A preface to Amazon's tryst with 3D

And why I think Amazon should go the Facebook way rather than Apple / Samsung way. 

Hmm (link)...  surprising.   

THE DISAPPOINTMENT THAT IS 3D

3D in smartphones was a potentially-compelling value proposition back in 2010 (as it was in TVs around that period).  The widely-accepted failure of 3D across electronic appliances so far has taught us an important lesson - there isn't anything remotely-exciting in 3D apart from the fact that it sounds 'cool'.  LG came up with a similar no-glasses-required 3D smartphone last year (or it could be late 2011, not sure).  I happened to check it out at one of the retail stores - the display was pretty disappointing and there just wasn't enough justification for the price of a 3D panel.  The narrative is similar in televisions and PCs too.  Mind you - this is a personal opinion - 3D overall has been very disappointing.

Say what you will, customers don't care about how a new technology works.  What do they care about - does it improve the current UX narrative.  That's all that matters in the end. 

TABLETS WERE ALWAYS CORE ENABLERS TO AMAZON'S KEY BIZ MODEL.  ARE SMARTPHONES IN THE SAME LEAGUE FOR BEZOS & CO.? 

This isn't the first time Amazon's name has shown up in the smartphone game (back in 2010).  Am really surprised Amazon is looking to get into this dog-eat-dog industry.  Tablets make sense to their core business model - make money on services in the long term on cheap hardware rather than upfront on expensive hardware (the latter is what players like Samsung, Nokia, RIM, HTC do).  Remember Amazon sells its Kindle products at almost cost and gets recurring lifetime rev$ through their content ecosystem of books, shopping, music, etc.  I articulate here a similar (albeit opposite) strategic shift which Microsoft tried to employ for its Surface hardware, but to their chagrin, that doesn't seem to go anywhere.  Also, tablets are much more content-consumption friendly when compared to smartphones - would you prefer to read a book on a 7-9" display or a cramped 4'4.5" display?  Your pick.  Additionally, when they launched their Kindle tablet, we didn't have a podium finish yet - iPads were ruling, and then Samsung was selling some tablets.  Windows 8 wasn't around, and HP was floundering with its webOS strategy.  Relatively easy pickings in the offing as far as tablets were concerned.

NO SUCCESS SYNERGIES GUARANTEED IN THIS MARKET  

Winning the smartphone game is an altogether different proposition.  The podium is crowded here - Samsung, Apple, Windows Phone 8 vendors (Nokia mostly) and then you have Blackberry and HTC biting off the crumbs.  Begs the question what could be Amazon's line of thinking with the smartphone line (if the news is true).  The only analogy which comes to my mind is what Apple did (and still does very successfully) with its iPod Touch and iPhone / iPad strategy.  

iPod Touch, being a low-entry device (when compared to other iDevices) becomes your first affordable Apple purchase and more often than not, sucks you in Apple's content ecosystem (apps, songs, movies, etc.) - try keeping a global perspective here and not necessarily how Apple buying behavior occurs in your country of residence.  Guess who are the most avid buyers of the iPod Touch - very young kids (school-going children mostly).  As soon as they're ready to get into college and able to afford a cellular plan, more often than not, they tend to go for an iPhone as their first cellular device, since 1) they're already married into the ecosystem 2) Apple's marketing juggernaut will market the crap out of this installed base (i.e. in marketing terms, up-selling).  As this segment graduates further, it becomes easier to sell them more expensive Apple h/w - iPad, MacBook, etc...

iPod Touch - Apple's best tactical product category till date.

BOTTOM-FEEDER

So in effect, iPod Touch acts as a 'flanking' entry strategy to Apple's iPhone and iPad devices.  Now carryover the same analogy to Amazon - cheap e-readers, cheap $200 tablet already exist and have a good installed base.  It becomes relatively easier for them to sell a smartphone with an aggressive data plan to this audience (i.e. Holiday shoppers mostly).  I don't see Amazon going after the mid-to-high-end smartphone buyers, because Apple and Samsung are making a killing here.  Amazon will find it tough convince Android smartphone users (assuming it'll be going with Android as the underlying mobile OS for it's supposed smartphone) that it can offer a differentiated (forget superior) Android UX.  I know people will point out at Amazon's 3.7% tablet market share per IDC's 1Q'13 tablet market share report.  Deeper number crunching will tell you that most Kindles sold were during the first year, after which their sales momentum has tapered off. 

