S07E05 - Amazon Fire Phone & Open Source Android

This week the team talk about the Android Open Source Project (AOSP) and a recent beneficiary of that platform - Amazon and their new Fire Phone (like their Kindle tablets before). This week's discussion is kicked off with a (pre-announcement) blog post about an Amazon smartphone from an influential analyst's blog.

The team discuss the background and usage of AOSP and consider how firm's like Amazon are using it to build alternative's to 'Google's Android', substituting replacement services for app stores, notifications, media and mapping to build or promote their own ecosystems.

Ben: Hello and welcome to the 361 Degrees Podcast season seven, episode five. My name is Ben Smith from Wireless Worker.

Ewan: I’m Ewan from Mobile Industry Review.

Rafe: I’m Rafe Blandford from All About sites.

Ben: Welcome back gents good to see you.

Ewan: C’mon.

Rafe: Excellent.

Ben: Again full of energy. Full of energy because we have-

Ewan: We are both wrong we have to be getting there right now.

Ben: We have refreshments in the studio this week, which is much excitement there is a bit of sugar rush going on.

Ewan: I had a salad.

Ben: You had a salad, so we’ll have to admit I had some of the sugar so I’m probably geed up.

Rafe: You sound it. I am very properly geed up.

Ben: It’s been a long week already. I was doing some editing of a previous 361 Degrees Podcast episode the other night and it stretched on long into the evening because I had to take out all the times you were mean to Rafe Blandford.

Ewan: C’mon it’s not mean it’s just he is so wrong all the time.

Ben: There we go.

Ewan: It’s just this series Rafe. I don’t know what you are doing. It’s the water or something he’s drinking.

Ben: I think before we start it would be a good opportunity to say hello to new listeners, because I know there have been some new listeners. Welcome to the 361 Podcast. The three of us record every week talking about mobile topics and technology. So far this season we’ve covered off mobile networks, we’ve talked about security last week, we talked about what it takes to build apps. I suppose we should probably now move on to talk about this week’s topic and, Rafe Blandford, we don’t have a guest this week but you have an interesting blog post we are going to talk about?

Rafe: I do and this is in the light of Amazon announcing their phone product; going on of course from the Kindle fire tablet it’s the Fire Phone. I wanted to talk about a blog post written by John Dawson on Beyond Devices who is a research is a blogger who talks about mobile topics. It was particularly interesting because it was actually written ahead of the announcement, but talked about a lot of the themes that had then come up in discussion afterwards. We want to talk a little bit about that and Android Open Source Project devices. This post went through a couple of topics that were interesting about how Amazon needed a store front on mobile having already done the tablet and also how they started as a traditional web retailer and they’ve become a giant in that space frankly.

Ben: Just before you kickoff, I think there might be an interesting point for listeners who perhaps aren’t super-techy like your good self. What is Android Open Source Project?

Rafe: Android Open Source Project is all the android devices that don’t come with Google services. This happens because androids are available as Open Source but increasingly Google has put other bits of the offering into stuff that it controls itself and you have to sign an agreement with Google. There’s varying certification procedures you have to go through. That’s things like Gmail, Google Maps, but also crucially Google Play Services, which is how you get the Google Playstore.

Ben: I can, if I am a phone manufacturer, I can put android on my device and I don’t need to have anything to do with Google at all?

Rafe: That’s absolutely right, but it doesn’t come with all the bits that people associate the Smartphone.

Ben: All the funky stuff yeah.

Rafe: Android Open Source Project is interesting some markets particularly somewhere like China where it represents anything up to 80% or more of the devices that come in the store base. That’s partly because Google doesn’t operate as a business in China, there is a history in that that we won’t go into here. But because China is such a big market it’s actually getting to the point where the Android Open Source Project is between 30% and 40% of all android devices depending on how you do the estimates.

I think the other one to call to our attention here is Nokia now Microsoft is doing android devices moved on that again through the Android Open Source Project with Nokia X series of devices and they’ve provided their own app store they are using here, maps and promoting Microsoft services on the top of android. Essentially consumers don’t necessarily recognize it as an android device.

