1. Should Amazon offer free wireless on the Fire Phone? 2. Fire Phone's value add to the Amazon platform 3. Market feedback

1. Should Amazon combine
freeWireless Broadband
with its Fire Phone?
PETER ROVICK
27AUG14

2. Fire Phone Ecosystem Effects
Mobile Devices1
• Crowded & hypercompetitive market
• More growth in developing countries (e.g. China
– Lenovo, Xiaomi)
• Slower growth in USA (Samsung, Apple)
• Sales trending toward low end ($100-$200)
and ultra low end (<$100)
• New technology & hardware focus not the
goal for Amazon
Content
• Amazon’s Goal: increase mobile mindshare
• Control the home screen
• Push access to digital content & online store
• “Imagine a home screen of all Amazon apps” –
Carl Howe, Yankee Group
• Circumvent digital gatekeepers (e.g. Apple,
Google, & Samsung)
 Increase competition with iTunes Store:
customer immersion into and loyalty to
Amazon platform
1 See Appendix I

3. Strategic Fit: Business Model
Amazon’s Business Model
 Competitive/Low Prices (volume play)
 One-Stop Shopping
 Shopping Experience
 From your fingertips (no driving)
 Comparative
 Customers also viewed (alternate product)
 Customers also purchased (accessories / complimentary products)
 Fast/Immediate Delivery (to compete with brick & mortar)
Fire Phone as Strategic Fit
• Gain digital content market share (vs. physical goods)
• Become a ‘go to’ resource for digital content (e.g. primacy vs. iTunes & Google Stores)

4. Amazon’s Motivation: Wireless Bundling
• Influence on/Control over delivery channel (analogous to UPS partnership)
• Learning from AT&T’s exclusivity experiences with iPhone & Kindle
• Co-Marketing
• Both (AT&T and Amazon) have vast customer databases
• Marketing on two fronts by two significant players
• Pre-emptive strike for both Amazon and AT&T
• Shared focus & support vs. partnerships with competitors
• Dual prong:
• Defend existing customer base
• Add new customers
• Feasibility
• Free Devices: Match market offerings – current price structure makes sense
• Bundling Wireless Broadband: Yes, but not free.

5. Implications & Impacts
• Smartphone Market
• Minimal implications for now.
• Customers & Competitors will monitor Fire Phone evolution & market share
• Free offer - Device distribution
• Hardware: We’ve seen it before (iPhone/AT&T distribution)
• Wireless: Competitors may match (at certain threshold), then all would lose – don’t do it.
• Wireless Carriers
• AT&T: Preemptive Strike
• Capture Amazon partnership opportunity before another carrier does
• May cannibalize existing customer base (if lower fees apply), but at least won’t lose customers
• T-Mobile & Sprint
• Combined scale may help secure seat at the table for future similar opportunities
• Other regions/countries: No immediate impact, but may spur copycats or further partnerships

6. Conclusions
“We shouldn’t underestimate their [Amazon’s] ability to stand out from a crowded
market” Carl Howe, Yankee Group
• Amazon needs phone as driver for digital content (e.g. home screen control)
• AT&T as preemptive strike: don’t let Verizon or T-Mobile/Sprint partner
• Wireless bundling should not be free
• Short term gains minimal
• Long term profit reductions harmful for all
For those that do buy the Fire Phone, it will undoubtedly create a "halo effect" on
the rest of Amazon's businesses; the big unknown is just how far it will stretch.

7. Future Thinking
• Exclusive offers: only available to FirePhone users (not via Amazon apps on other phones)
• App-lications: Developers submit apps to Amazon
• App developers and e-commerce businesses tend to want to reach everyone they can, not just the richest
11.7% (Apple) – bodes well for Android/Amazon
• Store credit vs. discounted hardware or wireless service
"I would say the Fire phone is a blueprint of where Amazon is
heading with mobile," said IDC analyst Ramon Llamas.

