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Friday, March 11, 2011

Could Amazon Challenge iPad Dominance?

amazon_logoI’ve just read quite an interesting article on  It talks about how market research company Forrester says that the current generation of tablets can’t compete with Apple’s iPad, primarily as the manufacturers don’t have the back end infrastructure such as high street shops and dedicated App store that Apple does.  It goes on to suggest that online retailer Amazon may be best placed to challenge Apple’s dominance.

It makes sense.  The biggest problem for most manufacturers is they are reliant on making profit from the actual sale of the device.  Apple on the other hand generates significant revenue from sales through iTunes and it’s App store, and this gives Apple an advantage.  Apple can if its wants use its devices as loss leaders.  Its closed ecosystem means anyone buying an i-device is then locked in, so Apple can recover an losses on its hardware from the revenue it generate through its App store.  The likes of Motorola and Samsung making Android based devices don’t have that luxury.

Amazon on the other hand already has its own ecosystem in place with which it can lure users if it were to launch its own device, something it is no stranger to.  Amazon’s Kindle has been a huge success.  Although it doesn’t give any actual numbers, Amazon claims it is the company’s best selling product.  The actual sales of Kindle’s on their own is of no significant value, what it does mean is that users are then tied in to Amazon’s own ecosystem for buying eBooks, and this is where Amazon makes the real money.

As well as eBooks Amazon can also provide users access to various other forms of digital content.  They already have music downloads, an Android App store and following the acquisition of Lovefilm a video streaming service. Sounds kind of familar to what Apple offer to their customers, so the next step seems relatively obvious, build a device to drive more people to use these services.  Given an Android app store is already part of the proposition, a tablet based on Google’s OS seems the logical direction to take, and perhaps then iPad will have the competitor it needs to bring about true innovation to the market.

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