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How many new Kindles will Amazon sell?

Amazon will sell as many Kindles as they make, but the number they will make will not be the most they could make.

The logic of selling a product which has a profit model unrelated to the cost of goods sold is tricky. The incentives are different. The risk is not selling too few but selling too many.

For this reason I think the total number of new Fire units to be sold has already been determined by a production order. You cannot think about the business from a demand point of view. If the product would be free then the demand would be infinite. The decision about how many will be “sold” will depend on the goodwill of the producer.

What Amazon tries to do with the brand is ensure that the Fire is in the hands of its most ravenous consumers. That is why it’s not sold in all markets or through all channels. They are sold through Amazon.com in the US (limited sales in UK as well). This is because a large number of the product in the hands of users who only use it for browsing or in areas where Amazon does not have content deals or where its ads are poorly targeted (e.g. India, Indonesia or Madagascar) would be a disaster. It may not be all that helpful to Google to have Android in those markets but as you would expect it’s still a profitable business for Apple.

So one way to think of the Fire is as a promotional item (aka swag) for another business (Amazon.com). Using this frame of mind, assessing its “threat” to another business which charges for the product itself is like assessing whether free t-shirts from trade shows affect the sales of clothing or apparel in general. They do, but mostly the sale of cheap t-shirts. I doubt that people stop buying more functional clothing because they have hundreds of free t-shirts. And then there’s the problem of looking like an advertisement.

  • http://twitter.com/bennomatic bennomatic

    I don’t know… I’d rather have an Asymco shirt than a Luigi Borrelli any day. If someone gave me an LB shirt, I’d sell it and buy 20 of yours!

    • http://www.facebook.com/bob.arker.731 Bob Arker

      Not quite sure how this is relevant to the conversation, but I have a couple ‘rellis myself. As much as I love Asymco, I could not trade a ‘relli and those triple stacked MOP buttons for any T-shirts. It would be like trading an iPhone for a Galaxy S3.

  • http://ARMdevices.net/ Charbax

    Google’s 70k/day does not include Kindle Fires, does not include the 200k/day non-certified Android tablets made and sold in China, sold at starting $50 for awesomely smooth Jelly Bean 7″ capacitive tablets with HDMI and MicroSD. Android tablets outsell iPads in terms of daily sales since Kindle Fire 1 in December 2011. The bill of materials for a $199 Nexus 7 or Kindle Fire HD 7″ is below $150 with volume averaged over the 6 months of manufacturing. Neither Asus, nor Amazon, nor Google nor small Chinese $50 Android tablet makers are loosing any money, they aren’t amking $250 profit per tablet like Apple, but they dominate just as for smartphones, they dominate in terms of R&D invested and enjoyed by consumers, Android dominates by number of hardware and software engineers inveted, Android dominates in terms of spread coverage of the worldwide materials, minerals, components used, 99% of screen makers, ARM processor makers, memory makers, all are fuly dedicated to supply the Android Smartphone and Tablet market. Apple’s tablet profit margins are basically dead, especially with iPad Mini coming in at half the price of iPad3, no consumer is ever going to pay $499 for a tablet ever again, Apple only has their smartphones profits remaining, and that is under heavy threat, Samsung can cut Apple off from not just memory, also processors, Samsung can use their 32nm ARM processor fabrication capacity to make more own Galaxy phones and to supply any number of other Android phone and tablet makers worldwide. In fact Samsung’s 32nm ARM process node is fast enough to power ARM powered Chromebooks sold at $199 smooth and thin as ultrabooks, fast enough for Google TV to be included for free in more than 50% of HDTVs sold from 2013, Samsung does not need Apple, Apple is desperate.

    • Ivan Reese

      I can’t tell if you’re being satirical. If not, you should write “no consumer is ever going to pay $499 for a tablet ever again” on a slip of paper and hide it somewhere in your house where you won’t find it for a few years. When you do find it, I suspect you’ll gain a really interesting perspective via hindsight. There are consumers (I am one of them) who would pay $1000 for an iPad Pro. I realize that there’s probably not a raging market for a device of this profile at this price point, but it’s far too soon to make such a definitive statement as, “A wildly successful product at a stable price/demand balance is about to evaporate.” I expect to see the range of offerings (profiles and prices) expand, not contract.

      • Canucker

        No satire here, Charbax promotes all things Android (Samsung, Archos, etc). That’s OK, plenty of Apple and Microsoft fanboys out there too. Difference being they aren’t usually quite as daft.

      • http://ARMdevices.net/ Charbax

        I don’t need your experiment, I’ve been proven 100% right for most of my tech predictions online over the past 15 years. I for example predicted OMAP4470 in the new Kindle Fire HD. Simply because OMAP4470 is easier and cheaper to integrate and it’s faster than Tegra3 and iPad3.

        There’s such a thing as cannibalization, that happens with every single consumer electronics segment in the history of consumer electronics. But if you and other AAPL fanboys want to believe to the core of yourselves that somehow the only product segment that makes up 90% of Apple profits today, the iOS ARM Powered product segment, mostly at 85% iPhone and 15% iPad profit, that somehow that is never going to get disrupted and cannibalized, that you somehow want to believe that consumers are always going to pay 400% more than cost for iPhones and that they are always going to pay 100% more than cost for iPads, you can if you want live in Apple’s alternate reality world, go put your trust and money in them forever being able to sell overpriced devices for as many millions of consumers as they do today.

        iPad Mini is going to kill iPad faster than all Android tablets do. But of course the iPad mini is a demonstration of Android dominating the world of tech and forcing Apple to make the decision to auto-cannibalize their own so-called Post PC World market.

        There’s still a bit of profits left in smartphones, and that can be lucky for Apple, as gigantic corrupt and crappy carriers are hiding prices of these insanely overpriced devices behind even more overpriced carrier consumer contracts, the biggest scam in the history of humanity. Imagine how many Ramses 2 pyramids you can build with Apple’s $600 Billion stock market valuation, Apple is a much bigger scam than Egypt.

        But even the overpriced iPhone can’t last. Samsung Galaxy S3 is already sold at 50% cheaper than iPhone 4S to carriers, the carriers do not enjoy paying Apple 50% more than any high-end awesome Android phone. So you should not expect Apple to continue having such huge profit margin neither on the iPhone.

      • FalKirk

        “I’ve been proven 100% right for most of my tech predictions online over the past 15 years.” – Charbax

        I predict that nothing you say will add any value to this discussion.

      • Walt French

        Either you’re not the same person who’s been going by “Charbax” for many years, or your “100% right for most most of my tech predictions” is dead wrong unless you are practicing weasel-word sophistry that will not impress anybody to listen to you at all.

        Anyway, as far as a nearly-useless prediction of where markets would be going, this one jumped out at me from a quick scan on Google. Of course, yes, ARM laptops may yet win; perhaps you’ll let us know what year you intent them to be the Big Deal.

        Charbax.com
        August 14, 2009
        ARM laptops will win
        Filed under: Consumer Electronics — Charbax @ 3:47 pm
        1. They are much cheaper. Cheapest unlocked 3G-enabled ARM based laptops will be sold at $100 without any carrier contracts needed.
        2. ARM Laptops have no screen size limits. Get a 15″ ARM powered laptop for $200 soon.
        3. ARM Laptops run 15-20 hours on a small 3-cell battery at the minimum.

        8. Full HTML5 enabled browser runs on ARM Laptops with an unlimited amount of tabs with as little as only 256mb RAM required thus lowering the price.

