Amazon Kindles Its Fire with a Secret Weapon
If you ever wondered why Amazon.com (NAS: AMZN) named its e-reader Kindle, that mystery has been solved. The choice had nothing to do with burning physical books, but simply paved the way for the Fire tablet. I expect the Blaze, Conflagration, and Inferno to come next.
All jokes aside, the Kindle has done an amazing job of preparing consumers for a full-fledged, Amazon-branded tablet computer. Take a look at Jeff Bezos standing Zen-like in front of the evidence:
Image borrowed from "Chart of the Day" by Business Insider's Jay Yarow, with permission.
The chart behind Bezos shows Amazon's physical book sales trend in yellow and Kindle-based e-books in orange. Keep in mind that the yellow line was steep enough to kill off Borders, reduce Books-a-Million to a pale shadow of its formerly robust self, and send Barnes & Noble (NYS: BKS) looking for an online strategy of its own. Also, note that the appearance of e-books seems to have bolstered physical sales rather than replacing them. Imagine that, Netflix (NAS: NFLX) -- it is possible to launch a whole new business model without killing the old one in the process!
Speaking of Netflix, the video service is one of the four non-Amazon content pillars upon which the Fire's success will rest. The other three are Twitter, Facebook, and Pandora Media (NYS: P) -- no surprises there. Well, except for the fact that Amazon runs its own stores for digital music and videos in direct competition with at least two of the above launch partners.
While Amazon surely would love for all Kindle-based traffic to stay inside the Amazon ecosystem of sites and services, in the vein of Apple (NAS: AAPL) tying every hardware device into its iTunes platform, Bezos isn't as arrogant as Steve Jobs. He's quite content to suck millions of customers in with the promise of a low-cost entry point into the tablet universe, complete with top-shelf content from competitors. If those accidental tourists then stumble over the Amazon Prime movie rental service and decide that they like it, well that's just gravy.
In the meantime, Forrester Research shed light on a hidden way Amazon can further profit from a foray into tablets. The researcher reports that tablet users are about 50% more likely to buy stuff online than other Internet users, and also spend about 15% more when they make a purchase. Simply putting that tool into more hands, then, should juice Amazon's plain old e-tail sales -- especially when the Amazon experience is baked right into the tablet product.
Clever move, Bezos. That lack of unbending ego is one of the reasons why Amazon is changing the face of retail. Grab a totally free copy of this free report to read more about how this online cash king is killing Wal-Mart.
At the time this article was published Fool contributor Anders Bylund owns shares of Netflix and several books, but holds no other position in any of the companies discussed here. The Motley Fool owns shares of Wal-Mart Stores and Apple. Motley Fool newsletter services have recommended buying shares of Netflix, Amazon.com, Apple, and Wal-Mart Stores. Motley Fool newsletter services have recommended creating a diagonal call position in Wal-Mart Stores. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended creating a bear put spread position in Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio, follow him on Twitter or Google , or peruse our Foolish disclosure policy.
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