Amazon is kind of in one sense more the middle ground because it does play up the fact it’s android compatible on their Kindle Fire tablets and they are going to do the same with the phone. But they have replaced several bits of it including the store, including push notifications, maps and payment with their own system. They of course then promote their own ecosystem in terms of music, books, and videos on top of that. The phone part of it had been widely anticipated and as this Beyond Devices blog post talked about there’s several reasons for that.

It’s the growing role of E-commerce, now about 30% of visits to E-commerce websites – this is in Western Europe and America now on mobile devices, the conversion rate is still a bit lower than that between 15% and 20% depending on which numbers you believe. There is also this idea of phones and tablets as kind of the new screens for consuming content. We’ve always talked about them as being second screen devices but in fact, now arguably the Smartphone or the tablet is your first screen and the television is your second screen.

The blog post does a good job of summarizing all of this but it also notes that Amazon is in a unique position. We’ve talked in the past before about the difficulty of launching ecosystems and the way the Windows phone and Microsoft has struggled and how can anyone possibly get there, Firefox OS and Blackberry obviously ties into that. Of course, Amazon has brand recognition, it has a channel to the market and actually it already has a developer interest because for a while now had had the Amazon app store. Now originally that was setup for its tablet device, but arguably it has the potential to become the defacto, at least in the western European and American markets, AOSP kind of app store provider. There are a couple of ones for Russia and obviously India and China as well.

Ewan: They are now doing it for Blackberry.

Rafe: Indeed. There is then this question with Amazon that came up before the announcement was made, it’s not really surprised anybody around business pricing and innovation there. That’s something I want to talk about a bit in this podcast because it feels like this is a iteration one product and Amazon they jumped into the tablet space and has struggled a little bit there. If you look in the US for example it got between 5% and 10% of tablets in the US are Amazon Kindle devices. That’s just one market if you look in some of these other large markets it’s done not as well. The phone space is arguably even more competitive and harder to get into so that’s something we should maybe address.

This blog post finishes up by saying you have to be realistic about Amazon’s prospects and that’s born out I think in a lot of the conversations that’s happened. It does I think raise some really interesting questions about can you disrupt the main ecosystems? Does Android Open Source Project have potential to do that outside of China or in those Asian markets? Of course, is there a potential for Amazon to get in from what was thought of as a startup in that retail space and get into mobile in a way that Google has done and obviously Microsoft is trying to do and Apple did. Actually if you look at all those entrants they are all relatively recent arrivals and all of them had businesses outside of mobile before they started.

Ben: This week we are talking about Android Open Source Projects and specifically the Fire Phone, which most people in the countries that listen to this will probably have access to. Let’s backup a bit. Why would you pick Android Open Source Project rather than some other Smartphone OS?

Rafe: Do you mean anyone or do you mean Amazon?

Ben: Why would anybody who wanted to make a phone pick Android Open Source Project?

Rafe: I think the simple answer to that is that phones are a lot more difficult to make than people realize. The advantage of choosing Android Open Source Project it is completely compatible at the kind of level we are talking about, the hardware level with android it will use the same drive as it uses the same base operating system. It’s actually only the top layers some of the APIs and some of the apps that you can’t take from Google that you have to replace them with something of your own. Everything beneath that is actually the same  and so there are reference designs out there from the likes of Qualcomm, Media Tech and other chipset manufactures that mean you can build a phone using off the shelf components very quickly and very cheaply.

If you are looking at other operating systems you are going to have to do more hardware integration work yourself. It’s kind of the problem that Blackberry has had, the cost of creating a new device, or a new device family is much higher. It’s something that Symbian world really suffered from because it was basically just Nokia as a player there and every time it wants to do a new generation of hardware it had to absorb all the costs itself. If you’re doing it in the android world most of the work is actually done by the chipset manufacturer and the little bit that you may have to do is likely to be shared across the component suppliers and the manufacturers of the handsets which is why you’ve seen the proliferation of android handsets. And it’s practical from a business point of view to do runs of as few maybe 50,000 or 100,000 devices. Go back 10 years that just wasn’t practical in the phone world.

Ben: That’s pretty minuscule in terms of phone runs.

Rafe: Absolutely. Yeah.

Ben: If anyone is interested in reading this blog post just tell us quickly the background behind the guys who’ve written this.

