Why the EU decision about Google does not change the future for an Amazon Phone

Last week the European Commission fined Google five billion dollars for breaching the E.U competition rules. Among other things, the European Commissioner for Competition Margrethe Vestager claimed that Google helped kill off competing OS forks that were developed, including Amazon’s Fire OS for smartphones. According to Vestager, Google told handset makers they couldn’t sell any devices running other such forks if they wanted full access to services like the Google Play store on their other Android devices.

The EU press release stated:

“In doing so, Google has also closed off an important channel for competitors to introduce apps and services, in particular, general search services, which could be pre-installed on Android forks… Therefore, Google’s conduct has had a direct impact on users, denying them access to further innovation and smart mobile devices based on alternative versions of the Android operating system. In other words, as a result of this practice, it was Google — and not users, app developers, and the market — that effectively determined which operating systems could prosper.”

Fire OS did not kill the Fire Phone

It is easy to blame the lack of success of the Fire Phone on Google, but the truth is that, while the ability to leverage the Google Play Store could have helped, there was more about the phone that made it a hard sell. The price point and many of the features were aiming at higher-end and experienced users. Yet, the lack of brand share in the smartphone market, lack of apps and limited channel availability made it hard to appeal to a target audience that was already taken by either iOS or Android.

We also need to remember that Amazon introduced the Fire Phone back in 2014 when its brand in the device segment was nowhere near as strong as it is today thanks to its Echo line. Of course, the Kindle e-readers were very successful, but there was skepticism on whether or not Amazon could take its brand and expertise to other tech products. So much so that, back then, the Fire Tablets were still called Kindle, a name that was dropped a few months after the Fire Phone’s announcement.

For both smartphones and tablets, apps were more important than anything else, which is why the inability of Amazon to take advantage of the Google App Store certainly contributed to the premature demise of the Fire Phone. Developers were far too busy with iOS and Android to spend further time developing for Fire OS when the opportunity was uncertain.

Content vs. Apps

As both the smartphone and the tablet market matured, apps and content started to have a much more balanced role to play in driving user engagement. This was undoubtedly something Amazon was expecting and counting on as a revenue opportunity when it thought of the Fire Phone and Fire Tablets. Amazon music and video services had been in place for quite some time by the time the Fire Phone was introduced, but the streaming portion of such services only started after. There is no question that much of the value Fire Tablet users get from those devices comes from the content that Amazon makes available on them. Content that Amazon can leverage across Fire TV and their Echo products too.

The Challenge of taking Alexa Outside the Home

Since Google was fined, some have hypothesized that if indeed the EU’s decision holds, Amazon might have another go at the smartphone market. A lot has certainly changed in Amazon’s favor for a reboot of that smartphone attempt. But other challenges arise.

Alexa is, of course, the one to benefit the most from an Amazon attempt at launching its own smartphone. Alexa on other smartphones has not been as successful as it would be with a much tighter integration between hardware and software.

Other Amazon’s services have little to gain from a dedicated Amazon smartphone in my view. This is mostly because the Amazon, Kindle, Video apps all work very well on other devices and are much less dependent on being a “default” option on an optimized OS. Volume is value when you are making your money through content and services and not hardware.

Alexa becoming the one and only assistant on a phone might, however, not bring as much return to Amazon as some might think. I believe that while our dependence on Alexa is grown in the home and so is our level of satisfaction, our expectations for what we want Alexa to deliver outside the home might raise the bar too high. Alexa knows enough about us in the home to be useful but does not really know as much as Google and Apple know about us overall. Being the default agent on the phone would not change that as most of what makes other assistants more knowledgeable are the services and the apps we use from mail to navigation to search.

Considering the challenges of the smartphone market as well as the need for a regionally-tailored approach – Amazon’s worldwide offering is not as comprehensive as it is in the US – there is a much stronger short-term opportunity for Amazon that does not even have to wait for Google to lose its appeal to the EU decision. Amazon must change the perception users have today of the Alexa app on a smartphone.

The Alexa app must shift from a command center to an engagement center. As a user, I only go to the app to troubleshoot or add and manage a skill. While Amazon added texting and calling options, I don’t think these have proven to be very popular with users leaving Alexa pretty much isolated from our day to day outside the home.

Amazon should start thinking more about how Alexa can be useful to us when we are out and about. Can Alexa be our home away from home? The increased and improved focus on the app and a couple of strategic partnerships with vendors would provide a good enough return to Amazon in a market, the smartphone market, which as critical as it has been for the past ten years should not be the focus of tomorrow.

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Carolina Milanesi

Carolina is a Principal Analyst at Creative Strategies, Inc, a market intelligence and strategy consulting firm based in Silicon Valley and recognized as one of the premier sources of quantitative and qualitative research and insights in tech. At Creative Strategies, Carolina focuses on consumer tech across the board. From hardware to services, she analyzes today to help predict and shape tomorrow. In her prior role as Chief of Research at Kantar Worldpanel ComTech, she drove thought leadership research by marrying her deep understanding of global market dynamics with the wealth of data coming from ComTech’s longitudinal studies on smartphones and tablets. Prior to her ComTech role, Carolina spent 14 years at Gartner, most recently as their Consumer Devices Research VP and Agenda Manager. In this role, she led the forecast and market share teams on smartphones, tablets, and PCs. She spent most of her time advising clients from VC firms, to technology providers, to traditional enterprise clients. Carolina is often quoted as an industry expert and commentator in publications such as The Financial Times, Bloomberg, The New York Times and The Wall Street Journal. She regularly appears on BBC, Bloomberg TV, Fox, NBC News and other networks. Her Twitter account was recently listed in the “101 accounts to follow to make Twitter more interesting” by Wired Italy.

3 thoughts on “Why the EU decision about Google does not change the future for an Amazon Phone”

  1. Greetings! Very helpful advice in this particular article! It is the little changes which will make the most important changes. Thanks a lot for sharing!

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