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Amazon looks primed to give HTC, Motorola and LG a knockout punch

Published Mar 7th, 2014 12:51PM EST
Amazon Kindle Phone Analysis

The latest Chitika statistics show Samsung gobbling up 55% of web traffic that Android devices generate in North America. No surprise. But what is intriguing is that Amazon generates the second largest chunk of web traffic. This means that on the strength of its Kindle tablets alone, Amazon muscles ahead of Motorola and HTC, even though these fading Android vendors both have wide ranges of smartphones. Amazon’s plan all along was to grab big enough a chunk of mobile content market to bootstrap a whole device operation into life. That plan is on track and may have surprising implications on the smartphone and tablet market in America in coming years.

Now that Amazon has been able to reach a substantial portion (8.2%) of all North American Android web traffic with just Kindle tablets, it is only a matter of time until we will see a Kindle Phone. Amazon’s Kindle approach of pricing the tablet so low that it undermines all but Apple and Samsung has been highly effective. Pricing smartphones aggressively could mean a moderately well-equipped, 4.5 inch smartphone retailing at around $150.

With some help from increased tablet traffic, adding Kindle phones could boost Amazon’s share of North American web traffic on the Android platform to the 15% to 20% range very soon. The more content Amazon controls, the more heavily it can subsidize tablet and smartphone prices. Device users spend more time shopping on Amazon sites and viewing Amazon videos. The bigger Amazon gets, the more it can afford to subsidize its devices. This is something other vendors cannot match — they do not possess the massive power of Amazon’s online retailing and content streaming services.

There is no way brands like Motorola, LG or HTC can compete against a leviathan that can tolerate posting negative margins on its devices indefinitely. This is effectively the only real threat to Apple-Samsung device duopoly in North America — the smaller, but infinitely scrappy and hyper-vertical Amazon.

After launching mobile game company SpringToys tragically early in 2000, Tero Kuittinen spent eight years doing equity research at firms including Alliance Capital and Opstock. He is currently an analyst and VP of North American sales at mobile diagnostics and expense management Alekstra, and has contributed to, Forbes and Business 2.0 Magazine in addition to BGR.