Why Amazon might make a smartphone

Jul 26, 2012

There’s been growing speculation lately that Amazon has a smartphone in the works. But why?

It’s a crowded market out there in smartphone land. There’s a whole bunch of phones based on Google’s Android software, there’s the Microsoft Windows phone, and of course, Apple’s iPhone.

Also, a small sampling of people on a downtown Seattle street didn't show a whole lot of interest in an Amazon phone.

Most already had iPhones - or coveted iPhones.

"Good luck, Amazon," said Shane Mehling. "I wish you all the best."

But hey, this is Amazon – the company that’s taking over the world with everything from streaming movies and TV shows to cloud-based computing to selling groceries. So why not a phone?

ABI Research analyst Michael Morgan says it could make sense, especially if Amazon aims for people who are more budget conscious than people who buy iPhones. He says that’s where the smartphone market is heading.

"You’re going to start to see the emergence of the mass market or middle class-type customer who doesn’t need a jetpack on their smartphone," Morgan said. "They just want to do Facebook, maybe browse on Amazon a bit and that’s it."

He says Amazon probably sees a smartphone as a way to drive more dollars toward its digital offerings like movies and music. And he says Amazon could add applications to the phone that people could use to comparison shop in brick and mortar stores.

"Perhaps an app that says, 'Oh, you’re in a store, hit this app, scan the barcode, oh, you can get it on Amazon shipped to your door tomorrow, just hit this button,'" Morgan said.

Morgan says there are definitely risks, though.

Amazon would probably use Google’s Android operating system and for the company to be successful, it would have to rise above that crowded Android market with something different – something that showcases Amazon’s content. But the smartphone market is growing fast, and he says he’s not surprised a behemoth like Amazon wants a slice of it.

In its story on the prospect of an Amazon smartphone, Bloomberg wrote earlier this month that a smartphone “would give Amazon a wider range of low-priced hardware devices that bolster its strategy of making money from digital books, songs and movies. It would help Chief Executive Officer Jeff Bezos – who made a foray into tablets with the Kindle Fire – carve out a slice of the market for advanced wireless handsets.”