>It’s a heads we win, tails you lose strategy. That’s the brilliance... Amazon wins so long as you consume media content from Amazon, no matter if you play it on a Kindle Fire or an iPad. Apple only wins if you buy an iPad.
It's amusing that Gruber can see the brilliance when amazon does it, but not when Google does it. This is exactly google's strategy with android, except that it doesn't involve users buying content. Google makes money when you use the internet. They win whether you use an iPad or a Nexus or a Kindle, Apple only wins if you buy an iPad.
Not really. No apps are allowed to link to places where purchases can be made for that app. The purchases need to happen within the app itself, at which point Apple gets a cut. If the app decides not to allow in-app purchases and cut Apple in, it may not link to other places where purchases can be made.
This may be, in the end, the worst mistake that Apple is doing with their platform. What shape would for instance web shops, or the SaaS market, be in, if the only way to run one was to give 30% of your revenue to Netscape.
Netscape could still be alive this way, but web would be way smaller.
If you're a SaaS app provider, you keep 100% of any revenue you generate through your own website. So if a customer buys a subscription from your website and then downloads your free app from iTunes, you keep 100% of that revenue that you sourced.
If a customer downloads your free app from iTunes and then upgrades to your Subscription offering using an In App Purchase, then you have to share 30%. What Apple is asking for is that if the subscription is generated from inside of the app, you give a 30% revenue share on those subscriptions. That's why they disable links from your app to your website... because those revenue opportunities originate from Apple.
I am not a huge fan of this approach, but it's definitely more defensible than requiring a SaaS provider to give 30% of all subscription revenue to Apple. Apple does generate and give app developers a steady source of traffic/app customers, and it's not unreasonable for them to get some consideration for it. That said (and this is totally subjective), 30% does feel high to me.
Amazon is, like Apple, a "sell people stuff at a price they're willing to pay" company, versus a "free but we will auction slivers of your soul" company. Apple makes most of its money up front, Amazon makes most of its money... um no one is quite sure how or if Amazon makes money. Google "gives" away goods and services and makes money selling ads ... like an old fashioned TV network. Not exactly the same thing at all.
Oh, and how much net profit has Android yielded Google?
> Oh, and how much net profit has Android yielded Google?
Probably a whole lot. When my sister, who would otherwise be in front of a computer at most half an hour a day, can get an android smartphone for 150 euros and idly browse the Web all day, Google makes a shitload of money they wouldn't have if all these people were on cheap nokias.
Don't iPhone users make just as many (probably more) Google searches as Android users? Or do you think that without Android, nobody would have put out cheap smartphones by now?
It's quite possible there wouldn't be cheap smartphones without Android. At least, not ones with a decent browser. Meego imploded on its own, Palm took webOS down with it as a realistic option, and MS would probably never let the word "cheap" attach itself to Windows Mobile. What's left? Openmoko, maybe? And, just as importantly, if you assume the cheap smartphone makers wouldn't gang up and make their own platform, who else might have pushed a new, free, mobile OS other than Google? Funnily enough, the only other company I can think of who might have had a go at it is Amazon. Today I could see Facebook having a go, but where were they 7 years ago?
Then again, markets are funny things. In a world without Android, I can't imagine the expensive iOS ecosystem being the only game in town. Something might have filled the sucking void at the cheap end of the market, but what?
I realise I've effectively written Symbian off here. It's funny, it took me a good 5 minutes to even remember it existed. I suppose we could hypothesise that in a world without Android, the Nokia of 2009-2010 might have seen the light, but I think that's extremely unlikely.
(Not implying you specifically, nor is it necessarily a bad thing...)
Interesting framing and perception - I've never read anyone say that "Mozilla charges Google for being the default Firefox search engine", it's always been "Google pays Firefox to be the default Firefox search engine".
Same result, really, but it's interesting how much of a change it implies, passive vs active, etc.
Actually the move to mobile is hurting Google. People tend not to click on ads while searching from mobile devices as much as they do on desktops. And since people are moving to mobile, Google's ad revenue growth is getting affected.
"the remaining 30% goes to the distribution partner and operating fees."
When I read that a couple weeks ago, I assumed distribution partners meant carriers, though I guess I don't really know what it means. Also, operating fees probably means Google, so I stand corrected.
Yes but Android cost Google billions more, and occupied the limited attention of key people for years. The evidence is that most android buyers do very little web surfing.
Divide that by the number of owners of each platform. There's your answer. Well, there's part of your answer. Chances are that Android owners are bimodal - some (like me) do a lot of surfing, others very little.
