In a highly anticipated move, Amazon (AMZN) announced the release of its Fire smartphone on Wednesday. With a platform customized around Google’s (GOOG) Android operating system, Fire is a competitive high-end market offering. However, without features that truly differentiate it from other smartphones, it is doubtful that Fire will initially gain the traction necessary to be competitive in an already crowded smartphone market.
First, let’s examine Fire's capabilities. Amazon based many of the phone’s new features on its current customer profiles. For example, a function called Firefly allows users to point the camera at any object and snap a photo. The phone will then automatically search Amazon’s online store and give you the ability to immediately order said item from Amazon. While this service simplifies online shopping, it is also a blatant attempt by Amazon to generate more revenue from consumer data.
Fire is also seamlessly integrated with Amazon’s Prime service. Those who purchase the phone, with a two-year contract, will enjoy a free yearlong subscription to Amazon Prime. Among other features, this gives customers access to Amazon’s video and music streaming services, and allows users to back up photos to Amazon’s cloud.
Amazon has also provided a major improvement to its already superb customer support service. Fire comes with a live 24/7 customer help center called Mayday. By calling Mayday, users can video chat with live Amazon representatives to help solve their problems. This will be a very useful feature for new, and elderly, Amazon users. While Fire’s software is Android based, Amazon designed its smartphone around its popular tablets. Thus, Android and iOS users, who switch to Fire, will inevitably face user interface challenges, many of which can be solved via Mayday.
Essentially, Amazon presented customers with a friendly new smartphone. However, despite Amazon's extensive marketing, Fire will not offer any truly revolutionary features to the smartphone market. In terms of functionality, the phone does not outclass Samsung’s Galaxy line, or Apple’s iPhones. Fire will be sold for $200, with a two-year contract, and will have a limited market reach since the phone will only be licensed to AT&T.
In short, Amazon has missed a golden opportunity to drastically transform the smartphone market, trading long-term results for short-term gains. Ultimately, consumers want simple, un-intrusive, and functional smartphones. Amazon will fight an up hill battle to convince loyal Apple and Samsung users to switch to its unproven Fire platform.
However, Amazon has succeeded in developing a phone that integrates its core services (to boost the company’s bottom line). Amazon Prime subscribers will have a much-improved experience when using Fire. With this in mind, the market had an initially positive reaction. Amazon's stock climbed almost $11 Wednesday afternoon, from $325 to $336. Despite these positive signs, expect this enthusiasm to soon fade. Amazon’s brand recognition will help them sell some units, but its high priced, mediocre device will not deliver Amazon favorable long-term results.