      • simon

        Let’s just say Charbax is the same person who really said Archos Android tablet is better because it supports multiple codecs which lets users to download content from BitTorrent whereas iPad is only for the rich users who pay money on iTunes. Really, that’s what he said at the Engadget forum a couple of years ago.

      • http://ARMdevices.net/ Charbax

        Archos is by far much much better than Apple. That’s absolutely plain common sense. I can prove that by putting your parents in a store where the $400 Archos 101 XS with keyboard is for sale next to the $600 iPad3 with Logitech keyboard. You can be absolutely sure that your parents are going to choose the Archos as the much better value for money. Same for any consumer. The only reason Apple sells more than Archos is because Apple has more cash to produce more products and to sell more products in own Apple stores, demanding of retailers to only highlight Apple in the store, having psychologically corrupted pretty much the whole techmeme media to continually try to tell people online that only Apple exists on the market etc. It’s pretty much a piece of cake to understand that Archos has always been far better value than Apple over the past 13 years of the consumer electronics market.

      • Walt French

        I was in a Best Buy yesterday to buy a new backup disk before traveling, and all the action was at the iPad exhibit; the various tablets sat unattended.

        And of course sales figures also agree with my single data point. Again, what is an obvious proof to you is not even in accord with industry statistics.

        You seem to be making the too-common mistake of projecting your own preferences on the world at large. Here, the obvious flaw is that “parents” who didn’t grow up with computers as we did, need the reassurance of both informal and formal tech support, of brand name quality assurance (e.g., the recent JD Powers satisfaction scores that are big in the US) and many other “network” and “ecosystem” effects that you discount.

        FUD used to be a big marketing plus for IBM, but concerns about the many unknowns is NOT unreasonable, especially for consumers who are spending hundreds based on very little ability to understand acute technical issues.

      • unhinged

        @Charbax: “having psychologically corrupted pretty much the whole techmeme media to continually try to tell people online that only Apple exists on the market etc.”

        Hahahaha! I don’t care that you’re serious, I still think this is the funniest thing I’ve read in a month!

      • http://profiles.google.com/simon.hibbs Simon Hibbs

        I’m sure as hardware the Archos is fine, the problem is it doesn’t have the rich, deep pool of high quality apps available for the iPad. Since these devices exist only to run software, the quantity and quality of that software is the critical factor in their success. Android promoters have been saying that Android will ‘soon’ have the best software since the day it came out and it’s still not even close. This is the reason Archos has a tiny fraction of Apple’s sales. My parents know cheap, poorly supported, derivative crap when they see it.

      • http://ARMdevices.net/ Charbax

        That is complete nonsense. The best apps are on Android by far. Real developers only develop on Android because 5 Android phones are sold worldwide for each iPhone that is sold. And since Android 1.6 Donut SDK are all Android apps automatically scaled and expanded for tablet screen sizes and resolution, unlike iOS, all Android apps work and look perfect on tablet even without being fully tablet optimized yet. The app number argument for iOS has been completely and utterly bogus since the beginning. Both platforms have hundreds of thousands of apps, Android has WAY MORE apps today, simply because 95% of China and India use Android thus all developers there develop on Android only. iOS is just about to get even more fragmented as iPad Mini has a screen size that render most iPad tablet apps incompatible, and thus all iOS developers will have to yet again re-optimixe for yet another iOS screen size and pixel density, that is never needed on Android as the deepest level of Android SDK is EXACTLY about making same apps scale to any manufacturer, any screen size, any screen resolution, any pixel density, any touch screen technology, and all that happens automatically as long as Android developers follow the basic and simple Android SDK rule.

      • http://ARMdevices.net/ Charbax

        ARM Powered laptops are just about to destroy Intel, Microsoft and Apple Macbook sales, that’s kind of common knowledge by any serious industry analyst. It’s of course only a matter of time before the ARM Powered Laptops and Desktops take over that whole market. You can now buy ARM Powered Desktops for $25 in China, by next year, the performance of the $25 ARM Powered Desktop is going to be superior to the fastest current Intel Atom system, that $25 ARM Powered Desktop next year is more powerful than the most powerful $1000 x86 desktop of about 5 years ago. By next year, you can buy ARM Powered Ultrabooks for $199, with 13.3″ screens, fully smooth and full speed Chrome OS running on them, or Windows RT, or Ubuntu (all 3 OS can be installed on top of Android if the device has a cheap Neonode IR touch screen), that ARM Powered ultrabook is not just $199 which is 5x cheaper than the current x86 ultrabooks and Macbook air, it’s 2x thinner, 2x lighter, runs 5x to 10x longer on a battery.

      • Walt French

        @Charbax, you do yourself no favor by replying to evidence of a badly off-target forecast, by making new claims.

        In my professional forecasting, I follow a guideline that approximately says the range of my forecast should be the range of possible outcomes, times my insight percentage. If you think you call it right 100% of the time, you can make astonishing predictions; if you have about a 10% batting average (that’s great in my line of work) you’ll limit your claims to more modest levels.

        Please note the technical term for a forecast that something will happen, that has NOT happened before the game changed: “wrong.”

        There’s nothing wrong with noting the potential of things like the $25 ARM board or the $35 Raspberry Pi computers for students and hobbyists. They are merely irrelevant to well over 99% of the computer-using world. Likewise, it is not cheap 2009 ARM laptops destroying the X86 laptop market, it is 2010 ARM iPads that are displacing purchases of them. Yes, our household has more ARM- than X86-based devices, but as yet, no ARM-based design has been shown, let alone brought to market, that harnesses ARMs to match the power of a full-throated desktop CPU tackling desktop tasks.

        I’ll finally note that I’m a voracious reader of news on industry trends, and I have yet to see anything remotely like your claim of the death of X86 as “common knowledge by any serious industry analyst.” Certainly this page is the work of one of the finest, and I don’t think you can cite anything by him to that effect.

        So you appear to have some insights and your inputs could be appreciated if you simply refrained from making foolishly over-assertive claims about your somewhat over-enthusiastic forecasts, which you pair with a combative spirit that’s quite at odds with what we normally enjoy here.

      • http://www.facebook.com/profile.php?id=100000728233984 Kristian Iskanius

        “ARM Powered laptops are just about to destroy Intel, Microsoft and Apple Macbook sales”

        You can leave Apple out of that. You forget or don’t know that ARM is very much connected to Apple. It was founded by Apple, Acorn and VLSI to design RISC based processors for the Apple. Apple knows exactly where it wants ARM to go. Apple owns part of ARM and has all its things licensed. It modifies basic designs to fit their needs and the they use something like Samsung to manufacture those. Samsung also modifies ARMs basic designs and Apple uses also those to save money. The bigger yield the lower cost, because these designs are expensive. But next time remember that ARM is Apple company and very close to it and that Apple is ARMs biggest customer. Apple leads and others follow.

      • http://ARMdevices.net/ Charbax

        Apple didn’t found ARM, Apple invested in ARM about 6-7 years after the first ARM processor was created at some point but owns NOTHING of ARM today. Apple is a minuscule ARM customer, Apple licenses less than 3% of ARM’s yearly processor licences. Apple does not design the ARM processor, Samsung does most of the ARM design work for Apple. Samsung is not just the foundry for Apple’s ARM Processors, the Apple A4 is basically based on the Samsung Exynos3 design, Apple A5/X/6 is basically based on the Exynos4210/4212/4412 designs, Apple does very little to change that (except paying Imagination for a GPU design exclusive). Apple has very little influence on ARM, in the opposite, ARM is the basis of pretty close to 99% of Apple’s success today. Without the ARM Powered iPod 2002-2007 and without the ARM Powered iPhone 2007-2012, Apple would be absolutely worthless and bankrupt today.

