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Does Anyone Need an Amazon Phone?

Amazon has made its second foray into the mobile device market, though the raison d’etre seems to be a little flimsy.

After months of speculation, CEO Jeff Bezos announced the Fire Phone this week at a press event in Seattle. The (sort of) Android-based device will feature a 4.7-inch screen and a 13-megapixel camera. Unlike its "giveaway" Kindle and Kindle Fire, the 32 GB Fire Phone will sell for $199 with a two-year contract, and the 64 GB model is $299; without a contract the phones are $649 and $749, respectively. AT&T will be the only carrier offering the Fire Phone.

There are lots of reasons to expect the Fire Phone to be a failure, not the least of which is that like the Kindle Fire tablet, it isn't a true Android device. That is, it will not have access to the Google Play store nor the ability to tie in to other Google services. So without an existing ecosystem, Amazon (like Microsoft and BlackBerry) will have to woo developers to write apps for the platform. Unfortunately, those developers are business people and will look at the prospects for the Fire Phone much the way I do, and the product will likely slink into irrelevance.

The smartphone market has matured into a comfortable duopoly between iOS and Android, and significant technical enhancement has all but ground to a halt. In order to change the calculus at this stage, someone would have to come up with something really big. The Fire Phone's big innovation is its 3-D display, however 3-D TV sets have pretty much been a bust, so I don't see this lighting the sky on fire.

Apparently Amazon has been listening to the market research that points to unrelenting growth in mobile commerce. comScore is reporting that M-Commerce in the U.S. could surpass $25 billion this year. You can see how Amazon, being the powerhouse of online retailing, could be enticed into thinking it could bolster its position by having an Amazon "shopping phone," but the pieces just don't add up.

So Amazon is clearly about selling, and the Fire Phone is about buying. Bezos showed off the Firefly developer kit for apps that let you point the camera at something and immediately order it from Amazon. The company said that it has catalogued 100 million items Firefly can recognize. The phone also comes with a 1-year subscription to Amazon Prime.

Amazon did come up with some interesting tricks like its Dynamic Perspective eye-tracking technology. If you are looking at the screen, its four front-facing cameras track your eye movements and allow you to bring up hidden menus or scroll through webpages by tilting the phone -- fun, but far from earth shattering.

A number of analysts are comparing the Fire Phone business model to the Kindle, but there's a big disconnect (no pun intended). The Kindle can exist as a give-away product based on the old "Give 'em the razor then sell them the blades" model. It's a book reader, and Amazon started as a bookseller. However, selling the color Kindle Fire (also not a full Android device) for $200 was probably an error. It was clearly a loss-leader, and since the color screen made it a far less functional book reader, it was a bad play on both fronts.

However, I was talking to Soumen Ganguly, a Director at Altman Vilandrie & Co., who made an interesting point about Amazon. He characterized it as one of those companies with the will and the resources to succeed even if it takes multiple attempts. I might not be a fan of the Fire Phone, but I am a fan of Amazon and of Jeff Bezos, so maybe he has some other tricks up his sleeve that can alter the trajectory.

The big thing to remember is that smartphones are primarily communications devices. Yes, we can use them to shop, but that's a third- or fourth-order function. Getting a better way to shop while losing access to the Android ecosystem looks like a pretty bad trade-off to me.

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