Amazon Challenges Apple

The key moment in Jeff Bezos's keynote announcing Amazon's new Paperwhite Kindle and Kindle Fire models came before he introduced any of the new hardware. "People don't want gadgets any more," Bezos declared, explaining why the Kindle Fire had succeeded where other gadgety Android tablets had failed.

"They want services that improve over time. They want services that improve every day, every week, and every month." This statement of purpose signals a new phase in Amazon's evolution as a company, and its singular, emerging take on the developing consumer marketplace, and how it's positioning itself towards its broad field of competitors.

"The Kindle Fire," he added, "is a service. It offers 22 million items. It calls you by name. It makes recommendations for you." Bezos was talking about the Kindle Fire as if it were Amazon itself: the entire retail and technological experience made manifest in a single device. The future of Amazon, he seemed to be saying, isn't the website; it's this material portal, and others like it.

It's a truism that computing today is driven by increasingly portable hardware backed up by cloud services and subscriptions, that the fun play of digital media is displacing software suites driven by text-based productivity, that subscriptions and proprietary stores are just as legitimate as pure hardware plays. But nobody distills that transformation to its purest essence quite like Amazon.

While Apple, Microsoft, Google, and Facebook are all charting different evolutionary routes from PC to post-PC and from desktop to mobile, Amazon has largely been able to sidestep that entire problem. It's borrowed what it's needed to from all of its competitors — whether spiritually in the case of Apple's iTunes, or materially in the case of Google's Android — and moved on. While the iPad is still trying to prove itself in the face of criticisms that it's only a media consumption device, a portable store in a fancy box, Amazon's simply embraced that fate and never pretended otherwise.
Amazon's challenge to Apple is both direct and indirect. First, Amazon wants to prove that like Apple, it's a serious, innovative technology company. This is why, even as Bezos disdained "gadgets," he was also willing to take a long detour through the minutiae of MIMO Wi-Fi technology already common on laptops and routers sold today.
At the same time, Amazon gets to have it both ways, touting hardware not for its own sake, but as a "critical," "essential" part of the Kindle Fire HD "service." Improved Wi-Fi just happens to let you stream higher-definition movies without lag or buffering; Dolby stereo sound makes video and games a more immersive experience.

Everywhere else, Amazon's head-to-head comparisons with Apple are less direct. Amazon didn't make a 9.7-inch tablet with a 4:3 screen ratio; it made an 8.9-inch tablet with a 16:10 ratio. It may seem like a subtle difference, but the large Kindle Fire HD won't really look and feel like an iPad; it'll look like an oversized Kindle Fire. It's big enough for games and movies, but not anywhere near personal computer territory.

Reducing the cost of 4G data access to just $50 for the first year is another fascinating asymmetric challenge to Apple. Sure, you'll have to sign up for a regular data plan after the first year, and 250MB of wireless data is awfully paltry for road warriors, but a 4G LTE-enabled iPad suddenly looks very expensive on the shelf, while a maxed-out Kindle Fire HD looks like a bargain. Amazon is shrewdly appealing to its customers as customers, asking them to comparison-shop Apple out of the picture.

This focus on retail as the primary revenue stream is the flip side of what Bezos now calls "the Amazon doctrine": aligning the company's incentives with the needs of its customers, and "winning only when they win." If Amazon's customers are happy with the Kindle Fire's still-growing media offerings and advertisements for its giant retail catalog, Amazon wins. If its customers sour on that future, Amazon loses. Everything, from Amazon's hardware choices to its price points and messaging, flows from that concept.