      • http://www.facebook.com/profile.php?id=100000728233984 Kristian Iskanius

        “Apple didn’t found ARM, Apple invested in ARM about 6-7 years after the first ARM processor was created at some point but owns NOTHING of ARM today”

        You are mixing things here. You have to read further from other sites like these: http://en.wikipedia.org/wiki/ARM_Holdings, http://www.ot1.com/arm/armchap1.html

        And could you tell me what medicine you are taking? I really have to get what you are having.

      • http://www.facebook.com/profile.php?id=100000728233984 Kristian Iskanius
      • http://twitter.com/JessiDarko Jessica Darko

        I’ve proven you wrong more than once, by citing facts. But it never seems to phase you, and you just spew more.

        “Applei s a much bigger scam than egypt”? How is apple a scam?

        You’re lost in paranoid delusions, man.

      • http://ARMdevices.net/ Charbax

        How is Apple a scam? This one is too easy. $100 iPhone sold for $650 to millions of sheep consumers. Apple stock priced at $637 Billion even though 90% of Apple profits are based on ARM Powered devices running iOS, especially the overpriced iPhone, devices that obviously are being totally annihilated by much better and cheaper Android based competition worldwide. Apple is a huge scam because they claim to have invented technologies when in fact Apple never invented anything. Apple is a scam because they claim to care about factory workers when the fact is Apple absolutely doesn’t care and is by far the biggest modern slavery exploiter in the world. I can go on, but you’re not understanding.

      • http://ARMdevices.net/ Charbax

        ups, why was my comment deleted, maybe I clicked something. if you got the scam reply comment to your email notifications please copy paste it as quoted here.

      • jawbroken

        Hmm, let’s see.

        http://www.asymco.com/2012/01/31/pricing-paradox/#comment-427834705

        “I have always been right. You can look back at all my posts since 2000, everything I say comes true. AAPL stock value will be halved within 6-12 months, reply here by then and tell me I was right.”

        Looks like they were at $450 at the the time, now over $680. Are you still holding out hope they will drop to a third of their current value in the next four months? Sounds catastrophic.

      • http://ARMdevices.net/ Charbax

        Samsung is already cutting Apple off of memory chips, it doesn’t have to take long for Samsung to announce that they are cutting Apple off for ARM processors and screens too. Apple can’t find other suppliers, it’s just impossible, not without significantly reducing quality, volume and delaying products for many months if not years. If Apple continues their manic rampage trying to ban Samsung devices in the USA, you can be absolutely sure Samsung executives are going to decide to cut Apple off for all component deliveries, and they can have South-Korea make that demand as a protectionnist executive order, thus there is no breach of contract since the component supply contract is in South-Korea. That can be a very easy and logical way for Apple to loose iPhone and iPad from worldwide sales, likely also to get into serious troubles with Macbook sales too. Also, you should not think China is at all happy about Apple’s wishes to ban Android device sales in the USA and Europe, Chinese smartphone and tablet brands use Android 100% exclusively, you can be sure that Chinese Government workers are monitoring the level of Apple’s arrogance trying to block Android sales in USA and Europe, and if Apple pushes it further, you can be sure that Foxconn will be ordered to stop supplying Apple instantly and dedicate all that manufacturing to ramping up production of Chinese brands like Huawei and ZTE for worldwide sales, with focus to the main growth markets that are developing countries, that way China keeps all the smartphone profits in China instead of letting Apple export all the profits outside of China. This is an obvious decision that China can take any minute now. Samsung does not need Apple, Apple is less than 4% of Samsung revenue, less of Samsung profits even, and China for sure does not need Apple, Apple is less than 4% of Chinese consumer electronics manufacturing and export. It’s a piece of cake for Samsung and China to turn off all manufacturing of iphones, ipads, macbooks and dedicate all that capacity on own brands production and to supply any other consumer electronics brands in the world, for example Japanese brands like Sony and Panasonic are also eager to get more components and manufacturing.

      • jawbroken

        That’s a lot of wild speculation somewhat tangential to my comment. Just wondering if you’re standing behind that prediction, really.

      • http://ARMdevices.net/ Charbax

        oak, of course, it may not be exactly within the 12 months of that comment, but it hasn’t got to be long. 70% of AAPL profit is the overpriced iPhone, that can’t possibly last and when investors realize that, the stock is going to collapse.

      • jawbroken

        Well, it was already a 6-12 month prediction, pretty wide range. Have you got an updated timeframe here? What about a date for when Samsung cuts Apple off from components? Is that a 2013 move? And China ordering everyone to stop producing Apple products, wow that’s going to hurt. When should I expect that?

      • http://ARMdevices.net/ Charbax

        Apple has an army of PR reps getting ready to hype Apple up as high and as much as possible in a few days, the question is only when investors understand how fragile Apple really is. How fragile Apple is with its suppliers and how fragile Apple is on the market. The question of when Samsung and China cuts Apple off depends on Apple actually wanting to be so stubborn and arrogant to think that they can actually push forward on demanding the bogus US courts to put bans against the whole range of Android devices from sales in the USA. If Apple “succeeds” in banning Samsung in the USA before Christmas sales, you can be sure that accelerates Samsung’s riposte, that basically means war, and Samsung is not going to hesitate for a moment to cut Apple off ARM processors, screens and memory. Apple can desperately try to find other memory suppliers, Apple can desperately hope Sharp and LG will continue to supply screens and Apple can desperately hope that TSMC can make ARM Processors for them. But that’s not going to work. Because the Asian suppliers are not at war with each other, they can all live without Apple. Sharp of course needs some help, but Sharp can also easily find other brands to use their screens, Samsung for example can buy a large chunk, and other Japanese and Chinese brands can buy them too. Basically it’s a no brainer, anyone making smartphones sells them all and can make a profit. That basically means that all Smartphone makers quite simply want to buy as many components as possible because they all know that they can easily sell them all on the market without loosing money, and quite likely that smartphone business being the most profitable part of their company regardless of what the brands otherwise do. Even selling cheap Android phones is extremely profitable as there is a demand for 1 Billion smartphones in 2013, 95% of those are obviously going to be Android based.

      • jawbroken

        Okay, but I’m finding this difficult to pin down to a particular prediction or conditional prediction. So if Apple gets some Samsung devices banned ahead of Christmas sales, when will Samsung stop supplying components by?

        Is 95% of the approximately 1 billion smartphones sold in 2013 being Android based a prediction? That would be quite a collapse in iPhone sales, down to 50 million worldwide for the year. They sold 93m in 2011 and have sold 61m in the first two quarters of 2012. Disastrous, if you’re correct. Is this contingent on your predictions about Samsung not supplying them components? What about all Asian suppliers somehow banding together to stop any supply and manufacturing of Apple products? Trying to understand how this sequence of troubling predictions fits together.