The beauty of an ultra-competitive market is that competitive threats are perpetual. Boom - Google Nexus 7 and Apple iPad Mini, Kindle Fire's nemesis.

Refer to the interactive chart above to understand how successive Holiday seasons have seen waning sales for Amazon tablets (feel free to hover over the graphs to understand the numbers better).  Y-axis refers to the % of tablet shipments (sourced from IDC) by vendors cutting across the past 8 rolling quarters which are shown on the X-axis.    

BUSINESS MODEL MORE AKIN TO FACEBOOK THAN APPLE

This is where I find Amazon's justification a little bit weak in going after the smartphone market, that too with 3D as a supposed differentiating feature.  The 'flank' leverage which Apple enjoys doesn't necessarily hold for Amazon anymore.  Sure, they have arguably the best content ecosystem in the market right now - even better than iTunes.  Once you start the ecosystem debate, that's when Amazon starts looking more like Facebook than Apple / Samsung.  Here's how.

If you've observed Facebook evolving over the past 3-4 years, you'll immediately notice how it has stopped trying to be a pure play 'find-a-friend' destination and become more of a 'here are 100 other things to spend your time on Facebook' destination - i.e. news feeds, games, videos, music, maps and most recently, gifts.  The more time you spend on Facebook, the more money Zuck and his hoody-cladding team makes by selling targeted ads.  Over a period of time, this ecosystem becomes 'the internet' for most users (think: average Joe on the street).  The ecosystems pushes relevant and consumable content to it's users, who in turn send valuable data back to the ecosystem servers, enabling them to push more relevant content.  It's a vicious circle.  In a lot of ways, this is pretty much how Amazon has evolved too - think about it.  

Today, above and beyond the best-in-class online shopping portal, they have Prime Instant Video which offers on-demand content from leading content providers such as CBS, FX, Travel Channel, etc.  You also have Amazon Studios, Amazon's venture to create original content for movies and series.  Think Amazon is ignoring the enterprise market?  AWS (their web services division) announced Redshift service which offers full-scale managed warehousing services at highly competitive prices as compared to a traditional data warehouse.  It is doing tonnes more - AWS OpsWorks, Amazon Elastic Transcoder, AWS CloudHSM...                 

Amazon tends to 'behave' more like Facebook.  Facebook wanted to be on all phones, and they are - sans the h/w pressure.  I think THAT's a good biz model for Amazon to follow.

Right then, where do we go from here?  All we know about Amazon's grand plan is just a rumor, which may stay likewise.  It's during these times that one tends to look at the management conviction in a particular strategy.  Bezos is a tech-maverick and isn't afraid to take risks - he manages quite a few big ventures outside the industry too.  Neither is he afraid of taking on giants - remember the Kindle Fire launch event?  It'll be interesting to know what he's thinking with this one though.  

And please, no 3D for Chrissakes!!!

Image credit 1: http://convert-to-3d.com/blog/3d_without_glasses_the_future_of_3d_technology.html

Image credit 2: http://allthingsd.com/20111117/amazon-kindlephone-for-2012/

About Facebook's monetization and our flirtations with privacy

If you're in the field of mobile advertising, mobile payments and social networks, some of the recent developments might be of interest.  I'd like to articulate a couple of these developments which may have significant industry ramifications.

MANNA DEW FOR MOBILE ADVERTISERS?
Last week, Facebook unveiled the Facebook Card.  There's quite a bunch to read (scroll right to the bottom of the post for details), but let me save you some time and get to the heart of the development.  Simply put, Facebook Card is a gateway which will allow Facebook to 'farm' the enormous amount of user data that's sitting in it's servers.  Google does it through serving customized ads by tracking user activities, Amazon does it by cross-selling you it's wares based on things you've purchased from them in the past / pages viewed.  