Rafe: This is from Jackdaw Research and it’s Jan Dawson I believe who is behind this. He’s come out to be kind of a one-man band in terms of providing analyst services. Just like a lot of the other analysts commentators he’s done a blog to give himself a bit of promotion but has written quite extensively now and has written around each of the results, quarterly results as some of the big players. Well worth reading if you want that very strong analyst view of the mobile industry. Of course, it comes with its own baggage and viewpoint, but I think seeing it from a financial and business case base viewpoint can be a very helpful thing.

Ben: We will link to that post. If you are interested we will link to that post in the show notes. Let’s get into the chat though because I’m itching to go and I can see Ewan McCloud is literary on the edge of his seat. I think this guy is wrong which, for a man who professionally charges money for advising firms and giving them a strategy and that kind of stuff, I appreciate I might be skating on thin ice. But I think that the Amazon phone is technically it might have chosen the right platform, so I think as Rafe said you and …

Ewan: What was it going to choose?

Ben: Exactly, Android Open Source Project.

Ewan: Windows? Windows phone?

Ben: Windows, well you can get Windows license free but it does come Microsoft branded so if you want your own branding you’ve got to go Android Open Source Project now. Let’s put that aside; that just makes sense and everybody does that. I think that the whole thing about Amazon reaching its customers with a hardware device is nonsense and nothing about the Fire Phone actually moves Amazon any closer to reaching its customers. My take on this is that the Fire Phone at the moment is 100% vanity project.

Ewan: Okay, Blandford let’s hear from you before we...

Rafe: The backup point to that is Facebook’s chief Mark Zuckerberg going, “There is no point in doing a Facebook phone if it only reaches 5% to 10% of our users.” That’s one of the reasons things like the HTC First, the Facebook phone, basically died very quietly shortly after launch. I think there is a strong point there, but I think Amazon’s viewpoint on this…

Ben: Just note that Rafe thinks I have a strong point.

Ewan: A strong point but that’s it. This is a nice way of saying he doesn’t agree with you. About to get schooled.

Rafe: Amazon’s viewpoint that it’s a … calling it a vanity project I think is unfair because the amount that Amazon can control and learn by doing their own phone is significantly more than the alternative which I assume you are proposed doing it through software and services sitting on top of other phones.

Ben: My argument then in detail is that there is two, you can divide the Fire Phone into two groups. There is all of the software with the cool image search, with the …

Ewan: 3D?

Ben: So there is all the software which is the cool shopping experience, the recognizing pictures, recognizing sounds, all that kind of stuff, which is I agree is brilliant, makes it easy to be an Amazon customer, but is absolutely reproducible on any other Smartphone platform. Realistically, to take your point Rafe, it has to go on every other platform because lots of their customers …

Ewan: You want all your customers …

Ben: Lots of your customers are on android, lots of your customers are on iOS, so in that regard I say, “Well-done, but what you’ve done is improved your software and there is nothing to do with the Fire Phone. It just happens to be on the Fire Phone when you announced it.” Then there is another group of stuff, which is the 3D interface, the snazzy cameras, the physical hardware, the Firefly button that you can … it’s like a quick shopping button. My argument there is that none of that is actually at all really focused on helping people be better customers of Amazon or providing an interesting experience. It’s just all completely novelty.

Therefore somebody in Amazon’s innovation lab has got a bit giddy and a bit carried away and has managed to have Jeff Bezos pay for some novelty projects to be able to use four cameras to do a 3D interface. That has nothing to do whatsoever with adding any value to the android ecosystem. Well done to them for having their hobby funded for a few months and producing this thing but it’s not going to meaningfully impact Amazon.

Ewan: Wait a minute. So your logic there, can you apply the same logic to Kindle, Kindle the eBook reader? Should Amazon not have created their own physical platform on hardware and relied on Sony, or insert other hardware brand, to do that themselves because I think that’s what they are doing here.

Ben: I think that’s interesting because the Kindle is noticeably different in two ways.

Ewan: Go on.

Ben: First of all they put out their software on iPad so all the people who had high end devices could access Kindle, sorry could access the Kindle software. Then the…

Ewan: Did the hardware not come first? I’m trying to remember. I think the hardware came first.