8. Appendix I
Q2 2014 Global Smartphone OS Market Share – source: IDC
OS Shipments Notes
All 301 M 25.3%Y/Y Growth
Android 255 M 85% Market Share*
*Fueled by gains in the low (US$100<US$200) and ultra low-end (<US$100) of the market, seeing those categories grow 16.5%
sequentially since the first quarter.
Q2 2014 Worldwide Vendor Market Share – source: IDC
Period Samsung Apple Huawei Lenovo LG Others
Q2 2014 24.9% 11.7% 6.7% 5.2% 4.8% 46.7%*
Q2 2013 32.2% 13.0% 4.3% 4.7% 5.1% 40.7%
*While Samsung has ¼ of market share, no dominant global player in increasingly commoditized markets. Regional/Local market
dominance is focus (BRIC or other)

9. Appendix I - continued
Q2 2014 Worldwide Vendor Market Share – source: IDC
Period Samsung Apple Huawei Lenovo LG Others
Q2 2014 24.9% 11.7% 6.7% 5.2% 4.8% 46.7%*
Q2 2013 32.2% 13.0% 4.3% 4.7% 5.1% 40.7%
*While Samsung has ¼ of market share, no dominant global player in increasingly commoditized markets. Regional/Local market
dominance is focus (BRIC or other)

10. Appendix II: Market & Marketing
Market Opportunities
Demographic(s) / Behavioral
◦ “Good enough” (features/functions) – The Price is Right
◦ Gamers
◦ Heavy Users
◦ Support Reliant
◦ Aesthetic Sensitive: Colors
◦ Feature-Specific
Geographic
◦ USA
◦ Others? (partnerships with other carriers?)

11. Marketing: Amazon
Targeting Apple/iPhone
Amazon Touting… (Competitive Mechanisms)
1. Dynamic Perspective
2. Firefly technology
3. Mayday
4. And…Prime- full year included
$0.00 – $649.00
Price varies with service agreement

12. Marketing: AT&T
Note the Order of the four features/benefits
Amazon Touting… (Competitive Mechanisms)
1. Prime  differs from Amazon’s order
2. Firefly
3. Dynamic Perspective
4. Mayday

13. Market Buzz
Mashable
• Fire pushes Amazon further on the path of becoming the next Apple… Amazon has created a real
ecosystem that fosters loyalty among its users.
• For the Amazon faithful, Fire completes the platform with the most powerful and intimate of devices —
the one that's carried at all times.
• For the uninitiated, it's the most powerful gateway drug the company could have built. Either way, Fire will
sear Amazon's mark on you, and you'll probably like it.
COMPUTERWORLD and IDC, Forrester
• "I would say the Fire phone is a blueprint of where Amazon is heading with mobile," said IDC analyst Ramon
Llamas, who laid out the idea of using the phone to assess a planned TV purchase.
• "I'm not saying these technologies aren't interesting, but is there enough there for consumers to say, 'I need
this phone?'" said Julie Ask, a Forrester analyst.
• Llamas said that if even 5% of Amazon's estimated 20 million Prime customers buy a Fire phone, Amazon
would reach a "reasonable" starting number of 1 million sales.

14. Market Buzz
WSJ and IDC: “Showrooming on steroids”, but apps already exist…
• iPhone: Amazon app
• Google: Goggles app for scanning
• “Once again, even if it indirectly, Amazon is putting retailers back on their heels”
BBC
• …for those that do buy the Fire Phone, it will undoubtedly create a "halo effect" on the rest of
Amazon's businesses; the big unknown is just how far it will stretch.
• "Most of the value Amazon will accrue from these handsets will be made over the following years
after the initial sale," said Chris Green, principal technology analyst at the Davies Murphy Group
consultancy
• "I wouldn't say Amazon has tied everything together as well as Apple, but it's certainly done it much
better than Google."

15. Market Buzz
New York Times
• The Fire phone, the product of four years of research and development, offers Amazon fans the
chance to live in an Amazon-themed world, where just about every element can be identified,
listed, ranked, shared and, of course, ordered.
Forbes
• …scanning technology that essentially turns the phone into a cash register. The Firefly button
“let’s you… take action in seconds,” said Bezos.
• “The device brings nothing disruptive or particularly innovative to end-users to justify such
pricing,” said IDC Research director Francisco Jeronimo. “The only way Amazon has to succeed in
the premium segment is by providing a disruptive shopping mobile experience, a disruptive price,
or additional value to users. None of these were announced today, which is disappointing.”

16. Market Buzz
Huffington Post
• Like the iPhone when it was first announced in 2007, Amazon's phone will only be available to
AT&T customers, at least for now.
• Unlike Apple and Samsung, which rely on huge profits from expensive iPhones and Galaxys,
Amazon makes money when you use the phone to order diapers and download movies, not
when you buy the hardware.

17. Users: Mixed Reviews
Mixed Reviews: minor if addressed
 Cons
 Battery Life
 Temperature
 App Organization
 Pros
 Value
 Loyalty to Amazon
Detailed user reviews  savvy customers