This is an aggressive expansion into a new market for Amazon. Photo: Getty
Show Hide image

Amazon's smartphone launch offers a prudent platform for growth

What the launch of Amazon’s smartphone tells us about the company’s future strategy.

Amazon, the e-commerce internet giant, is launching its first smartphone. Media attention is focusing on whether the phone’s features, such as its rumoured 3D interface, are really as cool as portrayed in its trailer video which aims to wow early users. But by entering into the fray of an already hyper-competitive mobile phone industry, Amazon is doing a lot more than adding another gee-whizz feature to a smartphone.

This launch tells us a great deal about CEO Jeff Bezos' strategy for his company – and what it might mean for the future of competition and innovation in our increasingly digital world.

First, let’s ask the obvious questions. Why is Amazon, known for internet retailing and related software development, entering a hardware market where leading incumbents like Nokia have already failed? After all, what does Amazon know about the telecoms business? Can it succeed where Google has failed?

We have seen Google, which has virtually limitless financial resources, enter the mobile phone handset industry by purchasing Motorola Mobile in 2012, only to take a heavy loss after selling it on less than two years later. Even incumbent firms who had a very strong set of phone-making capabilities have taken tough hits in this turbulent market – witness Nokia’s dramatic plunge, which led to a sale of its mobile phone business to Microsoft.

Platform Number 1

You cannot understand Amazon’s move without situating it in the broader context of platform competition. Platforms, these fundamental technologies such as Google search, Facebook and the Apple iPhone, are the building blocks of our digital economy. They act as a foundation on top of which thousands of innovators worldwide develop complementary products and services and facilitate transactions between increasingly larger networks of users, buyers and sellers. Platform competition is the name of the game in hi-tech industries today.

The top-valued digital companies in the world (Amazon, Apple, Google, Facebook) are all aggressively pursuing platform strategies. App developers and other producers of complementary services or products provide the armies that sustain the vibrancy and competitiveness of these platforms by adding their products to them. The more users a platform has, the more these innovators will be attracted to developing for them. The more complements available, the more valuable the platform becomes to users. It is these virtuous cycles – positive feedback loops, or “network effects” – that fuel the growth of platforms and transform them into formidable engines of growth for the companies and developers associated with them.

The smartphone is a crucial digital platform. Achieving platform leader status in this space is a competitive position all the hi-tech giants are fighting for. Google has its ubiquitous Android operating system, Apple has shaped the whole market with the iPhone, Microsoft has purchased Nokia’s phone business, and Facebook has invested $19 billion in WhatsApp among other acquisitions for its growing platform.

In fact, I suppose I should have rephrased my question a little earlier – why hasn’t Amazon already staked its claim to lead this digital space after having launched its Kindle Fire tablet and Fire TV set-top box?

Opening the door

Simply put, the smartphone is the main gateway to the internet today, and, in the hand of billions of users throughout the world, is the physical embodiment of a conduit that links those users to each other and to the whole content of the internet. There are almost 7 billion mobile phones in the world (and only 1 billion bank accounts). And the trend is staggering. Mobile payment transaction value surpassed $235 billion worldwide in 2013, and is growing at 40% a year, with the share of mobile transactions already reaching 20% of all worldwide transactions.

So, while risky, Amazon’s entry into the smartphone business is a classic play: a platform leader entering an adjacent platform market that is also complementary to its primary business. All platform leaders aim to stimulate complementary innovation (think how video game console makers aim to stimulate the provision of videogames), and they often attempt not to compete too much with their complementors in order to preserve innovation incentives. But at some point all platform leaders start to enter these complementary markets themselves. Google has done it through Android, Apple has done it with iTunes, Facebook has done it with Facebook Home.

It happens when platform leaders feel threatened by competition in their core market, or when they want to steer demand, competition and innovation in a particular direction. The idea is to use their own user base as well as their own content and technologies to create an unassailable bundle, one that is difficult for external competitors to break into. Think of it as creating barriers to entry, while expanding the core market.

The reasoning behind entering a complementary market is well known, and related to the benefits of bundling. In the case of hi-tech platforms, the benefits are even stronger. By optimising and controlling the interface between a platform and complements, a company can have a structuring impact on the evolution of the platform ecosystem – and that means on all the innovators around the world that invest and make efforts to develop complementary products and services.

In your hands

So, these are the reasons why Amazon is entering the mobile phone market, despite the difficulties inherent in taking on an über-competitive market. This strategic choice makes a lot of sense.

As to whether Amazon has a fighting chance of succeeding, there are reasons to be optimistic. Beyond its deep financial resources, Amazon has learned something of what it takes in the development and successful commercialisation of various versions of the Kindle. That has given it expertise in hardware, on top of its software background, and should prove a useful training ground to allow it to launch other consumer products such as the smartphone.

But the ultimate judge will be you, gentle readers. Will you be willing to swap your favourite mobile phone for a yet another new kid on the block, even if it does let you browse Amazon’s ever-growing catalogue in splendid 3D?

The ConversationAnnabelle Gawer does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.

This article was originally published on The Conversation. Read the original article.

