How Amazon used the Kindle to beat the odds
Editor’s note: This piece originally ran on PandoDaily.com. It is being reprinted with permission.
Whether you own one or not, you have to respect the Kindle. In the age of digital Darwinism – where perfectly good products and companies were brutally rendered extinct by superior species – the Kindle was the little e-reader that could, not only thriving in the age of tablets but even, in time, evolving into a multimedia device that took a bite of the market share for tablets.
The Kindle was never flashy. It lacked the sexiness of the iPad, offering instead pure functionality. Its design was bland and boxy, offering up a color spectrum that could be found in a dirty ashtray. It went on sale in 2007 for $399 and sold out in five hours. Skeptics thought this was just a small but fervent niche market of book lovers who fetishized the Kindle. But in time, the Kindle proved those skeptics wrong.
The Kindle proved skeptics wrong again when the iPad launched with its own built-in ebook apps. The Kindle app that Amazon created for the iPad was so good, some people thought the Kindle device itself was finished, that Amazon would achieve its ebook dominance through an app it created for the iPad and other tablets.
That view proved wrong too. In part because of e-ink, the black-and-white, eye-friendly technology invented way back before the dot-com bubble started to form. But also because – thanks to Jeff Bezos’s obsession with bargains — the Kindle’s price dropped as low as $69, cheaper than a parking ticket in most cities.
And so, while Apple’s iOS-driven products sold by the millions, the Kindle sold well too. Apple proudly disclosed how many iPhones and iPads it was selling each quarter. Amazon was much more circumspect about the number of Kindles that consumers bought, folding Kindle unit sales into its total media revenue to create a new accounting term called “product sales”.
Amazon’s obscurantism concealed the full success of the Kindle device. You’d have to go to an airport boarding area or a metropolitan transit system to see just how popular they were. Anywhere literate people knew they would be spending hours idle, you’d see Kindles aplenty. Boring grey slabs that, more often than not, lacked a full keyboard in favor of binary buttons that brought future and past pages into the present moment.
The next time you see someone reading a Kindle in public, watch closely (if you haven’t already). Ask if he or she prefers paper books – some people will say they do. But the reader-brain, once it’s lost in a narrative, can’t tell the difference. The Kindle – by design – is digital paper. And the tablet – by the hubris of its own design – is not. The tablet is most emphatically not paper. It may even aspire to be the opposite of paper.
A decade ago, Apple designed the iPod, a latish-entry music player so much better than what came before it that it ended up claiming the market as its own. An ecosystem of speakers and accessories arose around the iPod. The ecosystem expanded to include more customers, musical artists and (belatedly) the music labels themselves.
This term ecosystem is thrown around a lot in the tech world these days. Like a lot of business jargon it can be used so broadly it’s meaningless, or so narrowly it’s useless. As I understand it, ecosystem means a living community of people who – through the companies they sustain or the products they create – support each other. It usually includes customers and consumers who feel strangely bonded to something in the business world. Or even competitors who feel the same way.
Apple has been the classic example of a Silicon Valley company that has a thriving ecosystem. But I started thinking about Amazon’s ecosystem about a month ago, when Amazon held an “event” announcing new ereaders and tablets. At the time, Michael Carney wrote this: “With the approachability and affordability of the new Kindle ereaders and tablets, we may soon look back and realize that they were the gateway drug that got us hooked on the Amazon ecosystem.”
And how was Amazon able to cultivate its own ecosystem, even as experienced gadget makers like RIM, Microsoft, Dell and Motorola tried and failed to have a hot seller in the tablet era? How did the Kindle and its spartan interface continue to sell so well even as a fifth of Americans came to own tablets? The answer is simple: Amazon has been cultivating the Kindle’s ecosystem for decades.
While RIM, Microsoft and others were competing with Apple and Google for the attention of app developers, Amazon was focusing on an inventory of content that was much more traditional: the hoary, centuries-old publishing industry. There was a massive consumer market that has remained stubbornly loyal to old-fashioned books during the rise of the Web, and Amazon had been turning that spirit of consumer devotion into a loyalty for Amazon’s brand itself.
But books are only one part of the growing industry of digital content. And so Amazon builds on its customers’ loyalty – formalized with a $79-a-year Prime subscription – to lure them into a broader ecosystem including content in areas where the company has been weaker. Apple has long been a bigger presence in digital music, and no company has yet cornered the market for digital video.
It remains to be see whether Amazon’s Kindle Fire tablet will be a big seller for as many years as the Kindle has. But the mix of low price, customer loyalty and a rich ecosystem of content has given Amazon a strong start. And when companies more experienced in hardware manufacturing try to compete with their own low-cost tablets, they may wonder why Amazon had a hit on its hands when they didn’t. The answer, although maybe not easy to hear, is nevertheless simple enough: It’s the ecosystem, stupid.
PHOTO: Amazon CEO Jeff Bezos holds up a Kindle Paperwhite during Amazon’s Kindle Fire event in Santa Monica, California, September 6, 2012.