      • http://ARMdevices.net/ Charbax

        I can’t tell you exactly when these things happen, but I’m sure they are going to happen. Apple never invented anything, they are not going to invent something “magial” now. There are few new markets that I think have promise, one is wearable computing like Google Glass and smart watches, the other is the 4K HDTV market between 55″ and 84″. For one I don’t think wearable computing can be as profitable as smartphones have been for Apple since 2008. Unless somehow they find a way to make sure everyone in the world wants one and that it’s really very much overpriced. I find that very unlikely. Android based wearable computing will dominate that too anyway simply because open source free software cannot be competed with. For the 4K TV market, it’s going to be hard for screen makers to deliver screens sub-$2000 as soon as possible. And even if the 55″ 4K TV is $1999 in 2013, that’s still quite expensive, that still leaves 98% of homes probably out of reach of even considering upgrading to that TV, even if everyone can go to the store to see how awesome it looks like. Basically I find it very unlikely that the 4K TV market can be anywhere near as profitable as the smartphone has been for Apple since 2008.

        Now I’m telling you it’s obvious and not hard to predict that the smartphone is going to be disrupted and cannibalized. That’s not hard to predict, every single product category in consumer electronics has always become a commodity as soon as many competitors joined the market. That’s pretty much exactly what you are seeing with Android. And the only reason the full-on commoditization of smartphones hasn’t yet fully happen is because the overpriced status of the smartphone is hidden behind even more overpriced carrier contracts still today. The carriers surely aren’t eager to loose those $2000 2-year contracts too quickly, so that somewhat protects the overpriced smartphone market for now. But, again, Android high-end phones are sold to carriers much cheaper than the iPhone. Samsung Galaxy S3 is sold to carriers for $425 while iPhone 4S and iPhone 5 are sold to carriers for $650. It’s quite obvious why carriers worldwide prefer to sell Android devices, they get to keep $225 in their pockets for each new customer that they get. And it’s not true that iPhone users generate more profits for carriers, iphone users actually generate less revenue as Google has Google Play store and Google Global Revenue sharing deals with carriers, where carriers can keep up to 20% of Google Play Store and of any other Google monetization on Android, for example each time you click on an add on your Android device, the carrier may take 20% of that revenue. That means carriers don’t just pay $225 less for high-end Android over iPhone, they get paid a revenue share from Google on all monetization Google does on the phone over the many months that the phone is used.

        Now, it’s also possible that someone clever at or outside Apple tells Apple to stop their ridiculous campaign trying to sue and ban all Android devices in the USA, and if Apple then stops all their lawsuits against Android, it just might be that Asian component suppliers and manufacturers are going to continue supplying Apple for a bit. It just might be. Don’t be sure though. Samsung has already got a huge taste for selling own Galaxy phones by the huge amounts, pointing at Samsung being able to sell above 250 million Android phones per year. An insane number, and Samsung loves it, Samsung makes far more profits keeping their components to themselves than to sell those to Apple. And many other brands are ready to buy Samsung’s components at the same price Apple is paying for them. Also, you can be absolutely sure that China is ready to pull the trigger and stop manufacturing for Apple. Not just because Chinese don’t like being insulted by arrogant Americans going around claiming that they invent everything and that Chinese only copy, but most importantly because China much prefers manufacturing for their own Chinese brands like Huawei and ZTE and sell those worldwide and thus keep a much higher share of profits in China instead of enabling American companies like Apple to take all those profits out of China. China is clever, they know to keep profits inside the country and not export profits like they still do for Apple.

        So if you want my estimate, Apple goes stupid continues to sue Android companies, tries to ban Samsung and other Android devices in the USA, around Q1 2013, Samsung and most other Asian suppliers cut Apple off, no new iPhones and iPads are going to be built. Apple desperately may attempt to buy Sharp and use Intel processors instead, but that won’t work, Japan won’t allow them, even Apple executives on their knees with a $50 Billion apology gift won’t convince Asian technology providers to continue to support Apple’s huge worldwide technology theft and innovation scam.

      • jawbroken

        By all accounts the revenue share from the Google Play store has been a pathetic income stream for carriers, do you have a link that suggests otherwise?

        “Android based wearable computing will dominate that too anyway simply because open source free software cannot be competed with.”
        Interesting theory. Any idea why this hasn’t happened during the long history of open source software? From operating systems down to user software? Seems kind of suspect that it hasn’t happened in decades of computing but is suddenly imminent. Or were you making a long term prediction, perhaps, for a few decades from now.

        Why do you think all Asian countries/manufacturers/etc would band together over this?

      • http://ARMdevices.net/ Charbax

        Google makes upwards above $50/year per Android user, above $100/year per high-end Android user, it’s up to Google to decide how much of a revenue share they are ready to share with carriers to help speed up the killing off of Apple and Microsoft. Google’s business model pretty much by far the best in the world.

        Open source free software always wins when there is free market competition. There wasn’t for the PC/Laptop market with Wintel dominating how bloatware was used to overprice PC/Laptops for decades, literally threatening the few PC/Laptop makers out of Taiwan and Asia. Look at servers, most of consumer electronics, infrastructure, 99% of all that is pure open source free Linux software.

        Without China, Apple is dead. And without Samsung, Apple is dead. Apple is 5% of Samsung revenue, but Samsung is in 95% of Apple profit. Apple is 5% of Chinese consumer electronics revenue, but China is used and exploited to do 99.5% of Apple’s profits today. Now you can argue that Apple may make some deal somehow with the desperate areas of Asia like Taiwan and Japan, but that’s not going to work. 99% of Taiwanese and Japanese brands are fully invested in Android already. Those countries are not ready to kill their own brands just to have the privilege to be Apple’s slave, even if Apple wants to pay extra to be supplied. Regardless what the Japanese and Taiwanese can be convinced to do by money, without Samsung and without China, Apple is dead.

      • jawbroken

        Got a link for those revenue figures? They don’t really seem plausible because the tremendous growth in android devices hasn’t seen a commensurate growth in Google’s revenues/earnings. How do I explain the disparity? Are their revenues in other areas falling at the same rate that android is growing?

      • http://ARMdevices.net/ Charbax

        Google makes about $25/year per 1.5 Billion Google users worldwide. Obviously that Android users monetize much more than that average. Android users are addictto the Interneby dition, they learn to check gmails constantly, they learo share pictur10x more often than people that don’t own smaes, all this is puric, Android monetization is surely above $50/yeeaveraged over all Android users and if you only measure the average of high-end Android users such as owners of SGS3, SGN2, N7, the average is above $100/year, since those owners have more money thus buy more onlineus monetize much more. Of course as Android reaches 1 Billion users, that aerage revenue per user goes down as users in China, India aren’t monetized as much as Europeans and consumers in the USA.

      • jawbroken

        None of this answered my question. Why can’t I see this growth in Google’s financials? Where are they losing tremendous amounts of revenue year over year to counteract this large growth in android revenue?

      • http://ARMdevices.net/ Charbax

        Why is it hard to understand? Google makes about $25 Billion per year on the 500 million people that own an Android device and they make around $20 Billion per year on the other people that don’t yet use an Android device. Google’s growth factors are many, that more and more people buy things online, that more and more advertisers use the web, that more and more people use the web, that Google online services are better and better and that people appreciate them more and more, that Google is able to better and better monetize video on YouTube, and most certainly the huge growth of Android is a HUGE factor in Google’s growth, as Android is probably the best ever way to increase and improve monetization per user. You shouldn’t want to be primitive in your thinking and somehow decide that Android is a separate category of revenue and profit for Google and that people who use Android do not use PC/Laptops, that activities people do on Android are separate and unrelated to the general way in which Google makes money.

      • jawbroken

        Again, if Android is a huge factor in Google’s growth, the only way I can explain that it’s not reflected in their financials is that they’re losing revenue at a similar rate in another part of their business, or that their financials are fraudulent. Which one are you saying that it is?