Azeem Ward
Show Hide image

Living the Meme: What happened to Azeem Ward and his flute?

In the first of a new series investigating what happens to people after they become memes, we speak to Azeem Ward, whose flute recital went viral in 2015.

The Sixties had Woodstock. The Nineties had Lollapalooza. The Tens – and, if we’re being honest, just a single year of them – had Azeem's Senior Flute Recital.

If you were inactive on the internet between 12 and 16 May 2015, you’ll be forgiven for not knowing who Azeem Ward is. After setting up a Facebook page for his end of year flute performance, the University of California student was inundated with over 100,000 RSVPs from the United Kindom, along with multiple requests to fly to England and play (for no apparent reason) Darude’s “Sandstorm” in Nando’s. After international news coverage, Ward – as all memes inevitably do – appeared on Jimmy Kimmel Live! to discuss his newfound fame. On 16 May, he had to turn hordes of people away from the 500 seat recital hall, and over 55,000 individuals tuned into a livestream of the event. Then, Ward disappeared. Not from social media, and not from the world, but from the internet’s collective consciousness.

Search interest in "Azeem Ward" over time

“I’d say no,” answers Ward, when I ask him whether, one and a half years later, he still receives any special attention or has any fan interactions. “I’m just regular Azeem now, and I’m okay with that. Regular me is a more focussed person that is not reacting to things that are happening around me.”

Ward is Skyping me from his home in Iowa, where he is getting his master’s degree in flute performance. He spends his time composing flute beatbox songs, learning how to produce music, and teaching a class on flute fundamentals at the university. “A lot of [the students] here in Iowa know what happened but they don’t go like: ‘Oh my God! It’s Azeem!’. It’s just like, ‘Hey, what’s up man? I saw that one thing about you on Jimmy Kimmel’.”  

The original Facebook event page

Ward regained his anonymity when he moved to Iowa, as many of his fellow undergraduate students in California recognised him because he was on the local news. “But the whole viral thing was a UK thing,” he explains, “It wasn’t really around the whole US.”

An Azeem meme

Four months after his famed flute recital, Ward did come to the UK and toured the country to perform as part of various university freshers’ weeks. “That was a crazy time,” he says, “I was over there for five weeks and played 22 shows in 12 different cities, all the way from London to Scotland.” His concerts were popular, though most people came to take a selfie or ask about how the recital happened, and only a few wanted to talk to him about music. Still, Ward profited from the events. “We did make some pretty good money," he says, admitting he earnt around $5,000. 

Despite clearly enjoying this time, Ward seems unfazed that his viral fame is now over. His only regrets, he says, are that he didn’t make any connections in the music business while in the UK, and that he didn’t have any social media accounts set up before he went viral, so there was nowhere for people to go to listen to his music. “When you go viral people hold onto that rather than taking you seriously as a musician,” he says. “Sometimes it annoyed me but sometimes I realised that I wouldn’t be there in the first place if it wasn’t for going viral.”

Azeem now, photo courtesy of Azeem Ward

So what advice would Ward give to the next person who finds themselves, unwittingly, the object of the internet’s affection?

“I'd say don't lose sight of what you've already been doing in your life, like keep your focus. I'd say that sometimes in your head you're like ‘Oh man, I have to do this now’, but you've just got to stay focussed on your goals. When you have your own path and you go viral you have a lot of people asking you to do all these different things. It was pretty intense – I’m not used to having a lot of people look at me and my actions, so I was pretty anxious at first. In the end I realised that I came to do what I came to do, and I had to go do it.”

Although Ward doesn’t miss being internet-famous, it is clear that going viral had an impact on him. He recalls the peak of the madness with telling clarity, sharing specific details such as "256 people” clicked attending in "four hours", and “then 512”, before 12,000 people RSVP’d overnight. Mostly, however, he seems very grounded, though he acknowledges it was “out of control” and “really crazy”.

Perhaps Ward feels this way because he received little in the way of negativity or hate. He fondly discusses memes that were created and art that was drawn about him, and the support of his family and friends. “Even though there were a lot of silly things going on, I managed to make it positive for the school,” he says. “I had no haters. Everyone was like ‘Damn, Azeem. Good job, man’.”

One day, Ward hopes to come back to London, although he is wary of returning. Not because of his viral fame, nor the number of selfies he might have to take with Nando's customers, but because of Brexit. Our conversation, like all post-June conversations, turns swiftly to the topic, and Ward asks me about the economy. “I was thinking about trying to do a doctorate over in London, but if things aren't going to be so good in a few years...” 

Ward admits he wouldn’t be bothered if he never went viral again. “When I think of something going viral, I think it has a point in time where there’s so much interest and then it goes away. I’d like to produce material and the attention to keep going up.” So do you want to be famous, I ask? “Do I really want to be famous?” he ponders. “Being famous is okay, I guess. But I want to be is respected and appreciated.”

To listen to Azeem’s music visit or Like his Facebook page.

To suggest an interviewee for Living the Meme, reach out to Amelia on Twitter.

Amelia Tait is a technology and digital culture writer at the New Statesman.