How Amazon Could Attack Android?

In News, Technologyby sanjayjadhav

Summary

  • Android and iOS captured 94% of smartphone sales in 2013.
  • Although Android controls 78% of the market, the lead isn’t nearly as insurmountable as it seems.
  • Orienting native development around the web is one way Amazon could attack Android and win developers.

Apple (AAPL) and Google (GOOG) undoubtedly dominate the smartphone market. In 2013,?Android and iOS captured 94% of sales, according to Gartner, while Microsoft (MSFT) trailed in third place with a meager 3.2%. Although it seems?more likely?for a third operating system to survive outside of North America, Amazon (AMZN) still has an opportunity to plant a meaningful stake in the mobile landscape.

Apple has historically focused on the high-end, prizing hardware profits over unit volumes, intentionally ceding most of the market to others. Assuming Apple maintains this strategy, the battle for Amazon is more likely with Android for the majority of the market than with Apple for the high-end.

Since Apple’s revenue model revolves around hardware, the company can thrive at lower volumes provided its products command a price premium?-?much like how Chanel and other luxury companies operate. Amazon, conversely, is structured to monetize smartphones with software and services. 23% of the online retailer’s?operating profits?stemmed from transactions related to Kindle devices, from which it sells high-margin digital content like movies, videos, advertising, and books. Of course, each Kindle user also becomes easy prey for Amazon’s e-commerce services, the primary source of revenue.

If Amazon intends to monetize mostly with software and services, not hardware, this suggests a volume strategy and an attack on Android. Betting on volume and cheaper models also positions the e-commerce giant to more aggressively target emerging markets like China and India where?the cost of an iPhone can equal one month’s salary.

Although Android shipped on 78% of smartphones last year, the lead isn’t nearly as insurmountable as it appears. Samsung, the most popular Android vendor, only controlled 31% of the market and may defect from Google altogether, adopting its own operating system, Tizen. The remaining 47% were scattered across an array of manufacturers, none of whom held more than a 5% share. Because these manufacturers offer different devices, with different capabilities and different screen sizes, it is challenging for developers to publish apps compatible with all 78% of those Android phones. The resulting fragmentation means Amazon requires a much smaller slice of the market in order to threaten Android and present a compelling alternative to developers.

Attracting developers is pivotal. The value of smartphones is a function of apps and services, and how those apps and services enhance people’s lives. The more compelling the apps, the more compelling the smartphone.

One way of luring enterprising developers is with innovative features like holographic 3-D images,?which the upcoming Amazon smartphone reportedly offers. Another way is to orient the native development platform around the web and instantly tap into an ecosystem of millions of software engineers.

Instead of imitating Apple and Google and relying on native apps, Amazon and Microsoft could pioneer a new development model and bake web apps into the heart of their smartphone platforms. Web apps have failed for several reasons, but as Chrome apps and PhoneGap apps prove, deep platform integration erases the disparity between native and web apps for most cases.

For instance, a re-imagined OS could enable web apps to enjoy one-click payments, push notifications, and access to the camera, microphone, and other hardware components?-?subject to the same constraints and controls imposed on native apps. Discovery could still happen in a central store, only this store contains both native and web apps. Web apps could get bundled like native apps and presented to users on screens exactly like native apps.

Shooting games and other performance-sensitive apps may require special extensions to JavaScript, HTML, and CSS?-?but these enhancements are not impossible and indeed are more practical when one company makes both the hardware and operating system. AppStream, the new streaming service from Amazon, also reduces performance concerns since it empowers apps to offload computationally intense tasks, like graphics rendering, to the cloud.

For developers, the appeal of web apps is faster release cycles and more freedom to experiment. The appeal for Amazon is instant access to a vibrant ecosystem of developers and a shorter path to compelling apps.

To entice developers, Amazon could invest $15M in a magnet program where they offer free devices to 10K developers and guarantee $100K in revenue to the top 100 applicants.

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