Oh, and how much net profit has Android yielded Google?
Android has cost billions but what if Apple and Microsoft shared the mobile market and replaced the default SE with Bing or Yahoo? That was Google's worry and that's why they spent billions for years. That huge expense was essentially hidden by filling web search pages with ads in commercial niches to the point of making them unusable. When earnings grow by double digit questions are few
Google saw that in mobile you only get a seat at the table by owning a platform demanded by customers or by being a carrier. Otherwise, you're just a feature on someone else's product–-something that can easily be swept away. You're thinking along the right lines. Google's decision to develop Android should be evaluated not by whether it has made profit to date, but by the alternatives facing Google at the time.
Amazon makes money from selling digital and physical media content as well as physical goods. Google makes money primarily from search-based advertising — YouTube which is digital content is around the order of 1B revenue whereas total revenue is in the range of 30B.
Amazon makes money whenever you buy their content. Google not so much.
When you have a strong platform player that have decisive power over how they locate information — in the case of Apple, (1) control over the default search engine in Mobile Safari, (2) control over what web browsers are approved for their App store (3) has their own maps app backed by their own services and partners, which doesn't include Google (4) demonstrated capability and intent to build alternate ways to access information such as Siri (5) demonstrated animosity — I'd say Google doesn't feel like they win if you buy an iPad.
So correction, it should be "Google makes money when you use their services".
The difference is with Amazon you're the customer, and the device and content are the products. With android, _you_ are the product and the advertisers are the customers. This distinction means that Apple/Amazon's interests are more aligned with consumers than Google's.
No, you are not the product sigh. Google has to keep users satisfied as much as they can, and they do. E.g., AFAIK, they downrank ads which point to sites which people leave too early again, even if they would generate them more revenue.
Ad clicks is the product, and not users' data. If you setup an ads campaign, you will see that the adwords experience is not nearly as polished as other Google products - and why should they care, businesses just HAVE to use adwords to gain traction. If anything, Google treats its ordinary users as clients, and forces its advertising monopoly on advertisers.
Google's using data they aggregate about me to pick and choose which ads I should see, ideally optimizing for ones that I'll click on. Those clicks are sold to advertisers.
Google's selling our clicks to advertisers. We are the product they're selling.
Exactly. It's not a bad thing, it's a pretty fundamental basis of the Internet and the reason we get so much for free. At the end of the day it is still a win for consumers. I'm glad it works that way, since I'd rather view ads then pay a monthly subscription to Google (or would I? At least most people would).
The difference is with Amazon you're the customer, and the device and content are the products.
Funny, my Kindle has ads. I believe you mean IF you pay the $15 extra, and for all I know is that $15 allows you to turn off ads. As far as I know, it doesn't preclude Amazon from selling your information and choices to third parties. Someone correct me if I'm wrong.
You still paid for the device generating revenue directly to Amazon. The ads are just supplementing a discount on the product. Google is not making money off of the Android devices they don't sell, although it is changing as they start building and selling their own hardware.
"This distinction means that Apple/Amazon's interests are more aligned with consumers than Google's."
Not necessarily. It simply means they have more incentive tying you down to their 'product' and stifle any competition. Google on the other hand couldn't care less about what device you use as long as you use their services.
They do? Then they do a crappy job at it, since when I moved out of Gmail and GReader and when I get something on Google Docs, I could export my data in standard formats.
You should really tell them they're screwing their tying down plans with their Data Liberation initiative, the Google Takeout and all those APIs.
Googles not making any revenue off you directly, yet they're paying engineers to work on it. They're making money somewhere - it's off of the ads you you see while you likely use google's services.
Please note that I don't think this is a bad thing, and I love and use Google's products myself very happily. But there is a difference between Google who is collecting revenue from advertisers, and Amazon/Apple who are making their money primarily from consumers.
Isn't that a comparison of hardware revenues vs Google Android ad revenues? And isn't that exactly Google's play—keep the market from being dominated by a single hardware company that could cut them out from those revenues? ('Course, Amazon has forked it to do basically the same thing, in some regards, so while it might work as an anti-Apple-hegemony move, the openness may have been too much, even from a business persepective.)
"Android" revenue as a whole to be compared against Apple's hardware revenues would need to include Samsung, HTC, etc. And then I'm sure Apple's margins would still be higher due to their excellent supply chain, but it's not like they aren't spending any money making all that hardware.
