Posted by Sarah Rotman Epps on August 29, 2011
We’ve been beating the Amazon tablet drum for a while—in fact, as early as April 2010, my colleague James McQuivey wrote that Amazon's product strategists should “go head to head” with Apple and create its own tablet. Now, on the cusp of Amazon actually doing so (perhaps as early as October), we’re turning up the volume with a new report explaining exactly how, and why, Amazon will disrupt the tablet market.
This report has been in the works for months. We held off publishing it last week out of respect for Steve Jobs, and we have great admiration for his inventions and influence on our culture.
Even though Amazon taking on Apple is a bit like David taking on Goliath (compare the market cap, profits, and cash position of the two companies), Amazon’s willingness to sell hardware at a loss combined with the strength of its brand, content, cloud infrastructure, and commerce assets makes it the only credible iPad competitor in the market. If Amazon launches a tablet at a sub-$300 price point — assuming it has enough supply to meet demand — we see Amazon selling 3-5 million tablets in Q4 alone.
Amazon’s quick ascension in the tablet market will completely disrupt the status quo. Apple will retain dominant market share, but Amazon will cause product strategists at:
- Apple to prepare for war. Apple sells software and services, but the lion’s share of Apple’s revenue still comes from hardware, which makes it vulnerable to a company, such as Amazon, that isn’t seeking profit from hardware sales. Amazon and Apple’s relationship, already fraught with Apple’s policy changes on content sales, will become even more strained.
- Android OEMs to seek Amazon as a platform partner. We see potential for Amazon not only to launch its own hardware as an “Amazon tablet” but also to be a platform for other OEMs, layering Amazon’s software and services over Android to provide a richer customer experience. In a year from now, we could see a range of “Amazon tablets” made by different hardware manufacturers.
- Software, media, retail, banks, and others to scramble to build Android tablet apps. So far, product strategists across industries have invested in iPad apps but have held back from creating Android tablet apps: Apple claims 100,000 custom-built iPad apps, while Google’s Honeycomb platform has attracted fewer than 300 apps. If Amazon’s Android-based tablet sells in the millions, Android will suddenly appear much more attractive to developers who have taken a wait-and-see approach.
The bottom line: A year from now, “Amazon” will be synonymous with “Android” on tablets, a strong second to Apple’s iPad. If you haven’t yet contemplated how Apple-Amazon tablet domination will change your product strategy, now is the time to plan and act.