      • http://ARMdevices.net/ Charbax

        Just because someone buys an Android device, that users total revenue on Google is lost in another part of their business? Google makes user studies to understand how their users use their services, to understand how and why people click on ads, how and why people use Google’s services more or less, Android is a huge gigantic factor in that. But for sure it’s not the only factor. Studies show something like 25% of online and offline purchases happen in some relation with the use of the smartphone. For example you do some search on your smartphone, or you call someone, or you chat, get some news update of some type. Whether that revenue can be tracked or directly linked to that use of the phone is not for sure, but you can be sure Google knows most of the relations that are. Now if Google is asked at earnings call or by the one or other Senate hearing or Oracle lawsuit “How much money they make on mobile”, they can answer for example “$4 Billion per year”. That’d be true if you only count the money they make directly on users clicking on ads on the mobile phone, as well as share in revenue from Google Play, Google Wallet and few other such sources of revenues. But YOU CAN BE SURE, that is not the whole story for mobile. People who use Android phones, also use their PC/Laptops more as a result. People who use Android become more and more addicated to the web, they become more and more addicated to Google services on the web. People who use Android FAR INCREASE the number of Google searches they do in average per day, they FAR INCREASE the number of youtube videos they watch per day, and THAT IS NOT ONLY ON THEIR MOBILE. But you can be sure the mobile has a huge influence on the behavior of people towards their usage and trust of the Internet. You can be absolutely sure that Google knows every single detail about how online spending RAPIDLY INCREASES for people who buy and use an Android device. Not simply by the online purchases only on the phone, that area of monetization opportunity is barely being utilized yet, what Google notices is that an Android user rapidly increases their rate of online purchases, all of which has a direct influence on Google’s profit and revenue.

      • http://www.facebook.com/profile.php?id=100000728233984 Kristian Iskanius

        “Google makes upwards above $50/year per Android user, above $100/year per high-end Android user, it’s up to Google to decide how much of a revenue share they are ready to share with carriers to help speed up the killing off of Apple and Microsoft. Google’s business model pretty much by far the best in the world.”

        Indeed not. It doesn’t show in the bottom line of the Google nor does it show in the bottom line of the Android manufacturers. Why? Because all of them except Samsung and HTC loose money. Instead manufacturers in the Apple ecosystem all makes good money from Apple related products. From where do we know this? You just need to look around and there is massive amount of iPod/iPad/iPhone compatible hardware that are not sold at a discounted money loosing price. Software side of Apple ecosystem is huge success. It is not the market share that counts. It is the money that counts and more importantly the profits that counts. And btw… even Google makes more money out of iPhone than it makes from its own Android system. This is going to end though because Apple is going to cut Google ties for good and rip Google out of the Apple ecosystem.

      • http://ARMdevices.net/ Charbax

        Nobody makes money on the Apple ecosystem except Apple and people that make scam apps and accessories.

        About 1 million people earn good salaries working on the Android ecosystem. About 1000 Android companies are growing thanks to Android. Growth is more profit, even if investors don’t necessarily see it. Growth means more people earn a salary, more people do more work, Android benefits thousands times more entities than the Apple ecosystem. It’s just not true to say only Samsung and HTC make money on Android. Android is Sony’s biggest future profit growth. Android is the basis for Huawei/ZTE’s whole consumer electronics strategy. Android is Panasonic’s only road to profits. Asus, Acer only have Android as hope for profits and growth. Only thanks to Android is Motorola still alive today and has a good chance to be in the top-5 smartphone makers by next year. LG looses money on all of their consumer electronics product segments except in their rapidly growing smartphone business. Samsung alone nearly or already makes more smartphone profits than Apple. HTC would have been bankrupt if it wasn’t thanks to Android allowing them to reach phenomenal growth and be among top-5 smartphone makers today. I can go on, everyone involved with Android is growing and profiting. iOS market share has been constantly going down since 2009. Nobody wants to develop software for an ecosystem that only has 10% of the market. Angry Birds makes far more profits on Android than on iPhone. iOS is dead.

      • tca

        This is 2 blades sword for each side.
        China (and S. Korea too) does not want a war with US. The US is their biggest trade market. They would “die” in 24 months (very loose prediction based on my feelings, but i am 100% accurate when it comes to them) if US banned chinese (korean) products. US market would probably die about same time.

        PS. I think you live in beautifuly self-crafted fantasy world.

      • http://www.noisetech-software.com/Home.html Steven Noyes

        “That’s not hard to predict, every single product category in consumer electronics has always become a commodity as soon as many competitors joined the market.”

        Like MP3 players? As I said, closer to 0% right.

        “So if you want my estimate, Apple goes stupid continues to sue Android companies, tries to ban Samsung and other Android devices in the USA, around Q1 2013″

        This will continue your trend of being 100% wrong on most things technical and business.

      • http://www.facebook.com/profile.php?id=100000728233984 Kristian Iskanius

        “Samsung is already cutting Apple off of memory chips, it doesn’t have to take long for Samsung to announce that they are cutting Apple off for ARM processors and screens too.”

        Now your are delusional. Apple is Samsungs biggest and best paying customer. It is Apple who is moving its orders away from Samsung. This can’t be done very quickly, because both companies have invested to this relationship tens of billions of dollars and both have obligations because of the money involved. Apple pays Samsung tens of billions in revenue and lots of profits every year and losing that money is not good for Samsung in any way because their competion is going to get those instead of it. Apple has the money and the power to ramp up huge factories so if the competition doesn’t have the resources, then Apple has because of their over 117 billion dollar war chest. They even don’t need to use that money directly. They can simply make an deposit to a big bank and tell the bank to borrow the money what is needed. Bank will happily do what ever Apple asks. BTW the growth for Apple in China is huge and Apple will be very successful there. Foxconn is building at the moment a multi billion dollar store chain for Apple in China. Apple will reach more and more customers there. The only problem is that when Apple doubles their manufacturing capacity it gets more and more difficult because of the cheer magnitude of things. If you have 100000 workers doing things now you need another 100000 workers to double it. Apple now oversees over 700000 workers. Double that and it does not happen as quickly anymore.

        “if Apple pushes it further, you can be sure that Foxconn will be ordered to stop supplying Apple instantly and dedicate all that manufacturing to ramping up production of Chinese brands like Huawei and ZTE for worldwide sales”

        I would like to have the same medicine what you are using. Thank You. Foxconn isn’t going anywhere. Their relationship with Apple is so tight that you can’t imagine. Besides Apple can buy them with cash when ever they see fit. Apples CEO Tim Cook has build this relationship when he was the Chief Operating Officer. Terry (CEO of Hon Hai) does not do any big decisions without consulting the Tim first.

      • http://www.facebook.com/profile.php?id=100000728233984 Kristian Iskanius

        And let’s not forget that Apple is Foxconns biggest customer. Biggest part of Foxconns 1,2 million workers work with Apple related products. Apple is such a huge player in this field. Apple is Intels biggest customer. The list of companies that earn their profits from Apple includes ridiculous amount of companies. Take a Nvidia for example, 2/3 of their revenue comes from Apple. When you are in that position you defenitly don’t want to loose Apple.

      • http://ARMdevices.net/ Charbax

        Samsung provides the core technologies and components that make up 95% of Apple’s revenues and profits today.

        Apple pays less than 5% of Samsung’s corporate revenue and profits today.

        You’re the completely delusional human being if you think Samsung need Apple more than Apple needs Samsung.