Remember how Microsoft makes >75% of the money and "wins" in the web server market with IIS? Or the majority of profits in the server OS market with Windows Server? Didn't think so, because there's no blog roll pushing that on the blogosphere and then given traction on HN.
Wasn't he and Gruber making a lot of predictions and analysis that Android would never overtake the iPhone in sales? When that did happen,iPhone on Verizon was surely going to kill Android's ascendancy. When that failed to stop Android, they moved to the next metric that favors Apple, profit share.
It's like, before he writes some articles, he thinks.. okay here are some new numbers, how do I make Apple look good and Android/others look bad with these numbers? The only problem is that some people on HN give the Apple fan blogs too much traction on HN. Hell, Paul Thurrott's http://winsupersite.com is even hellbanned on HN from being submitted for the crime of being a Microsoft watcher site for which the punishment here is flagging to death.
Android is winning for Google in a massive way once you understand their goal. Google's Android and even Chrome strategies are that _no one_ should win at the OS/platform level. They never want another Windows, or Mac, or IE, or anything that prevents them from leveraging the open web because it's fronted with proprietary code that can block them.
The best way to win at that game is to either force the market to adopt the system they can manage ("with Google" approved Android phones and the market) or make the web the only worthwhile source of truth among a hodge-podge of OSes that try to bolt on proprietary components. Even the major commercial forks of Android have not yet proved to derail this from succeeding.
/etc/motd is a script that generates the motd on any somewhat vrecent version of ubuntu, it is not just that static file. On ubuntu server, one of the things it includes is an ad for landscape. you won't see it on Ubuntu desktop.
Google doesn't have a strategy to serve ads on android? sure they do, it's called a web browser. Google has the largest ad network on the internet, and just about every time you view a webpage google gets a cut of it. It doesn't matter whether you use an android device or an iOS device or a windows computer or a potato, google makes money.
if google can encourage people to use the internet more by selling smartphones, they win. The point of android is not to cannibalize iOS market share, it's to eliminate the dumbphone. They don't want anybody to ever be without internet.
Android gives Google a large number of devices where Google is the default search engine and (assuming we're talking about the "official version") always will be.
That's a big win - default search in the browser is something they and others pay a lot for and for (official) Android devices Google aren't paying that. The reason that they pay that money to others (including Apple) is that that's a way of serving and selling ads to the mobile platform.
Talking about amusements - another one is that Android activations are still "activations" for Gruber, long after Jobs and co doubted if Google is truthful with their number. Gruber definitely gets his % numbers wrong though - half percent instead of 5% :)
>This is exactly google's strategy with android, except that it doesn't involve users buying content. Google makes money when you use the internet. They win whether you use an iPad or a Nexus or a Kindle, Apple only wins if you buy an iPad.
Well, it's not the same at all.
For one, Google wins a minuscule amount of money if you use the internet. Amazon probably makes more off selling 1 (ONE) Kindle book than Google makes from you using their search engine all year around on their tablet.
Second, noone buys those other tablets (apart from iPad/Kindle). The numbers are 1/10 the iPad numbers and less.
Third, Google doesn't even win when people use Kindle Fire, despite it being Android. IIRC, Amazon switched the search engine to Bing.
>Google makes money when you use the internet. They win whether you use an iPad or a Nexus or a Kindle, Apple only wins if you buy an iPad.
And how does that work for Google vs Apple revenue/profits so far?
> Amazon is, to my eyes, the only company playing in the same league as Apple
I think it's a bit premature to write off all other Android tablets entirely. In 2009, Android phones also seemed like they weren't in the same league, and none of us could imagine living in a world where Android outsold iOS devices 2-to-1, but it happened.
Definitely agree. Android tablets are vastly improved with 4.1 and project butter. Kindle Fire 2 is still choppy and sluggish from the preview videos I've watched. It's too early to dismiss Android tablets.
As soon as it was clear that Symbian was'nt going to cut it, Android was always going the default choice was anyone who is not Apple. Android is what symbian was - ubiquitous and in every phone from dumbphones to smart phones. If Android wasn't around, Windows phone would likely have taken over that role. Apple will probably stay between 15% to 30% ( which would still be huge number and in the most profitable segment ) simply because Android will be phones from $100 ( note US style contract subsidies are not present in the biggest markets in the developing world like India ). Whether Android is buttery or is immaterial in these markets - its price that matters most. The volume is always going to be with Android.