You don't make a billion friends without farming them for some dough

All these years, and especially since it's IPO last year, industry pundits have been wondering how effectively will Zuck and team monetize the tremendous groundswell that has been generated.  For many, if not all, today's Facebook represents the entirety of the internet - photos, videos, messaging, email and most recently, voice calling (currently available only in the US).  But let's face it, 'likes' and 'shares' don't pay salaries, money does.  Facebook's primary source of revenue has been the banner ads.  But here's the problem - more Facebook users connect from their mobile phones these days than the desktop site.  Advertising through the cramped mobile UI is tough and ineffective, not to mention the universal problem of ROMI (return on marketing investment) - how do I ensure my marketing $ spending amounts to something.  

This is where the Facebook Card comes handy.  In principle, Facebook has tied up with a handful of retailers cum advertisers to start with - Sephora, Target, Jamba Juice and Olive Garden (US only at present).  With time, it's not very difficult to expect the retailer list to expand (I'll come back to this in a bit).  Facebook will be able to push relevant offers to you based on what you've liked and shared (hello Social Graph).  Fan pages liked by millions of users are kicking in invaluable marketing data about user preferences which Facebook hopes to cash through it's Facebook Card.  How difficult is it to imagine a Pizza Hut fan 'liking' it's page on Facebook and lo behold, Facebook pushes out a $30 gift card to the user.  You can count on Facebook to thrown in some deal-sweeteners to ensure product differentiation from other gift cards.  And when the card-holder uses it at the store-front - voila, there's an instant linkage between the marketing / promotion and sales.
      
TALKING ABOUT PRODUCT DIFFERENTIATION...
Gift cards aren't anything new.  According to First Data, the gift card industry in the US alone was worth US$43 billion in the 2012 holiday season.  That said, there is some serious differentiation which could work for Facebook - brand connect.  My mom may not understand the business models of Amazon, Google or Apple, but she connects with the Facebook brand much easily.  

I believe this point is self-evident and hence I'd like to draw your attention to something even more intriguing.  There's something about Facebook which not only creates but also sustains user engagement.  

Of all companies I can remember, Facebook must have the best user engagement quotient - most companies would kill to have something like that.  

How many times does it happen that you observe a profound / weird / bizarre / funny incident during the day and have a sudden impulse to post it on Facebook?  What explains this phenomenon - why do we continue to broadcast what would've been mostly considered private conversations less than a decade ago, on to the Wall at the slightest opportunity and intent?

A recent study at Carnegie Mellon University suggests that internet users tend to deal with privacy more loosely in a social networking context (think Facebook, MySpace, Twitter) than in a setting with much higher privacy protection.  We shun modern day browsers to track personalized search histories so that those results can be used to optimize future searches.  On the other hand, we don't mind sharing almost fanatically-detailed developments of our personal life on Facebook.  

SO, WHERE DOES THAT LEAVE FACEBOOK'S MONETIZATION POTENTIAL
There's little doubt that Facebook Card represents a huge opportunity for Zuck to convince his shareholders that Facebook's future holds more than being merely a glorified photo gallery.  I'm convinced that mobile is definitely going to be a big strategic cornerstone of Facebook's chances to survive.  Facebook Card's business model is geared up to embrace mobile wallet in the future - a future which may be closer than we think it is.  Mobile wallets have struggled to take off commercially so far, but that could change soon.  

The thing with cutting-edge technology is that it requires a random industry player to make it work and then everything suddenly makes sense - look no further than the iPod.  

In the banking industry, there's already a talk about this model expanding into the realms of P2P transfers and micro finance.  You'd expect Facebook to figure this all out.  As long as we continue to flirt with our privacy, Facebook's future is secured.  Having said that, the strategy comes with certain pitfalls.  Facebook has met with severe public and industry pressure each time it tinkers with it's business model.  Why, because it's built entirely on monetizing our private conversations.  Till Menlo Park's hoody-clad prodigy figures this out, the jury will have to wait outside.

P.S. Your mileage may vary with the Facebook Card's announcement page link above, so here's the full link: http://newsroom.fb.com/News/569/Introducing-the-Facebook-Card-a-New-Type-of-Gift-Card

Image courtesy: 
http://www.netedgemarketing.com/Images/facebookimage.jpg
http://blog.shareaholic.com/wp-content/uploads/2012/04/megaphone-guy.jpg