Amazon announced its own phone today — the Fire Phone. The primary question is: why? Tim B. Lee offers a Voxplainer on it and argues that it is to give Bezos an option:
Creating its own smartphone gives Amazon a kind of insurance policy. If customers ever have trouble getting Amazon content on third-party platforms, they can always buy an Amazon phone (or tablet) to access that content. And having that option in his back pocket gives Amazon CEO Jeff Bezos a stronger hand to play in negotiations with other big companies.
I’m not sure that Apple and Google are ever going to make it any harder for Amazon. And if they do, it is unclear Amazon will be able to compete using a phone. This one does not ring true — although I can see the argument more for a tablet.
Instead, let’s look at three things about the Fire Phone. First, it costs about the same as any current smartphone ($199 with contract) and is exclusive to AT&T; although some may say the inclusion of a year of Prime makes it cheaper. This is completely different than all of Amazon’s other hardware including the various Kindles and the Fire TV. The reason those other products are discounted is because they directly drive sales of Amazon products. A phone does not and so it is priced accordingly. Amazon itself sells phones so I can hardly imagine it wants to undercut what must be a larger potential business.
Second, but what about FireFly (Amazon’s app that allows you to take a picture of something and instantly buy it on Amazon)? Won’t that drives sales? Yes, but not necessarily exclusively on the Fire Phone. While Amazon announced it as a feature of its Fire Phone, I am willing to predict that it will soon be an app on iOS and Android. The wrinkle will be that in iOS it will merely fill your Amazon cart and so you will have to go to the web to complete the purchase. Of course, they could make it all a webapp (why not) and then there is no constraint. In other words, if FireFly is great for selling Amazon merchandise do you really think they will limit it to their own phone, on AT&T? There is nothing in that technology that requires that. It is just good image processing and a cloud engine.
Third, there is all that neat 3D stuff provided by having four (!) always on, front facing cameras. This is neat but my guess is that it will drive very few phone sales. Instead, this is Amazon showing that it can play in the big leagues on neat technology; a demonstration of being at the leading edge.
Given all that, I don’t expect the Fire Phone to be a big deal in this market.