Amazon sells you a device so they can show you an ad encouraging you to buy a rake. Amazon sells you the rake, has it delivered in 2 days, and makes 100% of the profit.
It's not that people will actively look for that integration, but that it exists gives Amazon a significant advantage imho.
Amazon sells you a rake made by a 3rd party who was put into FBA by a wholesaler and makes a reasonable cut of the profit in the process.
Amazon has more control but also takes all the blame when things go wrong.
Tbh, as someone who works at a business who does both the ads & selling stuff via Amazon as a manufacturer...Google actually makes more money off of us than Amazon does. I don't mean like a "little more money", I mean something like 5x as much money. This part is anecdotal obviously but I think you are very, very wrong in assuming that "Sell Product" > "Sell Ad".
Unless you only sell through Amazon, then a global comparison wouldn't be fair, because Google is semi-monopolist in ads while Amazon is far from it in retail. You should compare your average user acquisition cost with the wholesale margin left to Amazon; eg: how much does it cost to acquire through ads a user that buys products for $100? And how much of those $100 are left to Amazon?
When I say 5x, I mean Google gets 5x the amount of money than Amazon does. I think that is more relevant than a "per item" basis.
> Unless you only sell through Amazon, then a global comparison wouldn't be fair, because Google is semi-monopolist in ads while Amazon is far from it in retail.
It isn't my fault Amazon can't sell more of our products. ;)
> You should compare your average user acquisition cost with the wholesale margin left to Amazon; eg: how much does it cost to acquire through ads a user that buys products for $100? And how much of those $100 are left to Amazon?
That is a bad way of comparing for purposes of this conversation.
Amazon has to pay for shipping, pick & pack, customer service, return shipping, etc. That isn't free.
that would make it sound like amazon's current business model isnt working, which I think its doing pretty well. Amazon has razor thin margins for sure
Amazon's business model works. It just doesn't take "100% of the profits" by any stretch of the imagination.
Sorry if that was unclear.
Personally, I have a very much love/hate relationship with Amazon and I blame them, not the vendor.
I've had to issue a chargeback because of Amazon's incompetence...which most customer's probably haven't. It is literally the second chargeback I've ever had to do in my life, so it tends to stick with me more than it might for other people.
The eye tracking is nothing new and 3D as a sale gimmick crashed and burned years ago and I don't amazon doing anything revolutionary with it here.
If it were $200 unlocked then I can see it selling like crazy, but the current plan makes no sense, if amazon was providing the service as a MVNO and offered stuff like truly unlimited data and stuff then maybe, just maybe, but $199 for this phone and on AT&T? PASS....
That is clearly not the case with Amazon. "Just increases their profits" is pretty much the only thing that matters. Dominant market share comes much later, if at all. Dominant market share might even be a bad thing, if attaining it requires a race to the bottom. Most companies would (and should) prefer to sell a million devices with decent margins than 10 million devices with little or no profits. Amazon is known for pursuing market share at the expense of profits, but that's often not the best strategy and they can be excused for not taking it this time.
It's also better from a risk management perspective. For the first iteration of a device like this, it's less risky to try to sell a few of them at reasonable margins then to try to sell a gazillion of them at razor thin margins. The price of failure is far less, and depending on how this one does, then the next time around they can start adding cheaper models and gradually expand the user base. Or not, their choice. It's not always worth it.
If they can leverage that to reduce buying friction, then yes, that's exactly the right move!
At $199, my gut tells me that the early adopters of this phone will largely be people who already use Amazon regularly.
The term "big winner" to me implies that the thought process is that they will win out over Samsung and Apple in the long run, but I don't think that is very likely anytime soon. I don't hate the move by Amazon because you have to start somewhere, but predicting them the winner as this device is first launched is very optimistic in my eyes.
If I'm interpreting that correctly, I don't see how that holds. People use smartphones/tablets/televisions to consume many things. Amazon products are just one of them.
I don't think that just because controlling the entire product ecosystem would work to Amazon's advantage means that customers will want a phone that enables that end-to-end control.
The end-to-end control works well for the Kindle, because eReaders are used really only for reading the books that are available only on Amazon's eReader marketplace. But I can shop Amazon from any device I want. So having a phone that owns that experience isn't a major value proposition for me. I'm much more interested in things like display, battery life, camera quality, sound quality, and the phone's popularity than which product ecosystem it taps into.
To me Amazon is working from a major disadvantage here. The technology doesn't seem mind-blowing, the device at first blush doesn't look remarkably different from what's already available, and since phones are largely subsidized by carriers, most customers aren't going to be hugely price-sensitive. If anything, people opt for the most expensive, newest phones. If Amazon is looking for the people who will spend the most money, they certainly won't be interested in customers who think $199 is too much to spend for a new phone that they will use every day for at least two years (which is a moot point since the phone is priced at $199).