How Amazon and Facebook are Changing the Definition of Marketing

Special Report to SubscribersAmazon recently released new versions of its Kindle ereader and expanded the brand to include highquality lowcost tablets dubbed Kindle Fire The Kindle Fire line of tablets is designed to be seamlessly integrated with Amazon39s digital media offerings which include Prime Videos a Netflixstyle aggregation of videos for rent or purchase as well as the Kindle bookstore for ebooks and Amazon39s digital music service selling mp3 downloads Many industry observers are calling this nothing less than a revolutionary move that will disrupt the hardware and computing industriesThe reason for this is because traditional tablet manufacturers such as Motorola Apple and Samsung are threatened by this strategy Here we see a company with a catalog of media assets looking to leverage this competence by commoditizing tablets to sell media And only media Apple also has media assets in its arsenal via iTunes though as the company39s quotDNAquot is more rooted in the computing industry rather than ecommerce it excels at selling luxury hardware rather than commoditizing hardware to generate ecommerce transactionsTo more clearly understand the disruptive nature of the Kindle Fire let39s take a closer look at the key details of Amazon39s latest announcement1 The Kindle Fire is priced at 199 Given that the tablet39s variable cost of production is estimated to be approximately 209 Amazon is selling this at slightly below cost of production In other words this product is a loss leader designed to increase Amazon39s share of the customer wallet to generate more ecommerce sales Specifically the Kindle line is meant to be a line of computers designed for content consumption like purchasing mp3s ebooks and digital movies all of which can be done on Amazoncom2 The Kindle line of computers is also built atop a forked version of Google39s Android operating system By working off an open source solution Amazon is reducing its cost of production which in turn facilitates the strategy of using the tablet as a loss leaderAmazon39s strategy is likely to be imitated by others particularly niche content companies and social networks that already possess a robust catalog of media The hardware is also likely to increasingly be designed to operate in social networks centered around digital media Kindles are evolving into networking documents as ebooks sold through the Kindle store denote passages that have been highlighted frequently by users as suchA relevant but different idea one that is more geared toward content production is that some smartphone manufacturers are building Facebook connectivity into their hardware meaning there is actually a Facebook button on the phone allowing users to post even more easily to Facebook As the trend of media and social networking companies disrupting the computer industry continues we may see Facebook unveil its own line of mobile computers as has already been hypothesized geared toward consuming content on its own social networkThe trajectory of this trend would also likely involve Facebook leveraging some open source software perhaps Android to enable lowcost devices designed to serve as loss leaders for selling purchases on Facebook such as games music via a recently announced deal with Spotify movies via a recently announced deal with NetflixAnd of course these tablets and ereaders are also advertising delivery mechanism and pave the way for ads to be even more personalized All of this facilitates mediabased social networks extracting a greater share of customer wallet via the sale of computing devices designed specifically to interact with the aforementioned media networkThe end result A world in which the price of tablets continue to fall as content production companies use tablets as loss leaders to sell advertising and their own media assets Firms with a catalog of exclusive digital media like Netflix Demand Media Apple and Amazon among others are the ones to watch here look for them to grow by getting a bigger share of their customer39s wallet rather than simply amassing more customersThe next step that follows shortly after the commoditization of tablets by media companies is the rise of application ecosystems for these tablets Again Amazon is blazing the trail here as the firm is already in the process of creating its own curated application system Amazon39s ability to govern a platform here to manage the interests of all stakeholders including application developers content publishers customers and shareholders of Amazon will be critical to its success and thus illustrates the competence that media companies will increasingly need to develop the ability to transform into a niche computing platform with diverse interestsYou are receiving this email as a corporate subscriber to Jack Myers Media Business Report Redistribution in any form except among approved individuals within your company is prohibited As a subscriber you have full access to all archives and 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How Amazon and Facebook are Changing the Definition of Marketing

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