        Samsung has near nothing invested to provide those core components to Apple. The ARM Process design that Samsung has invested is the same that Samsung uses to power most of their Galaxy phones, and Samsung has no problem to stop supplying iPhone/iPad processors tomorrow and use all those processors in quite simply making even more Galaxy phones and providing supply for any of the top-12 Android brands in the world. It’s quite simply a piece of cake. Samsung can also very easily use the screens and memory themselves of find other customers that are ready to pay whatever Apple was paying.

        China makes 99% of the products that make up 99% of Apple’s profits and revenue.

        Apple takes up less than 5% of China’s consumer electronics manufacturing capacity. Apple is less than 20% of Foxconn manufacturing capacity.

        It’ll be a PIECE OF CAKE for China to decide tomorrow that Apple must go do the thing to themselves that Clint Eastwood talks about. It’d be an absolute piece of cake for Foxconn to agree to Chinese Government order to STOP all deliveries of products to Apple tomorrow and dedicate all the workforce and manufacturing capacity to ramp up deliveries to Chinese smartphone and tablet brands like Huawei, ZTE, Lenovo and to any other non-Apple brands from the rest of Asia or from European and US brands that are sure to be respectful towards China’s role in world technology.

        You’re completely delusional if you think Apple’s $117 Billion “war chest” can have any influence on the worldwide consumer electronics market. Apple cannot buy a Chinese manufacturer, China does not allow it. Without Asia and without China, Apple has NOTHING, Apple is dead.

      • albee

        Of all the commentators on tech I’ve ever seen you are without doubt the craziest. I’ve seen crazy things written before, but never with the kind of detail that you put into it. Its like a very high level of delusion. You actually believe everything you say, remarkable!

        Charbax said:
        “It’d be an absolute piece of cake for Foxconn to agree to Chinese Government order to STOP all deliveries of products to Apple tomorrow and dedicate all the workforce”

        i mean,.. seriously,.. really? Like.. my gawd.. to even think that scenario up is straight up nuts! How can anyone take you seriously?

        Let it go man.. let it go.

      • oases

        Shit Fandroids Say. This odious, obnoxious character has totally ruined this thread. I hope he gets banned from the site before he ruins more. Anyone who sublimates his emotions to that extent must be badly afflicted with something.

      • oak

        I’ve been proven 100% right for most of my tech predictions online over the past 15 years.
        proven 100% right for most of my tech predictions

        100% for most of my

        100% most

      • http://www.noisetech-software.com/Home.html Steven Noyes

        Charbax:“You’re welcome to put all your money in AAPL stock, don’t come back tell me I didn’t warn you when it’s worth less than half 6 months from now.”

        This is from 8 months ago. (http://armdevices.net/2011/08/16/google-buys-hardware-company-for-12-5-billion/#comment-420791951)

        The funny thing is, if you look back on all of your past prognostications (especially on Apple), your accuracy is far closer to 0% right than 100% right. The bad thing about the internet is its long long long memory. The question is, why do you hate Apple so very much. You would think that you are a Darlak and Apple is “The Doctor”.

      • N8nnc

        Dalek – http://en.wikipedia.org/wiki/Dalek
        But Apple might really be The Doctor.

    • James

      It appears that Steve Ballmer is now commenting on your posts Horace. Welcome to the big time:)

    • http://twitter.com/JessiDarko Jessica Darko

      I’ve seen an extraordinary number of unsupported assertions from you, Charbox, over the past month, in these rants across numerous sites. I’ve challenged you more than once and you’ve failed to support any of them, instead responding with even more incoherent assertions.

      I really don’t know what your objective is, but you’re not fooling anybody.

      • N8nnc

        He’s fooling one – himself.

    • Charbax is a homo

      Android tablets outsell iPad? Sources, please.

    • Sacto_Joe

      Folks, this guy is a classic troll. His only intent is to deflect meaningful discussion. As is well known, the only way to deal with a troll is to ignore him. ANY discussion just feeds him.

  • obarthelemy

    Actually, the Fire isn’t sold in all markets not because Amazon only wants “ravenous consumers” (?), but because its economics depend on content and ad sales. Amazon does not have good/broad content deals on all markets, and ads may not be worthwhile in some markets.

    Also, the difference between free T-shirts and the Fire is that the Fire is not total crap, contrary to most free T-shirts. Oh, and the Fire isn’t free either, so getting it does require quite a bit motivation. I actually don’t see the point of your comparison at all, apart from slipping that Apple is profitable everywhere.

    There was a fun bit on a big French site today, about which OS’s homescreen looks the more modern: http://www.lesnumeriques.com/telephone-portable/sondage-quel-os-smartphone-est-plus-moderne-a-vos-yeux-n25940.html. No contest !

    • Canucker

      If you do not use the Fire for Amazons intended purpose (to buy Amazon merchandise), it is simply a deadweight to them (and likely eats into other Android tablet sales due to price competitiveness). The new Kindle Fire is forked from Android 4.0 and runs Bing instead of Google search. It’s therefore a slight positive to Microsoft and potentially a positive for Android developers (not Google) as they may buy Android apps but a negative for the hardware OEMs.

      • http://twitter.com/WalterMilliken Walter Milliken

        I wonder how much Microsoft is paying Amazon for Bing search placement?

      • Canucker

        Makes me wonder whether Apple will do a similar Bing deal in iOS6 (in terms of the default search). If so, it won’t be for the revenue but further distancing themselves from Mountain View (and a side-serving of spite).

      • http://twitter.com/WalterMilliken Walter Milliken

        For Apple, I suspect what matters is which currently serves their customers best, rather than who pays them most, or even just corporate rivalry.

        I think that’s different with Amazon — I suspect they want the money. *And* they get to mess with Google some more — I really think Amazon has more of a potential problem with Google than Apple does.

        If Bing search really starts outshining Google, I wouldn’t be surprised to see Apple change the default.

        Personally, though, I’m beginning to root for DuckDuckGo….

      • Tatil_S

        I am not sure. Supposedly Apple is doing its own Maps app without Google’s Street View, but it is not offering a similar functionality. Same for the transit directions (granted Google does not have that functionality in many countries such as Germany or it is useless if you try it for Japan.)

      • http://twitter.com/WalterMilliken Walter Milliken

        Whether iOS6 Maps is better or equal to Google Maps, there is a bit of a difference between Apple choosing which 3rd party service provider to use, and deciding between 3rd-party and in-house.

        In the case of Maps, I think we’re seeing Apple’s need to be as independent as possible of any single-supplier bottleneck for a service that’s crucial to the iOS user experience. (See also the Flash war.) In that case, they do indeed seem to sometimes trade off near-term experience for longer-term flexibility and control.

        I’m not sure if Apple sees search as being quite as crucial a function, at least as a core part of the iOS user experience. But it wouldn’t entirely surprise me for them to grab some search startup somewhere (DuckDuckGo?) at some point, if only to integrate it into Siri in ways a web-based search engine (especially one with a need to sell your eyeballs) wouldn’t fit well.

        Anyway… no, I don’t think Apple spurned Google Maps just for spite, I think other motivations dominated here — Maps is one of the most-used applications on the iPhone, I believe, and thus crucial to keep customers happy with. And Google clearly would see benefits to having improved map functionality roll out first on Android, making dependence on them very dangerous. Though I’m sure Apple was more than happy to jettison them, too….

        Apple now has the opportunity to go in different directions than Google with their mapping functionality, and it looks like they’re doing a few steps that way already. Is it better than Google Maps? I think the market will answer that question, in time.