Like drivebyacct2 said, you can get content from Google Play. But the really funny thing is, you can get all of that from Amazon on any Android tablet. I don't understand how people don't realize that all the Amazon apps on the Kindle can be installed on any other Android tablet. This is exactly what I did with the Nexus 7 - you can get the Amazon App Store, Kindle app, etc.
I find Netflix and Amazon Instant complement each other nicely. I watch as much of a series as Netflix has, then I can watch the remaining seasons on Amazon Instant. Amazon Instant also gets me current shows, like the newest Doctor Who episode.
I've tried that, didn't work on my Galaxy Nexus. It installed but looked squashed and couldn't log-in to my account. It's obvious that it wasn't designed for multiple form factors. YMMV of course.
> Tech writers have a natural aversion to lock-in, high prices, and dominant market leaders.
You mean the same tech writers who have been breathlessly talking about tomorrow's iPhone 5 announcement for months? A device that fits this description exactly?
Gruber says "(Eric Schmidt even admitted last week, at Motorola’s Droid event in New York, that only one half of one percent of Android “activations” are for tablets"
Like Gruber, I really like the "we want to make money when people use our devices, not when they buy our devices" line. I often heard people deriding Kindles as merely vending machines for Amazon and I found myself slightly put off by that. But with that one line, Bezos really flipped a switch in my head to the point where the Amazon method seems much more fair to me as a customer than the one time hardware purchase model.
Everyone's different, but I have a "Kindle with special offers" from last year, and the sleep screen's ads are actually a feature. They're unobtrusive, informative and have actually saved me money.
If the Kindle Fire implementation is similar, I wouldn't hesitate on that count. (There may very well be other reasons not to get one... We'll see when they come out!)
1) When you turn your Kindle off, there will be a full-screen ad.
2) When browsing books at the main menu, a small horizontal bar across the bottom of the screen will display an ad. You only come to this screen by choice, though -- if you were in the middle of a book when turning off your Kindle, when you turn it back on it will go straight to where you were in the book without showing this menu.
Since they never interfere with reading, they are extremely non-intrusive. I think they are personalized but not positive.
Considering that Amazon knows about most of my online purchases from the past 10 years, the kinds of ads they show indicate that they are not at all targeted. Almost disappointingly so.
My main problem is being unable to access Amazon's content outside of North America and I'm not prepared to jump through hoops just to get them. In this regard Apple is way ahead of the curve here.
There wasn't originally, but they quickly added the $15 option to remove the ads. BTW: on existing kindles you can pay extra to remove the ads after the fact, so you don't really needs to decide up front. Amazon know that NOBODY buys the ad-free version so they mistakenly believed they didn't need to list an ad-free version separately. But people need to be given the option to feel better even if no one ever actually buys that version.
I own a 3G Kindle that pre-dated ads. When I saw the ads on my wife's newer kindle I actually opted-in to add ads to my version. The ads are more attractive that the default screensaver and occasionally you get a really good deal. (like $5 Amazon credit)
I think what separates Apple and Amazon from the rest of the pack is their simple but relentless pursuit of their values, and the extent to which they appeal to us customers. It's easy to understand their respective philosophies - Apple in terms of product design and quality, and Amazon in terms of prices and shopping experience. Both are now crossing into each others' territory - Apple with the future iPad mini and Tim Cook's operations knowhow, and Amazon with designing higher quality products. But both approaches are easily understandable by customers and appeal to their own values - innovatively, doggedly competing either on quality or price or both.
On the other hand, I don't think it's hard to see that most other manufacturers' philosophies go along the lines of "Let's make everything we can think of and see what sticks." Microsoft, for one, is only starting to turn around from its philosophy of "We want to be everywhere in your life" to focus on customer experience. These approaches are business-centric, and don't present anything that the consumer can trust or grab onto, especially when you think about the various music stores and other half-hearted approaches at retaining consumers who buy their products.
Intrinsically, I think customers understand the lack of focus - that these manufacturers are fundamentally focused on gaining a share of the pie rather than making customers really happy with what they just bought. With Apple, it's "Look at all these neat things I can do with all these apps"; with Amazon, it's "Look at all the stuff I can buy and read/listen to/watch." Other companies are only recently coming on board, and as long as they're not focused on giving the customer something to do with their products, they're going to miss out.
It's hard to tell if they profit even after including fixed costs, but they might.
But pricing it's low end model slightly above it's BOM is a signal to competitors: "we don't care to profit from sales, if you'll compete, you'll lose".
I wonder what Google has planned to fight for the top? Google's Nexus line is their first step into the battle. They're obviously trying to get involved in the media game but they know they're late compared to Amazon and Apple. Surely they will be stepping up their game for the next release.