Ben: I think it did but they arrived very soon but you have to assume that this was part of the delivery time scale, the plan, not the same thing. Kindle had whisper sync over the air built in network which no one else had, so Amazon had to build to give a seamless eBook experience. It had, certainly in most markets, a rock bottom price point that meant that people who were new to the eBook world could afford to get into eBook ownership, hardware eBook reader ownership for an affordable price. There, although they made hardware, they made something that delivered Amazon quality service in instant availability and allowed you to access their ecosystem. I don’t think that the Fire Phone does that because you can already go and buy a cheaper phone that will run all of Amazon’s software and allow you to use all of their apps and store and shopping services if you want to.

Rafe: I think also the point about eBooks and Kindle in general that was a new market and we have seen the kind acceptance of eBooks coming because of Kindle. They’re have been other competitors like Kobo where the Smartphone is a much more established market and so the level of innovation that Amazon is doing it doesn’t really feel like it’s done anything that’s going to be disruptive. I would disagree with Ben in that I think the dynamic perspective has the potential to be interesting. What it’s being used for at the moment is underexploiting four cameras on the…

Ben: Ewan MaCleod has the potential to be interesting. I’m not going …

Ewan: That’s very kind of you.

Ben: … I’m  not going to invest what must have been hundreds or millions of dollars.

Ewan: Wait a minute guys stand back listen here. The current device, okay, the current one that’s come out to market that’s not going to help anybody. It’s very nice if you can be bothered to A) use AT&T in the States, so you have to change carrier if you want to commit to a two year contract or if you want to pay $650. So the current one yes fine.

Rafe: I think you have to be realistic. Amazon wasn’t going to break the operators strangle holding America overnight it was always going to be a sub size product. We’ll get on to that in a moment because I think it’s a really important point, but it was also going to be AT&T because that’s the partner that they currently have for providing the connectivity on their Kindle. You have to start somewhere and starting with AT&T, one of the big operators, makes sense.

I think you have to remember the way Amazon delivers products, and I think it reflects their history as a web player, is to iterate fast. They’ve done that with Kindle. So we have to remember this is just the first product and the amount that they can learn from doing their own hardware is enormous. I think in time they may well abandon their own hardware, that’s probably a bit of a stretch at the moment. They would like to be able to control it but by controlling the whole experience.

The point is they can put a Firefly button, which was the product identification thing on the side of the phone, they are not going to be able to do that with any other hardware. Having that level of control and then starting to do interesting things with dynamic perspective on product catalogues, being able to move and get a view around things has potential. I’m as skeptical as Ben honestly …

Ben: I think you are reaching there.

Ewan: No, hold on a minute. This is a very smart company and I think what we’ll see here is really exciting stuff from them in three years’ time.

Ben: Potentially, but let’s be clear, I’m not saying …

Ewan: Not potentially, they are not idiots.

Ben: I’m not saying, “Don’t build hardware,” I’m saying they’ve built the wrong hardware. If you want to build hardware …

Ewan: No I think they’ve built the right hardware for the West Coast of America. For everybody to go, “Oh wow!” I don’t think Amazon wanted to launch their first phone,” Everybody going, “It’s a bit middle of the road, it’s a bit …,” I think they wanted to show off a little bit.

Rafe: That raises the question Ben what sort of hardware do you think they should have built?

Ewan: It’s the price point that is more important.

Ben: I would say that if you can learn anything you could have learned it from the Kindle, which is all of … if you are a very …

Rafe: Oh no, you don’t access the whole of the consumer, look at what you get on the phone messaging, emailing, track everything.

Ben: You’ve misunderstood me so back up a little bit. What I mean is that you built the Kindle so that people at a low end of the market could enter eBook ownership and...

Ewan: They don’t have to do that now right because we’ve all got phones. So they now have to enter in a standard manner.

Ben: Yeah, but so what I was saying is that what could you do with hardware that would allow more people to access the Amazon ecosystem. I think that what you could have done is would have been tied an Amazon branded device to an Amazon branded network and created a fully Amazon branded experience and the phone just needed to be cheap enough and optimized enough to run Amazon’s services.

Ewan: This is what we are going to see though. This is what we are going to see right? You and I are agreeing here Blandford.

Rafe: No, because I think that’s European thinking. You have to understand that the US market is different.

