Of Course Amazon Kindle Fire Cannibalizes the Apple iPad

Patrick Moorhead / November 15th, 2011

One way I test and gauge insights is to engage in and monitor social media.  It’s certainly not the only way, but it is one of many ways.  One very interesting discussion I am monitoring is the Amazon Kindle Fire versus Apple iPad.  There are definitely two camps that exist and not a lot in-between.  So what will really happen between these two tablets?

Different Target Markets, BUTimage

One thing everyone needs to realize is that there are many different kinds of consumers with very different needs, wants, drivers, and checkbooks.  Sure, our friends and family kind of seem like us, but that’s because its human nature to surround ourselves with people similar to ourselves.  We may think that we are a lot different from our friends, but statistically, we are very similar.  Let me give you just one example….. According to the U.S. Census bureau, the median household income in 2010 was pegged at $49,445.  Do you make a lot more… a lot less?  You get the idea.

As it relates to the iPad, there are consumers who would have stretched up to buy a $499 iPad 2 who will, instead, buy the $199 Fire.

Different Needs, BUT

The Fire and the iPad are also architected to address different needs, but that doesn’t necessarily dictate exactly what a consumer will do with it.  Tech.pinions colleague Tim Bajarin nailed it when imagehe talked about the differences in content creation and consumption on the iPad versus Kindle.  One thing to be careful with however, is what we mean exactly by content creation.  Is creating an email content creation?  Is cropping a photo content creation?  I happen to think it is and I believe that those who buy a Kindle will, in fact, be creating emails and cropping photos.  Why, because it’s the best available device they have to do that with at that moment.

Here’s the analogy, and it’s a personal one.  My teenagers don’t own a tablet, and therefore they watch videos and read books on their iPhones.  It’s the best device they have at the moment, even though it would be a much more enjoyable experience on the iPad.  Problem is, Dad (me) is too cheap to buy another one.   Those who have a Kindle will be creating light content because it’s the best device they have at that moment.

It Won’t Matter This Holiday Season

In the end, none of this discussion is relevant this holiday selling season.  Based on information from my contacts, both Apple and Amazon have been conservative in their production forecasts.  Apple doesn’t want to get stuck with potential inventory before their next iPad and Amazon took a cautious tone given it’s a new product and they barely break even on the gross margin side with an untested video and music upside content model.

Net-net, for the holidays, both will sell out and we won’t be able to see who will be the finest cannibal.  BUT after the holidays, when inventories are adjusted and there isn’t a line for either, if Apple either doesn’t adjust their pricing, introduce a lite-iPad, a 7″ iPad, or a new kind of subsidized business model, they will lose out in volume to the new class of 7” tablets, not only from Amazon, but also from Barnes and Noble.

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Patrick Moorhead

Patrick Moorhead was ranked the #1 technology industry analyst by Apollo Research for the U.S. and EMEA in May, 2013.. He is President and Principal Analyst of Moor Insights & Strategy, a high tech analyst firm focused on the ecosystem intersections of the phone, tablet, PC, TV, datacenter and cloud. Moorhead departed AMD in 2011 where he served as Corporate Vice President and Corporate Fellow in the strategy group. There, he developed long-term strategies for mobile computing devices and personal computers. In his 11 years at AMD he also led product management, business planning, product marketing, regional marketing, channel marketing, and corporate marketing. Moorhead worked at Compaq Computer Corp. during their run to the #1 market share leader position in personal computers. Moorhead also served as an executive at AltaVista E-commerce during their peak and pioneered cost per click e-commerce models.
  • The Fire will appeal to two markets: 1) people who want an eReader, but will pay a bit more to get color and multi-touch, and 2) people who are in the market for a 7″ Android tablet, but who don’t need 3G, cameras, Bluetooth, microphone, GPS, etc., and would rather pay $200 instead of twice as much for other 7″ Android tablets.

    Apple should welcome the Fire, since it will further segment the market for Android tablets.

    Samsung, HTC, and other manufacturers of 7″ Android tablets should fear losing sales to the Fire.

    A good comparison between the iPad and the Fire would be comparing the sales of the MacBook Air to Windows netbooks.

    Windows netbooks are much cheaper than the MacBook Air, but the sales of one does not affect the sales of the other. People will buy one product, but have no interest or need in buying the other.

    • Ag4

      It’s a good analogy, but remember the Mac market share is very small compared to PC.
      That’s not the case for iPad, not yet. What happens when it falls to below 20%.

  • Anonymous

    There is a chance Apple could upsize an iPod Touch (iPad Nano) and put a 7″ lower ppi screen on it. But the iPad would still be the only tablet interface unless they upsized the iPad to a 13 ” or 15″ iPad Pro.

  • yet another steve

    Of course it doesn’t cannibalize… that term is used in business for “eating your own” (and I know the author knows that.) It’s called “competition”. Not a fan of degrading the language for link bait.

  • Anonymous

    It would seem, however, that before the Fire does much damage they need a good product which version 1 clearly isn’t.

    • kindleOwner

      I disagree. I have purchased a Kindle Fire and find it to be competent at quick web searches, email, watching video, playing games and reading content. It has met my expectations. It is not as versatile and powerful as an iPad but at $200 it is an easy discretionary purchase. Personally, at $500 the iPad requires a more thorough justification and would crowd out other spending I might do. I find the Kindle to be more like a really big iPod Touch. The iPod I compare more to a laptop, which I already have.

  • Keep things simple: the iPad and Kindle Fire were not ‘architected’ they were ‘designed’.

    • Wouter v. Dam

      Would that be ‘Designed’ as in referring to an integral/holistic approach to product development and ‘architected’ as in referring to a top down directive style of product development? Or do you mean that the design department should be the directors, rather than the engineers?

      • Wouter, my issue is pure communication. I’m convinced the author means ‘designed’ but chose to use ‘architected’ because it has a smart techie sound to it. Products are designed to address particular needs or solve particular problems.
        Somewhere along the line the marketing boys and girls infected the way we communicate so that instead of saying: ‘cat’ we ended up saying: ‘furracious quattropod’ or instead of saying: ‘designed’ we say: ‘architected*’.

        *yes I know architected is an actual word. But is its use here appropriate?

        • Wouter v. Dam

          Thank you for the reply and your explanation.

          And I dare say the tendency to add (fancy) technical terms to product advertising/communication is all too familiar. I’m too inexperienced to be able to make any grounded statements about which department really is the root cause of it, but I will certainly keep your experience in mind.

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