From Internet Sales Pioneer To Technology Powerhouse

For the past few years, a new player has been quietly building their presence in the technology world. They offer one of the best cloud-based computing environments, available at pay-as-you-go prices. They own a significant piece of the downloadable content market. They offer a feature-rich but affordable tablet. Oh, and they also sell books. Amazon has gone from redesigning how warehouses and distribution works to becoming a major part of the technology world.

Transforming From Moving Things to Also Moving Bits

Consider Amazon just 5 years ago. Their bread-and-butter was books, CDs and DVDs. They were building a scalable platform for general retail sales, partnering with other brick-and-mortar retail giants to offer everything from socks to power tools. However, they offered that computing platform up for others, making it available for organizations that wanted scalable computing power, but didn’t have the budget or staff to build out their own. They also introduced the Kindle, and added music, TV and movie downloads (in the US, at any rate). They expanded their storefront platform to pretty much anyone who wanted to sell something, but didn’t want to use eBay. Their first real step into the world of general purpose computing was the Kindle Fire. It is positioned as a device for consuming Amazon content, but it has the potential to go beyond that.

All of these steps happened over years. They happened surprisingly gradually. Amazon didn’t jump into the tablet market with both feet. They snuck up on it, using the original Kindle and its successors as a way to gain design and manufacturing experience. It gave them a sense of what people would want out of a device made by Amazon. When the Kindle Fire arrived, it came into the world with a rich content ecosystem ready to support it. The app story is still a bit weak, but Amazon isn’t directly targeting the app consumer. Yet. More on apps later, though.

The Kindle Fire and Backing Into A Market

The Fire is an interesting device, not because of it’s technology (the hardware is actually unremarkable). What’s interesting is how Amazon arrived at this particular point. Unlike Google or Apple, Amazon didn’t charge headlong into the tablet market. Apple and Google specifically wanted general-purpose mobile computing that was more than a phone and less than a laptop. Some would argue that Apple effectively created the tablet market as we know it, given that it bears little resemblance to the tablets that were available prior to the iPad. However you look at it, Google and Apple were explicit: this was another step in mobile computing, and they were going after it directly.

Amazon didn’t get to the Fire by the most direct path. If you look at the original Kindle, Amazon offered some attempt at basic web access, media playback and e-mail support. It was largely marked as “beta”, so if it didn’t work, they could claim mea culpa, it was an experiment. Even the Fire’s release played down the “general purpose” nature a bit, focusing more on content consumption. Amazon appeared to want people to view the Kindle Fire as “just another Kindle”, but one that would provide expanded access to the Amazon content ecosystem. But Amazon, through their first attempts at making the original Kindle a bit more than “just an e-book reader” learned, and found a way to introduce a tablet that wasn’t positioned as a “tablet” in the conventional sense.

The Fire also gave Amazon a chance to use their own infrastructure for something other that running an on-line store, or acting as “computing for hire” for everyone else. The most talked about feature was the enhancements for web browsing, shifting the heavy-lifting of rendering and such from the Fire to the EC2 cloud. But what is more interesting is the use of EC2 to host and serve up content. They, like Netflix, have built infrastructure to provide on-demand content to herds of mobile devices. This becomes an important infrastructure piece as Amazon’s footprint in mobile computing expands.

A Bigger Push on Apps

So where does Amazon go from here? First, they have rapidly built a significant user base for tablets, something the other Android tablet makers have yet to do in serious numbers. Those users, though, are in an environment must like Apple’s: a walled garden where most of your content and all of your apps come from the provider of the device. Amazon’s Fire may run Android, but it doesn’t allow you to buy apps from the Android Market. If you want apps, you have to buy them from Amazon’s app store, and it (like Apple) has approval policies and such in place. But as Apple has demonstrated, most people don’t care about “open” vs. “closed”. They care about “available and useful”. Developers have made a lot of money off of Apple’s “closed environment”, and if Amazon’s installed base of Fires continues to increase, can expect the same there. A potential market of people who are willing to spend money on apps is very attractive. I fully expect Amazon to start to push harder to nurture and grow a developer base for Fire apps.

An Amazon Kindle Ultrabook?

I could see Amazon also trying, at some point, to build some kind of ultrabook. But before they reach that stage, I would expect another iteration or two of the Fire, probably offering a larger form-factor and paying more attention to the industrial design. The first Kindle’s weren’t exactly pretty. The Sony e-reader was, aesthetically, a better looking device. But Sony’s device lacked something important: content. The Sony e-reader was like the stereotypical B-movie Blonde Bimbo: nice to look at, but not much there. The Kindle may not have been much to look at, but actually had some substance. The current Kindle (the non-keyboard one) and Kindle Touch are very attractive devices. Amazon put some effort into their appearance, not just their functionality.

The first Fire suffers from much the same, appearance-wise, as the first Kindle. As tablets go, it isn’t much to look at. But Amazon offers a ton of content. I would expect the next generation or two of the device to improve in both capability and design. I think Amazon proved that it could make a decent device, and that people would buy them. Round 2 will need to be about making them slimmer, more powerful and better looking.

But I do expect Amazon will at least explore the idea of an Ultrabook, possibly something running Android again (so it can take advantage of their app store), but offering a full keyboard along with a touchscreen. I don’t expect it to be a tradition “keyboard and trackpad” laptop. Again, I could see Amazon backing into the notebook space with something aimed at the “power consumer”, someone who wants more than a tablet, but doesn’t care about running a traditional, heavy-weight, PC-oriented operating system like Windows or OS X.

Amazon In The Living Room

Another possible avenue is a small set-top box, along with deals with Sony, Nintendo and Microsoft, to get their music and video content available in the living room. Again, the focus is on making the content available. Even if they don’t offer a set-top device, I could still see them trying to expand their presence with Sony (on the PS3 and PSP/PS Vita), Nintendo (Wii and DS family) and Microsoft (with the XBox). Fewer barriers means higher probability that people will get at your content.

Content Is King

Ultimately, Amazon is likely to continue to focus its retail computing efforts on their real asset: content. The goal is to get more people to buy or rent that content. By providing things like a cheap tablet, and possibly a cheap laptop and cheap set-top device, Amazon will continue to knock down barriers to consuming that content. Any ultrabook will be, initially, about making it easier to get at Amazon content and services. Anything for the home theatre will, gain, be about getting at the content. The fewer barriers, the easier it is, the more likely people are to buy it.

Who Would Have Thought?

So here we are, in a world where a one-time retailer and distributor of books is taking a seat alongside technology leaders. Who would have expected that to happen? The traditional route would have been to “stick to the knitting”. While I fully expect Amazon to continue to grow and expand the retail sales side of the business, I also expect Amazon to continue to grow and enhance their position as a technology provider and leader. I also wouldn’t be surprised to see Amazon come up with something completely out of left field, like offering their distribution and inventory management services to other, completely unrelated businesses. If we can “rent” their computing, why shouldn’t companies with inventory and distribution challenges (but not necessarily in retail sales) “rent” their ability to manage and move things around?

However it develops, I no longer expect to see Amazon restrict themselves to refining the things they do. I now expect they’ll continue to surprise by entering into spaces we never expected them to. And a few will be “how did they get here” products or services, I’m sure.

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