Ewan: European thinking? I don’t know if I should be offended or delighted by that.

Ben: Offended I think.

Rafe: You should be delighted because …

Ewan: Oh thank you.

Rafe: … the US market is actually something of an odd fish in the way that phones get sold. All the phones get sold, or Smartphones at least, get sold on a contract that is $80 plus. The upfront cost $199 is actually a relatively small part of the cost of ownership even if they gave the phone away for free and let’s face it it’s not going to be that long before this Amazon phone comes down to free anyway. It wouldn’t make a lot of difference. In the US building mid-tier phones doesn’t make a lot of sense because of the way the pricing is structured in the States.

Here in UK or the rest of Europe or indeed the rest of the world where you actually need to have a contract cost that’s more associated with the real cost of the phone. I think your strategy would make more sense. But Amazon, their biggest market is the US and they have to tailor to their first mobile phone product for that market.

Ben: I’m just confused by this four-camera 3D screen.

Rafe: It’s not a 3D.

Ewan: Just to make sure

Ben: It’s pseudo.

Ewan: I reckon what Amazon needed to have was positive headlines saying, “That does stand out quite nicely to an iPhone 5.” I think that’s what – no I agree with you Ben that’s not really where they need to be going. I think the exciting piece would be when they iterate this to the n-th degree. I’m looking forward to seeing when I can have an Amazon Prime Plus Plus account that gives me global data access and global phone calls for $40 a month or £40 pounds a month or something like that. Amazon have done everything.

Ben: It just strikes me. We will move on… It just strikes me that you don’t need a $650 phone to deliver good Amazon ecosystem.

Ewan: I think they wanted credibility. I think they wanted everyone to go, “Yeah, that does stack up well. I’m not sure if I’d buy it but that does stack up well.” I think that’s what they wanted.

Ben: It looks like somebody is just going to upload the materials and go, “it’s only worth $400, let’s take another three cameras on there Jeff and make it do pseudo 3D”.

Ewan: I wouldn’t be surprised if, flippantly, if that’s roughly what has happened right?

Rafe: And the glass factor and their new menu buttons but that does bring up a really interesting question.

Ben: Rafe’s found something interesting out is what I said.

Rafe: How does Amazon therefore do it right? What’s the next model? And I think something you touched on which is around the pricing and how does Amazon disrupt this?

Ewan: Kill the rest of the market. It’s what Amazon does really, really well and I wonder if we are going to see that in area.

Ben: Let’s bring it back to Android Open Source Project. For me, all the people who are using Android Open Source Project are using it to enable innovation in other areas, so it could be a really innovative device to go with a really innovative tariff. It could be, in China, loads and loads of media players and loads of what would have been consumer electronics have now become kind of pseudo tablets and can run applications. You can put it into all kinds of consumer electronics, you can put it into connected vehicles even it could be the foundation for wearable or sort of feature phones and things like that.

That’s what amazes me is that you’ve got this free leg up that means you don’t need to worry about building the device, as Rafe was saying, now you can get on with your proper innovation. Think about where you are really going to change your market or something like that.

Rafe: The fact is the top of that software is stack is in the services and the apps not in the hardware because that can be …

Ewan: Or go beyond the little cameras and is in your wallet, it’s in what you are spending.

Rafe: Actually, it’s the experience you have right?

Ewan: You are in my way, you Mr. Operator, you Mr. Hardware Vendor, you are in my way and I want billions if not trillions. I want billions from this market so I will make that happen. I think that’s what we are going to see. It’s going to be so exciting to see what happens across the next couple of years with Amazon. I think it’s got the potential to completely revolutionize this whole mobile world.

Ben: Rafe I was going to say, why don’t you explain what was innovative about the way that the Kindle worked with operators, because that’s why I was thinking, “Wow! This is going to be big, they are going to have come up with something really smart with an operator,” because to my mind they’re one of the only companies that’s ever done that before with the Kindle.

Rafe: You are right ..

Ben: I’m right.

Rafe: … and the Kindle came into Wi-Fi and the 3G option and 3G immediately everyone go, “Oh, you are going to have to pay for a monthly subscription to connect your Kindle,” but no.

Ewan: That point when it came into market 3G was costing what, Brandford, about 25 quid a month?