        I do expect Google will launch their own map application on iOS, and try to make it compellingly-useful, if only because they need to try to collect data from iOS users, and connect them with Google advertisers. I also expect Apple will accept this app (otherwise I foresee antitrust complaints with some plausibility). Hopefully such competition will ultimately improve both map systems.

      • Tatil_S

        “there is a bit of a difference between Apple choosing which 3rd party service provider to use, and deciding between 3rd-party and in-house.”
        Fair enough, an argument I also made in the past. Still, Mountain Lion has announced built-in video sharing for Vimeo, but not for YouTube. That sounds a little like spite, doesn’t it?

        “Is it better than Google Maps? I think the market will answer that question, in time.”

        No street view and no transit directions (in the US). I think the answer is obvious. It may eventually match Google’s functionality, but Apple could wait until it has implemented those features.

      • http://twitter.com/WalterMilliken Walter Milliken

        The timing may have been driven by other considerations, like Google now charging for Maps access, and contract expirations between Apple and Google. Apple may have decided that what they had was good enough to not be worth tying themselves to Google for several more years (or whatever the contract period would have been).

        As far as Street View goes, I’ve never actually used it. I’m not sure it’s critical to the main use-case, though other users may use it a lot. Normally I’m fine with just the street map.

        Also, Apple is going in a different direction for building image map perspective than Street View, using the aerial photo texturing trick. It may be good enough for the purpose. And it avoids many of the problems Google has with privacy concerns in Street View. Apple doesn’t seem to have the coverage yet that Google’s managed with Street View, but the technique Apple is using is also a *lot* easier to do.

        The transit info is probably more of a loss, for people who live in places where it’s relevant (which I don’t). Whether the 3rd-party Map API will make this better, I don’t know, since that will depends on developers and data sources. In the near term, it’s likely be be a serious downside.

        I like Apple’s transit approach better, from the point of view that the people who own the information are more likely to make sure it’s up-to-date if they own and control the Maps plug-in, and can integrate it into their operational systems.

        Google apparently gets its transit data from static file collections that each transit authority must generate and host somewhere for Google to upload. That can introduce a lot of potential for error, and I’ve heard that Googles transit info accuracy is somewhat spotty.

        It makes a lot more sense to me to have a plug-in architecture for this, which allows transit authorities to push live updates about outages and the like into the mapping system. Of course, nothing stops Google from doing the same thing. It’s just that they use their familiar data-mining/cacheing model for now.

        The other thing I like about Apple having their own mapping system is related to user privacy. Google gets to mine data from Google Maps queries, and I’m not really happy about them combining this with everything else they know about me to sell me to advertisers. However, I’m probably a lot more concerned about my privacy than most people are. I don’t see Apple, at least in the short term, being at all interested into selling their users to anyone — it’s not their business model. But it’s about *all* that Google makes money from, so I don’t trust them with my data.

      • Tatil_S

        The rumors I’ve heard says Google backed down on payments for Maps (maybe in return for showing some advertising on the map.) On some occasions, I’ve seen ads on Maps app, so it could be true, but it is hard to be sure. In any case, we pay good chunk of money to Apple for an iPhone, so I’d expect Apple to be amenable to paying Google to provide a useful service. If Apple replaced it with an equivalent internal solution to save money, it’d be fine, but it obviously is not able to match Google at this time.

        Street View is not an everyday thing, but it is definitely useful in some cases (Is that motel in a good part of town?… Let’s check the surrounding area to see if it is worth it to go to the open house…) Besides, Google can probably use those picture taking trips to verify the exact geographical location of addresses, junctions and roads. Apple’s fly-by offering, assuming it is similar to Bing Maps, is also useful for house hunting, but I’d say they are complementary features, not replacements of each other.

        I don’t know how the transit plug-ins will work. In any case, I don’t think independent app developers will have more accurate data than Google. Many transit authorities do a lousy job of creating apps and there are many places you need to hop from one bus company to a light rail system etc. Besides, Google’s transit directions has been very accurate wherever I tried it in North America. Overall, I think Google was doing a very good job with that and it will probably be a big loss.

        All said and done, I am not very happy to hand over my data to Google, either.

      • http://twitter.com/WalterMilliken Walter Milliken

        I actually went and looked up Google’s transit “API”, which turns out to be “put all your data into a bunch of specially-formatted text files and put them on a server somewhere, and we’ll come pick them up periodically”. So I don’t think Google’s likely to have any more accurate data than any 3rd-party design, and probably less, since there’s apparently no mechanism for dynamic updates. Clearly lots of room for improvement in this space….

        According to one blog I’ve read, at least some transit authority apps do keep track of real-time schedule changes.

      • https://twitter.com/#!/azulum azulum

        Just buy DuckDuckGo, integrate it with Siri, done. A couple hundred million for a search engine that ostensibly doesn’t track you. Sounds like a good deal to me.

      • FalKirk

        “I wonder how much Microsoft is paying Amazon for Bing search placement?” – Walter Milliken

        Good question. It is my understanding that Google pays Apple millions in order to have Google as their default search engine.

      • https://twitter.com/#!/azulum azulum

        And that’s exactly why Google did Android in the first place — they didn’t want a single vendor to have them by the balls and charge exorbitant fee for traffic acquisition. Seems like they were screwed either way (though one wonders whether Apple would have been the one to screw them first — they seem to cooperate before going nuclear).

      • http://www.asymco.com Horace Dediu

        My guess is more than 40% of revenues. Perhaps 50%.

      • Walt French

        I haven’t seen separately any agreement between Amazon & Microsoft over patents that MS claims all Androids infringe. Might whatever rate also include an understanding that covers Amazon’s use of MS IP? It’d seem terribly unlikely to strike a deal on Bing while that basic issue was outstanding.

        (Or have I missed the AMZN-MSFT deal being announced?)

      • http://www.asymco.com Horace Dediu

        It makes sense to me that this is part of some understanding. Let’s not forget that Microsoft took a fairly large position with B&N to support the Nook.

    • Joe_Winfield_IL


      Actually, the Fire isn’t sold in all markets not because Amazon only wants ‘ravenous consumers’ (?), but because its economics depend on content and ad sales.”

      Ad revenue grows dramatically with scale, which Amazon (according to this analysis) isn’t really seeking. It probably helps subsidize the price, but isn’t a huge money maker today. Content is marginally profitable. In fact everything Amazon has ever done is marginally profitable, which is why Amazon needs Fires to be sold to Ravenous Amazon customers. If the model is dependent on 2% net profit, the company wants 2% of a big number. And it’s much easier to get to that big number with general merchandise than with media content.

      I think it’s useful to break Amazon customers into categories:

      1) Fire + Prime “ravenous”
      2) Fire + Prime “casual”
      3) Fire only “ravenous”
      4) Fire only “casual”
      5) Prime only “ravenous”
      6) Prime only “casual”

      I would suggest that Amazon sees each of these customer segments very differently. Prime is a service that starts off very profitably for Amazon and rapidly loses value if customers take full advantage. Fire is the exact opposite, starting at zero or negative profit, but relying on additional purchases. I’m curious where the most profitable intersection is for the company.

      • http://twitter.com/WalterMilliken Walter Milliken

        You’re missing one category:

        7) Neither “casual”

        This is the one I fit into. I wonder what fraction of Amazon users are like me — maybe buy a couple things a year from them. Obviously not Fire buyers, with the current (lack of) value proposition.

      • Joe_Winfield_IL

        Good point – maybe the Fire is all about migrating customers up from 7) Neither “casual.”

