Amazon is planning to build a smartphone, according to a new report from Bloomberg. The company reportedly is working with Foxconn to develop the hardware.
Foxconn, which produces devices for a number of big tech giants including Apple, Microsoft and China’s Baidu, is reported to be developing the Amazon Phone, according to “two people with knowledge of the matter.”
The recent Bloomberg report doesn't mention what operating system the device would run. Most likely, Amazon would adopt the same strategy with the phone it took with the Kindle Fire tablet. That is, take an open source version of Google's Android mobile OS and create an Amazon version.
Last year, Citygroup analyst Mark Mahaney speculated that a move into smartphones would be forthcoming and, given the success of Amazon’s Kindle e-reader and Kindle Fire tablet devices — the former of which had sold 4 million units at the end of 2011 — a foray into phones is logical.
Amazon and Foxconn have a long relationship, although the US firm opted for a different supplier to build its recent Kindle Fire Touch tablets.
Amazon has the potential to conquer the Smartphone market
Trust on the Brand
Amazon already has many of the building blocks it would need to earn revenue off a smartphone, including its own version of the Android operating system, an established app store and well-stocked content marketplaces that could make up a good chunk of revenue for the phone. It also has a pool of loyal customers who trust the brand.
Amazon is already a success than many other companies in the tablet market thanks to getting in early, a low price and offering Prime movie service, ebooks, cloud storage and Appstore for Android.
A February survey from Baird Equity Research found that just over 40 percent of consumers would be interested in an Amazon smartphone, should Amazon make one (compare that to 12 percent for a Facebook phone.
The King of Content
Given Amazon’s focus on content with the Kindle, an Amazon phone would make it more convenient to find shows and movies even a free version on Amazon if it’s available, for instance.
The online retailer offers a wide selection of movie and television episodes available for rent or purchase, a massive e-book selection, and, of course, apps through the Appstore for Android. Amazon's popular Prime membership offers discounted shipping rates on Amazon.com purchases, free e-book loans, and free TV and movie streaming.
In that way, Amazon could become a key distributor of content, compared to its counterparts, with Neflix, Hulu, Google and Apple.
Recommendations
Amazon also knows precisely what its customers buy and like, which is why it often makes useful recommendations on what else you might be interested in.
The GPS tracking on your Amazon phone (if you allow it) would also let the online retailer suggest places in the physical world to buy those products when you’re nearby a store carrying them.
Amazon has for years found ways to make money by referring people to other online retailers. There’s no reason it can’t do the same with physical retailers.
Offers
Amazon also has made a big push on daily deals with AmazonLocal, and it’s easy to see how those offers might be quite a bit more effective if they hit people’s screens while they’re actually near a restaurant/store that has an offer.
It already offers one Kindle whose low price is subsidized by “special offers,” i.e. ads on its screensaver.
Cost
With the Kindle Fire, Amazon seemed to be selling to those who had never owned an iPad, or could not afford one; Like the Kindle Fire, expect an Amazon phone to be cheap.
Protection
Amazon is reportedly looking to buy up available wireless patents to protect itself from competitor lawsuits. According to Bloomberg, the company is said to have hired an intellectual property acquisition expert and a general manager for patent acquisitions and investments at Amazon.
The future of the web is widely expected to revolve around mobile devices and Smartphones are used more than other devices already. Amazon understands this.