Rafe: It felt like a fortune certainly.

Ewan: Something reasonable.

Rafe: Actually the cost of your connection was bundled into the cost of the device and so you could use it for downloading eBooks wherever you were in the world. Actually I can remember being on holiday thinking it is fantastic I can get free content while I’m sitting on the beach and not think about how much its costing me to download this book. Now it was only a megabyte or two but this was when a megabyte or two would cost you £10 or £20.

Ben: They are not unique but there is very few firms that have ever moved to using 3G as a transport mechanism and bundling the cost in with the product.

Rafe: The thing about Kindle was that it was a relatively limited amount of data there was an experimental browser on it and Amazon have done some interesting thing with the SILK compression technology. Ultimately it was just they treated it as almost a machine to machine connection which they were quite happy just collecting a couple of dollars from Amazon whether it’s usage based or per device we don’t actually know. The Smartphone is a very different thing because there are lots of Smartphones out there and AT&T’s model is to charge a certain amount and so made it impossible …

Ben: Yes the model today is that model.

Rafe: Amazon can’t get around that because they have to sign the agreement with the operators, the operators are the ones that control that pipe and that frequency.

Ben: I’m impressed that they are working in this space because I think that they are the only people who could create in North America and in Europe and these established markets a new ecosystem. In everything else they do in the web services, in the delivery, even in their logistics they are laser focused on just building the ecosystem and making it stronger and stronger and stronger. And I’m just looking at this and going, “What is this, how is this in any way making the ecosystem incrementally stronger?”

Rafe: Yeah, I would agree because I think from a consumer perspective …

Ben: That means I’m right. That means I’m right.

Rafe: … The proposition is disappointing for the first iteration but in some sense that’s a sign of the expectation that was on Amazon’s shoulders before they launched this. At the same time I have to be really impressed they have launched this basically with a complete ecosystem, something that Microsoft with Windows Phone has taken years to get to and indeed you could say the same about Apple and Google. I also really like the way that this connects the physical with the digital world through the Firefly product. Amazon’s shop window is now the entire window. If you can see it or you can hear it you can buy it through an Amazon in about five seconds. That’s really impressive and as an experience that makes the technology disappear and appeals to consumers.

Ben: Am I being way too optimistic by saying …

Ewan: Yes.

Rafe: Yes.

Ewan: Look you are your European thinking sit back there. Am I being too optimistic in thinking that …

Ben: I wish I could have come back with some witty European language. Unfortunately my school boy French…

Ben: (Horrible broken French)

Rafe: We should gloss over that quickly.

Ben: Am I, for the third time, being too optimistic …

Rafe: Yes, for the third time.

Ben: Amazon’s strategy here? I think it could be beginning of something really exciting. I reckon that this first handset is just proving the way. Wouldn’t it be cool if Amazon came along a couple of years’ time, 30 dollars a month, Prime, Prime, Prime or something.

Ben: You’re that kid who comes back after the first date with stars in his eyes talking about getting married because this was our first outing and…

Ewan: Someone is going to take that and put it on Twitter.

Ben: It’s a chronic mistake.

Ewan: Okay, I accept it is a miss. I accept it’s a really difficult conversation.

Ben: I’m correct then.

Ewan: Now one of the readers on Mobile Industry Review, Giff, G-I-double F. I was asking him he is a big Amazon customer in the States there. He just doesn’t want to swop to AT&T. He is very interested in the Amazon phone and the $199 he’d probably pay it I think he was saying but  he just doesn’t want to swap to a different network.

Ben: You see I’d buy more stuff from Amazon I just don’t find their website 3D enough. I just look at it and think, “If I only I moved my head and the pictures moved around I would definitely buy some more of those … “.

Rafe: Don’t look at the individual bits of technology. Think about Amazon’s long-term plan, which is basically to sell more stuff to you. Does this enable them to do that? Quite possibly. It has really interesting implications across understanding consumer behavior, providing new purchase, making, and connecting physical to digital. Do they care about making money from hardware? Of course not. Do they care about making money from a phone service? Of course not. They care about being the retailer you go to first and last. I think they need to be in the mobile space and playing with mobile and commerce in order to reach that goal. As I said I see it more as something that’s a research piece in the real world and launching a product to do that to me that makes sense. If you are a consumer I can’t recommend it as a device at the moment.