Google can compete on price though, since they make money from the services they offer, just like Amazon.
Can't help thinking, is this a quest for a new god?
I am a huge fan of AWS, love the Amazon's "pay what you use" philosophy. However, I bought a Kindle Fire before, and since decided not to buy any more in the future. Not matter at what price. Sometimes you shouldn't be doing what you are not good at.
The latest offering of Kindle Fire might actually give the iPad a serious competition.
I'm currently an iPad user.
If I don't have the iPad now, I would be torn between buying the two.
The Kindle Fire is cheaper. Amazon's customer service is great.
But the most compelling reason is they have Amazon Prime. Being able to access all the Amazon Prime free movies and TV shows is a huge draw, at least to me.
There will be those who will buy it to install their own Android versions also. Small group though.
If I were to recommend either tablets to friends, I'm not sure which one I will recommend. Prior to this release of Kindle Fires, I would have recommended the iPad without much thought.
I'm interested to see what happens with Apple's upcoming releases. A large (albeit not the only) component of Bezos' message is that the Kindle Fire provides an iPad-quality experience at a lower upfront price because Amazon intends to get most of its long-term customer value through media sales; that idea could suddenly become a lot more interesting if a hypothetical iPad Mini / Air is released at the same price point as the Fire. Amazon would still be very well-positioned (as Gruber puts it, "heads we win, tails you lose"), but it would certainly make the hardware sales race more interesting.
> what about the Nexus 7? I thought they were being sold faster than they could be manufactured.
The implied statement is compared to iPad, nobody is buying Android tablets.
They might be selling faster than they can be manufactured, but it's still a tiny fraction of iPad sales. All of Google's revenue is a tiny fraction of iPad revenue.
Yeah 8 million Nexus 7s sold is what I heard somewhere. Only reason to buy Kindle Fire over it is if you want the option of a bigger screen and you watch lot of Amazon instant video.
Schmidt claimed 70K tablets activated everyday. That's 2.1M per month. Given they dont count the Kindles and no one else is buying other Android tablets the Nexus 7 has got to be selling 8M very shortly.
I like Amazon and the idea behind the original Kindle (the e-ink one), but it bothers me:
- They are all over with their tablets trying to compete with iPad or Samsung ones, it doesn't seem to have the same focus of the original: simply a good device to consume digital content. They will lose if they try to compete like that, trying to release full-featured tablets at low margins.
- Their event is way too much like Apple's WWDC. I mean, even the slides look like they are done on Keynote. It doesn't give a good impression.
> Their event is way too much like Apple's WWDC. I mean, even the slides look like they are done on Keynote. It doesn't give a good impression.
It was nothing like WWDC--there was no developer conference. It was a single presentation. That they possibly used a major presentation application to run a presentation is not very surprising. They probably had coffee in the back of the room too.
Why wouldn't the slides be done on Keynote? Keynote is an excellent presentation app, and it's not like Amazon makes their own presentation software that they ought to be using instead. I can't understand that comment at all.
- They are all over with their tablets trying to compete with iPad or Samsung ones, it doesn't seem to have the same focus of the original: simply a good device to consume digital content. They will lose if they try to compete like that, trying to release full-featured tablets at low margins.
Why would they lose? The Kindle Fire seems like a great device to consume content: movies, music, books, and also many popular Android apps.
- Their event is way too much like Apple's WWDC. I mean, even the slides look like they are done on Keynote. It doesn't give a good impression.
Doesn't give a good impression to whom? Do you think the average Amazon costumer cares? I don't.
Amazon's main strategy is to broker transactions between its users and the vendors that supply those users. Amazon is aiming to be everyone's primary retail store for everything.
Facebook's strategy is to own everyone's on-line "sharing". Google's strategy is to own everyone's "search" (broadly defined). Amazon wants to own everyone's retail experiences.
Amazon would love it if slick devices were cheap enough to just give away -- they'd know instantly how to make huge money off that. Google and Facebook? Not so much.
The whole Apple is superior to Company X because Company X makes far less profit might be what his target audience revel in, but is non-sequitur and gets old fast. How would he have reacted a similar comparison with, say Microsoft when Apple was not doing so well?
It's amusing that Gruber can see the brilliance when amazon does it, but not when Google does it. This is exactly google's strategy with android, except that it doesn't involve users buying content. Google makes money when you use the internet. They win whether you use an iPad or a Nexus or a Kindle, Apple only wins if you buy an iPad.