Appolicious powers Verizon Educational Tools

Analyst says next step for Amazon is an Android smartphone

by Phil Hornshaw

The Kindle Fire is the No. 1 Android tablet in the U.S., dominating with more than 50 percent of the market under its belt.

So what’s next for the Kindle Fire’s creator, Amazon? A smartphone, according to one analyst.

In a story from Wired, ABI Research analyst Aapo Markkanen says the “next logical step” for Amazon would be to create an Android smartphone, entering into another huge market. Markkanen told Wired that it’s Amazon’s content-selling capabilities that could make it a force in the smartphone market.

Smartphone market may be tough to crack

But breaking in against Android smartphones isn’t nearly the same thing as taking over the tablet market. In fact, the market for tablets has never been particularly strong for Android devices. Apple’s iPad continues to tower over the competition (including Amazon), and most other devices haven’t really been able to get any kind of foothold at all, against the iPad or otherwise. Many competitors to the Kindle Fire have only sold a few hundred thousand units, if that. With a low price tag and Amazon’s extensive retail infrastructure supporting it, the Kindle Fire has found a niche, but it also has entered a struggling market and provided a low-cost alternative.

Meanwhile, the same device makers that struggle to sell tablets are doing very well in smartphones. Samsung leads the pack, but there are a number of other healthy competitors. This is a market that’s not completely overshadowed by an Apple device, and there are lots of alternatives at various prices. Amazon would lack the ability to step into the market and undercut everyone in order to gain momentum.

But to Markkanen, it’s more about what Amazon can offer that others can’t: its massive content-selling capabilities. Amazon doesn’t really care about selling devices, it cares about selling content. That’s why the Kindle Fire is priced so low – Amazon sacrifices profits to be made from the device itself in hopes of selling stuff to watch, play and read on it.

Content is king for Amazon and Apple

Amazon likely can leverage the same advantage Apple does to create “stickiness” among customers, as well. Apple sells content to iOS device users through iTunes, and that content won’t work on other devices. The result is customers who are more likely to keep buying from Apple rather than abandon all the Apple-specific content they’ve already purchased. Amazon is primed to create a similar, although probably more open and user-friendly, situation with its content structure.

Wired points out that there’s one analyst who thinks Amazon already is working on bringing a smartphone to market. That’d be Citigroup analyst Mark Mahaney, who believes that Amazon has a phone planned for the fourth quarter of 2012. And like the Kindle Fire, Mahaney thinks Amazon will cut the profit margins on the hardware expecting to make them up by selling content, bringing the phone to market for something like $150 to $170.

What about carriers?

The biggest trouble would be breaking into the Android market to make Amazon’s phone stand apart from the already crowded field. There’s also the issue of getting developers to make apps for yet another highly customized version of Android like what would be found on Amazon’s smartphone. And then there are concerns like dealing with cellular carriers, and whether things like cellular data plans would affect how users buy content from Amazon.

It’s a convoluted situation, but Amazon has proven itself pretty capable in the tablet market. At the very least, an Amazon smartphone would likely offer new content-consuming capabilities we haven’t yet seen on Android.

Discover cool Android games right here