Ewan: Let me just finish off before I was rudely interrupted there Smith.

Ben: Hello.

Ewan: Will we see Amazon take an ego beating here when in the next couple of quarters we say, “How many of these new Fire Phones have you sold?” They go “25,000 or 50,000.” That’s not going to be a very good look is it? What are Amazon going to do? A) they must belong in a longer-term plan  to get this to wider mass audience. B) They are not going to react well to failure or to the perception of failure. So therefore what they will do with their billions?

Ben: I think that metric that will be interesting will be the number of people that go into the Prime, that’s their recurring subscription model because of the phone perhaps because they buy it and they get the subscription and they join the Prime membership or the percentage of people who use the phone because they are already subscribers and increase their volume. I think that they might not focus on unit sales they might talk about Prime coverage.

            50% of North American Prime subscribers are now using an Amazon phone because what we’ve done …

Rafe: That’s going to be huge figures they have to sell.

Ben: It is huge numbers but you’ve either got to use the phone as a gateway into the system or as a way to absolutely optimize your experience of it. That’s the gateway for me would be cheap like the Kindle devices or it could be a very high end Amazon experience. I don’t mean high end device but just absolutely as Rafe was saying, the easiest way to buy something in a heartbeat from Amazon. I don’t think this device is fish or fowl but I would be interested to see what they do next.

Rafe: On that point you make is that we can’t judge the Amazon phone the way we judge other hardware manufacturers. The metrics that matter most we will never hear about which are the how many more sales do they make, how many more products do they sell. If this results in a customer buying 10% more stuff through Amazon because it’s easier or for whatever reason, they will judge that as a success. For them the issue will then be how do we roll out that particular avenue to everybody?

            I think they’re asking un-answered questions about how you can re-create that Amazon experience on all phones because, make no mistake, it will only ever sell a small portion. Market people aren’t going to switch their iPhone or high-end Android for this just as has happened in the tablet market. Can Amazon learn from this, can they optimize their business and can they get better at serving you more groceries. Amazon’s business isn’t selling phones; its aim is to be 100% of your retail acquisitions. That’s what it’s all about.

Ben: Okay I think we’re going to wrap it up there. What have we learned this week? We’ve talked about Android Open Source Project and I’ve learnt a little bit from Rafe in terms of what it means. I didn’t realize that Android Open Source was completely Google free. So that’s been interesting and is now the basis for somebody else’s ecosystem.

Ewan: Thankyou Google?

Ben: Yeah, absolutely. There’s a bunch of other open source devices out there. The one that caught my attention recently was that Boeing black phone. They make that for the US government so it’s kind of android but super, super secure. I reckon we’d definitely be interested to look at other android open source devices. Are there any of these you can get in UK Rafe?

Rafe: There are a couple but they’re sort of branded devices and within the security space there’s a couple of other devices but it’s not something that’s really taken off in the UK, Western Europe or the States. It’s actually really been out in Asia where Google perhaps less prevalent or there are actually alternatives to go on top of that. In China for example Baidu and all the other big web services out there. Actually often they’re bigger than the ones we think in Western Europe. WhatsApp has WeChat and LINE as equivalents.

Ben: Okay gents thank you very much for your time this week. Lots of love. Hi to listeners again. Hi listeners. As ever, just a quick push, every week on the podcast when we publish a post with the player inside there was a three question survey and we’ve been getting loads and loads of answers, in fact so many answers that I haven’t yet closed the survey for episode one because we are still getting people who are going back listening through old episodes logging on and responding. We might actually save all the results to the end of the season, it’s a few episodes away. If you’ve enjoyed this podcast, or actually even if you haven’t, jump on the 361podcast.com, go to this week’s post and give us your opinion, answer the three questions and then perhaps go below and give us a comment as well. Thank you very much gents.

Ewan: Yeah, thank you.

Ben: Thank you for listening.

Ewan: That was emotional.

Ben: It was relaxed.

Ewan: You and your European thinking.

Ben: Relaxed and emotional. You can find us at 361podcast on Twitter or 361podcast.com. Thank you very much for listening and we will be back next week. Bye-bye.