In arguably one of the most exciting releases of the year, Amazon recently announced its Fire Phone. Rumors that they would release a smartphone have been flying around for years, and it’s almost a relief to know it’s finally here. However, now that it is, I can’t help but wonder if Jeff Bezos wishes he would’ve waited longer—or dropped it altogether.
An article titled “Amazon’s Fire Phone—Flop Phone, Brilliant Strategy?” has gotten me to thinking about why it was such a flop, but always why it may still be a brilliant strategy in the long term.
Pricey, But Not Premium
The price tag for the new phone is $199 for 32 GB and $299 for 64GB (with a 2-year contract with AT&T, of course), which was really surprising, considering Amazon’s history of offering cutthroat prices to sell as many devices as possible. But the fact is that customers aren’t going to get the same thing from the Fire Phone that they would get spending that much on a Samsung or iPhone.
First of all, phone service is restricted to AT&T, meaning customers with the other major carriers would have to pay hefty termination fees to switch. Amazon shouldn’t be surprised to hear a “No, thank you” on that one. Furthermore, Amazon’s app store is roughly only one-fourth the size of that available to iOS and Android users, most of which are optimized for tablet use.
“Premium” is obviously a subjective term, and while I definitely believe that many of the features of the Fire Phone are premium in nature, the phone just doesn’t stack up to what Apple and Samsung have to offer in terms of ecosystem and productivity. And that has me questioning whether it’s “premium” enough.
The Phone isn’t Compelling Enough
Let’s take a moment to go over a few of the phone’s coolest specs. The 3D display feature was the most talked about going in to the announcement. But as cool as it sounds (and probably is), it simply doesn’t offer any utility. Once the novelty wears off, it might even get annoying.
Probably the most innovative feature is the Firefly app. Taking the QR code thing one step further, Bezos explains that Amazon’s Firefly "lets you identify printed Web and email addresses, phone numbers, QR and bar codes, artwork, and over 100 million items, including songs, movies, TV shows, and products — and take action in seconds." But unless you’re obsessed with buying everything from Amazon, this feature is almost useless. It also wouldn’t be surprising if users caught on that the whole point of this phone is to get them to spend more money on Amazon.
The third major feature the phone offers is the camera. With 13 megapixels and a stabilization feature that prevents blurry pictures caused by minor camera movements, it’s definitely a step up from what we already have, but a slick camera just isn’t enough to convince anyone to switch.
All in all, as much as users want to have each of these features on their own phones (and I’m sure Apple and Samsung have taken copious notes for future models), they just aren’t compelling enough to make anyone who isn’t an Amazon fanboy or fangirl to switch.
Numbers Don’t Lie
At the time of writing this article, the Amazon Fire Phone was #31 on the website’s best-selling list for electronics, and it’s on the downturn. Shortly after the announcement, it made it up to #4 before the epic freefall. Yikes! Even FireTV stayed at #1 for a while. The sad thing is that there’s really no way Bezos can spin this in a positive light. Investors took note as well as the stock price dropped from $338.13 down to $320.49 last Friday for a loss of 5.2%. Since then, AMZN has recovered a little bit, but it seems to be shaky at best.
Destroying the Comfort Zone
Honestly, in some ways I applaud Amazon. Not only does this get them out of their comfort zone, but I do see it as a good way to get users to partake more fully from Amazon’s services in the long term. And hey, Jimmy Stewart’s “It’s a Wonderful Life” was a flop when it came out in the theaters. But since then, it’s become one of the most beloved Christmas movies of all time. So while I believe that the phone has serious problems in terms of the value it provides to customers and investors, I’m confident in Amazon’s ability to turn it into something better in the long term.
Furthermore, it does give users one more reason to use an Amazon device to make shopping on Amazon easier. And while things aren’t going too well for Bezos’ new baby so far, I’ve learned to never underestimate the power of Amazon when it comes to the holiday season. Expect to see a spike in sales around that time, and maybe even more as users see contracts with other carriers expire. In simple terms, don’t count Amazon out. They’ve made a huge step into the dark here, and I’m certain they were aware of the phone’s disadvantages and were anticipating this a little. But give Bezos some time and he’ll make it work.
Ben is a personal finance writer who is passionate about helping people to stop conforming to society's view of personal finance and to align their behaviors with their goals. His favorite food is chips and salsa and his spirit animal is Warren Buffett. You can find more of his stuff at www.wealthgospel.com. You can also follow him on Twitter @thewealthgospel or like The Wealth Gospel on Facebook.