, using features like Smart Scroll (scroll up and down a page by tilting your head while looking at the device) and Smart Stay (prevent sleep mode while a user is looking at the handset) to help set its devices apart from Apple's iPhones, which lack these features.
But most reviewers have found these features to be lackluster and poorly implemented (including myself). Relying on a single camera may limit the ability of these features to work as intended.
If Amazon could one-up Samsung, delivering a device that can truly and accurately a track user's head, it could offer a number of radical user interface features that haven't yet been seen on a smartphone.
A new operating system
Lastly, Amazon's smartphone will likely use its Kindle Fire operating system, which isn't new in the sense that Amazon first introduced it in 2011, but would be radical in that it would be the first implementation of Fire OS on a phone.
Fire OS, at its core, is saa version of Google's Android, but heavily altered so as to remove Google's services. This results in some notable omissions (like Google Maps) but allows Amazon to favor its own app store and media sales at the expense of Google's.
Buyers of Amazon's Kindle Fire tablets and Fire TV could become Amazon's primary customers. Apps and media purchased on these devices would likely carry over. At the same time, Amazon's app store is accessible through Google's own Google Play, and those Android users who have relied on it extensively may be enticed to make the switch.
A brutal market
Hopefully for Amazon, these features will be enough to set its handset apart. As it stands, the U.S. smartphone market is brutal, with only two companies -- Apple and Samsung -- finding much success.
Moreover, with the smartphone market nearly saturated, Amazon will have to work hard to win over buyers that may already be locked in Apple and Google's respective ecosystems.
Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Apple, and Google (C shares). The Motley Fool owns shares of Amazon.com, Apple, and Google (C shares). 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.