      • http://twitter.com/WalterMilliken Walter Milliken

        If so, it’s not attracting me very much — and I don’t own an iPad, either. (Though I gave a first-gen one to my wife.) Maybe it’s because I don’t use video content much.

        I’d probably actually use a iPad (or maybe even the 9-inch Fire) if I happened to have one, but don’t see them offering enough value for the cases where I’d use them. Mostly I’m happy with my iPhone for portable content. (Horace’s padcast is one of the very few pieces of content I’d like to see, and can’t access because I don’t have an iPad.)
        But if I were going to get a large-sized tablet, I’d still pay the difference for the current iPad. And that difference isn’t terribly large for the iPad2, though the 2’s screen resolution isn’t quite as good.
        About the only thing halfway interesting I see in Amazon’s offer is the lower-cost LTE connectivity, but I don’t think I’d use it enough to bother with, since I’d use my iPhone in most cases.
        The 7-inch Fire looks to be mostly useful as an e-reader (at least to me), and if I were going to go to that form factor, I’d probably just buy an e-ink Kindle instead. But I’m reasonably happy reading text on my iPhone, so there’s not much draw even there, and it’d be another device to cart around and keep charged.

        I guess the bottom line for me is that my use case for a tablet would be for web browsing and as an app platform. The iPad excels at both, while the Fire isn’t nearly as attractive, especially on the app side. The other obvious use cases — reading magazines and watching video — aren’t something I do much. I’m probably atypical though.

      • JaneDoe12

        Thank you for your comment. I’m thinking about buying an iPad and your perspective is very helpful.

      • http://twitter.com/WalterMilliken Walter Milliken

        And now I’ve read that the cheap LTE is just a typical short-term promo offer — it’s only for the first year, and then you’re back to normal AT&T pricing. So you save $130 — assuming you’d buy the data every month for the first year. My wife’s iPad is a 3G model, but we haven’t bothered to buy the data access yet at all. I was mostly looking at 3G as something that might be useful on occasion (like during an extended power outage with no normal Internet service).

    • ronin48

      Did you even read what Horace wrote?

      He clearly mentions that Amazon does not sell/marktet the Fire in regions “where its ads are poorly targeted.”

      Get a clue.

  • http://twitter.com/WalterMilliken Walter Milliken

    Sometimes I really wonder if Bezos is taking inspiration from Pohl and Kornbluth’s “The Space Merchants”….

  • Walt French

    Interesting to compare Horace’s ideas to its progenitor, the Nook. The Nook was touted on tech sites as a great way to get an inexpensive tablet that could be easily rooted to be broadly useful as a general purpose device.

    B&N’s efforts to recoup its expenses would be greatly harmed to the extent that many buyers were not ravenous book buyers. I suppose there’s essentially no way of knowing the share, since B&N wouldn’t seem to have interest in publicizing what fraction of units generated little or no book sales.

    News today suggests Amazon will NOT offer a Fire that allows home-screen ads to be turned off. That also suggests there will be technical measures implemented, maybe beyond the browser strategy and app customization, to make converting it to a general-purpose Android tablet hard enough that it will indeed only be attractive to what seems to be its intended audience.

    • http://www.facebook.com/bob.arker.731 Bob Arker

      One huge problem is that people who are buying the Fire tablet will not understand that it is not intended to be a “general purpose android tablet.” A lot of people end up returning these products once they see their folly. As a result, they associate Android with ads and think that it is just cheap garbage instead of blaming Amazon (because the general public does not understand what a fork of Android is). This further degrades the already marred reputation of Android.

      • http://www.asymco.com Horace Dediu

        I don’t think many people think that they are buying Android when buying Fire. Amazon certainly does not want them to think so. Nor does anybody else. To know that the product is Android-like requires consumers to research the topic.
        Imagine a street corner survey asking what operating system people’s devices have. I expect less than 10% accuracy, including iOS device owners.

      • http://www.facebook.com/bob.arker.731 Bob Arker

        That’s a very good point. Perhaps my comment applies more to the people who understand they’re buying an Android product, but at the same time do not understand what an Android fork is.

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  • analyst

    Charbax sounds like the average Rimmbecile on the Rimm Yahoo message board.

    Lots of idiot assertions, with ZERO facts & a selective memory when their obvious wrong past posts are pointed out.

    You can’t logically debate points with this type of poster, they are best igmored.

    Ayuh

  • Canucker

    Anyone know whether Amazon has indicated that last years Kindle Fire will get this years OS?

    • jsn

      what do you think?

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  • Davel

    “So one way to think of the Fire is as a promotional item (aka swag) for another business (Amazon.com). ”

    This seems to be the case. If so why does Amazon take the effort To implement parental controls, the imdb integration, etc. these are nice features that Apple does not have that increases usability. This does not seem to square with your assertion that they don’t want to sell too much product. If they want to limit sales why the effort to make the experience better? They can just cut the price and build better hardware and make it a value proposition. They seem to be building an Amazon moat like Apple does with iTunes.

    • http://www.asymco.com Horace Dediu

      The software itself is not part of cost of goods sold. It’s a fixed cost not a variable cost.

      • handleym

        What you say makes sense, Horace, but if it is true, there seems to be an obvious additional step Amazon could follow, which is to somehow tie it to Amazon Prime.

        One way to do this is the obvious “15% cheaper for Prime members”, but I can see why they don’t do that — people get pissed off (as Amazon has already learned) when they have to pay a different price from everyone else.
        But another way to do this, which taps into different psychology, would be to make the most desirable member of each family only available to Prime members. They could rationalize this as no different from, eg, having to buy a phone contract at the same time you buy a high-end phone.

        Or, alternatively, one more benefit of Prime membership would be that it allows you to switch off the ads.

      • http://profiles.google.com/simon.hibbs Simon Hibbs

        If they subsidised the Fire for Prime members, they’d be making that amount less money on prime from those customers. They can’t be making much money on prime, so there won’t be much room there to accommodate a subsidy.

      • J.M. Heinrichs

        You might want to check that, because I looked at getting a Fire when it came out, but signing up for Amazon Prime was a requirement for the purchase; it wasn’t available in Canada.

        Cheers

  • http://www.facebook.com/bob.arker.731 Bob Arker

    Here is an interesting fact: People were so outraged by the standard lock screen ads on the new Fire tablets, that they demanded there be some way to remove them. Amazon responded by saying that they would allow the lock screen ads to be removed for a payment of $15 USD to Amazon. This $15 is probably much more than what they expect to make per user off of those ads.

    I personally find it ludicrous and just plain tasteless to buy a personal computing product with built in advertisements on the lock screen.

    • Tatil_S

      Bezos says almost nobody orders “without ads” version of Kindle ereaders. You might be part of a very small minority. :)

      • http://www.facebook.com/bob.arker.731 Bob Arker

        No idea what this comment means. Seems rather irrelevant. I did not mention anything about the majority wanting to pay to remove ads…

      • hugginsjl

        Yeah I personally like the ads, it makes me aware of things I wouldn’t have known otherwise and because of it’s “uniqueness” I know i’ve purchased an Amazon Kindle product. I’m not looking for a typical “Android Tablet”, i’m looking for an Amazon Kindle. :)

  • http://twitter.com/ggirton George Girton

    I like the Tshirts Comparison. Myself, I have a lot of Adobe promotional shirts, black, of good quality. I wear them inside out and they look great. fine adobe design! So … I guess the same would not apply to the Kindle fire, which cannot be used inside out.

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