Amazon recently announced that it will sell an advertising supported Kindle for 114 USDs. Thats a price cut of 25 dollars, and Amazon gets to show ads on the Kindle home screen and some screensavers. Whats the mathematics behind this move?
Lets see. We’ll use 2011 projected numbers of 8 Million Kindles, and assume that Amazon will sell some 6 Million Ad-supported Kindles in 2011. Or, ignoring holiday effects etc. 1.5 Million Kindles every quarter.
Although we have no user surveys to support this, we shall assume that an average user sees the home page some 10 times a day, and the screen savers, a similar number of times (the basis assumption is that there are 10 times, including breaks between reading, that the user switches ‘on’ the Kindle.
We do not know how this advertising is sold, but assuming a quarterly exposure deal gives an advertiser, a total of 20 times 1.5 Million – that is, some 30 Million Views. This is more like a pop up window than banner advertising (technically the screen saver is like a popup window and the homescreen ad is like a banner) but we can assume that targeting can be heavy – this is a location aware device sitting in the hands of a one-click-purchase customer who has been profiled inside out by Amazon. There is a potential Groupon competitor in here, and if you add all the cross selling potential, we are looking at something big.
But working with existing numbers – Amazon just bought this growing ad inventory at the rate of some 0.08 CPM – an AMAZING DEAL – given how much this space would potentially be sold for, Amazon got a major deal for itself.
Agreed, the choice is still with the sellers of this ad space (potential Kindle buyers) but who would mind an ad or two for a 25 dollar deal upfront, right?
We remember reading some joke about selling advertising on the Windows blue screen. What a missed opportunity that one was!
[Reproduced with Permission from StatSpotting
In our opinion, the reason is right there in the news –
” Then, on Tuesday, Cisco announced that it’s shutting down the whole division and laying off 550 people.”
Its the 550 people that they could lay off – and the change in margins that it would bring – is the real reason flip is gone.
If it is a deliberate move (which it seems to be) – Amazon just dropped a bomb on the music industry. When everyone in the world including Apple have hit a wall when it comes to music licensing, Amazon’s announcement of the Cloud Player is nothing less than a thunderbolt. Read : Apple TV, iTunes and the Cloud
“Cloud Player is an application that lets customers manage and play their own music. It’s like any number of existing media management applications. We do not need a license to make Cloud Player available.”
That’s Amazon spokesperson Cat Griffin’s response to questions over whether the company’s new music storage and playback services require licenses from the record companies to operate.
Source: Ars Technica
We have written about how Apple manages Product cannibalization before. There is a terrific business blueprint behind Apple’s Product designs, obviously.
Any new product announcement from Apple raises the following question – “Will it not eat into the market for …”. For instance, people asked that when the iPhone was released – “Will it not eat into the market for iPods?”. They asked that when the iPod Touch was released – “Will it not eat into the market for iPods and the iPhone?” – Now since the iPad has been announced, the same question is being raised – “Will the iPad not eat into iPhone/Macbook sales?”
Apple has been extremely smart about handling product cannibalization issues. From a very simplistic perspective, it boils down to the feature set and the target segment. Now both are related in a funny way. The feature set determines pricing, and pricing determines the target segment. To a large extent, this is true. By taking a really smart approach towards deciding the feature set, Apple has taken care of the whole product cannibalization issue in one shot.
So while for the user, using the iPad as Apple TV would have been a terrific convenience, for Apple, it would have been a terrible business decision.
Apple’s controversial change of Section 3.3.1 of the iPhone Developer Program License Agreement to forbid the use of “applications that link to Documented APIs through an intermediary translation or compatibility layer,” has resulted in lot of criticism on Apple’s approach, with many folks depicting this as an Apple Vs Adobe thing. They say its not open, and hence, not good for mankind.
But we think this is the smartest thing Apple, or for that matter, any platform owner, has done in many, many years.
The title of this post more or less summarizes our thoughts on this – if any piece of software tries to serve the least common denominator, it will end up being just that – the ‘least’ common denominator. ‘ The best features of a given platform will go under-utilized. Ever felt a little odd when clicking on a Java button on windows?
Steve Jobs’ response email concludes the argument:
“We’ve been there before, and intermediate layers between the platform and the developer ultimately produces sub-standard apps and hinders the progress of the platform.”
Source: Taoeffect. We agree completely.
This was going to happen, only we did not realize it would happen so soon. As app marketplaces compete to attract developers and users to build a sustainable ecossytem, we as a digital generation get to witness the most significant thing in our connected lives this decade – the battle of the app marketplaces.
So we know they can be device driven (iPhone/Droid/iPad) or platform/network driven (Twitter/Facebook) – and we did some crystal ball gazing here at iptiam some time back – (Read OneForty and iTunes App Store: Do They Intersect? ) This is a scenario we had referred to:
Targeting apps to devices, and not experiences, is actually unfortunate. If you feed “Goto Movie” on your PC before you leave home, your PC at home must communicate with the smart device in your car, which should communicate with the smartphone in your hand which should communicate with your iPad in your bag. Seemless integration based on what you want to do should be the intended result.
And we had suggested that OneForty (a Twitter App store) has an edge, since Twitter maps closer to experiences than any single device (iPad). In this battle of the App marketplaces, maybe a collection of devices might come closer to addressing an experience requirement of the user – iPad + iPod touch + iPhone – but at the end of the day, it boils down to reach (think Facebook vs Google Opensocial). Which might be a problem for the android phones at this point (Low reach => Fewer Apps => Fewer Reasons to Buy => Low Reach) – whereas the iPhone has this – (High reach => More Apps => More Reasons to Buy => More reach). So as in all cases, obviously, the trick is in getting this balance right.
Or, you just go for an open territory with more reach but the platform owner did not bother to have a marketplace. Like OneForty. Which is why, like we said before, we think it is probably a masterstroke.
Picture this: you select an app on OneForty, choose the “devices” you need that on – or better still, choose the “experiences” you want for that app – example: select one or more of the following: 1. Native Experience (Win) 2. Native Experience (Mac) 3. Touch Experience (Smartphone-Win) 4. Touch Experience (Smartphone-Mac)5. Touch Experience (Tablet-Win) 6.Touch Experience (Tablet-Mac) – then pay for all that on OneForty, in one shot. OneForty of course takes care of the rest (pay iTunes ? / Google / MS).
Why is OneForty at the center in this scenario? Because its NOT device-driven. User requirements are NOT device-driven. They are context-driven (e.g. at home, in a coffee shop) – today, a device is the closest proxy we have to represent the user’s context.
Welcome to the battle of the app marketplaces. You can find where you parked your car, in 10 different ways. We live in exciting times.
DigitalBeat is reporting that smashwords could have a potentially big deal in store, with the launch of the iPad:
Smashwords, a site where writers can publish their own e-books, said today it has signed a distribution deal with Apple to put its books into the iPad iBookstore. Mark Coker, chief executive of Smashwords, said in an email to authors that his company has been working on the deal ever since the iPad was announced. And, yes, this means that unpublished authors can sell their work on the Apple iPad at virtually no cost.
This is definitely welcome news for hundreds of people.
We have written about Amazon’s challenges due to the iPad – Read The Real Question Facing Amazon. More specifically, we had asked the question – What happens to the Kindle Reader App now?. We now have the answer.
In what can be termed as a strangely significant event, Amazon showed off its Kindle Reader App for the iPad – a better experience to capitalise on the benefits of the hardware, page-turning visual effects, books in color and all that – but we agree with the article - the most important piece was how you buy books.
“Content is King” – Steve Jobs gave a live demo of this when he got the whole iTunes ecosystem up and running – the pricing and the approach there was pure genius. But now, he has a different challenge – with eBooks, Jeff Bezos landed there first. But you can bet he’ll handle this one with the same genius touch. (Pls read: Why Apple treats Books and Music differently).
Apple Inc. is still working to secure content for the iPad with just weeks to go before the tablet computer’s release, said people familiar with the matter, as the company tempers some of its initial ambitions for the much-hyped device.
Apple is racing to complete some discussions with potential content partners before the iPad is scheduled to ship on April 3, said people familiar with the matter. But nailing down the content has proven difficult as some potential collaborators weigh the advantages of working with Apple against the potential threats to their current sources of revenue, these people add.
Source: WSJ. If there is one firm that can navigate these tough waters, our bet is, it would be Apple.
We already know the iPad’s fate would be decided by apps. But we also believe that the real killer app is not out in the open now – given the form factor, the price point and the software, there must be a killer app that would end up fueling the iPad revolution. We thought it might be the classroom – read iPad enters the classroom. Well, it could be gaming – read Is gaming iPad’s ‘killer app’?, or, is it healthcare? – Voalte: Healthcare communication using iPad
The answer is, we dont know yet. But we have a feeling that there could be a surprise element here – (think: waiters taking orders on the iPad) – we’ll find out soon.