There are three reasons Amazon will fail with the kindle fire, even if they succeed in selling millions.
1) Apple sells a boatload of content through iTunes and its only a very small part of their business, selling $6 billion in content in 2011. If we take the total iOS devices sold in 2010 and 2011 and divide it by that $6 billion figure then apple made $21 in revenue on content per iOS device that year. This is a rough calculation as it only takes devices for the last 2 years and doesn’t include iPods, Apple TV and macs and PCs which can also access the iTunes store. Content selling is a business with low margins and your average revenue per user is very low. Amazon will have a hard time making profit from their Kindle Fire customers.
2) Google sees only $10 advertising revenue per handset per year. If Amazon can keep these devices in use in customers hands for 2 years, which seems to be the lifecycle of a tablet device, then at most they will make $20 in advertising. You can see why the kindle fire comes with ads, but this paltry figure is still not enough to stem the financial losses at Amazon.
3) A price conscious product attracts price conscious consumers. From my experience in the app market I know that price conscious customers are those least likely to make a purchase. We see this most from app promotional “free days”. The free customers don’t spend to acquire the app and are very unlikely to spend once inside the app. The reason promotional free days work is in their ability to increase exposure to paying customers. Amazon isn’t selling a product, but is selling in a category of product where the paying customers will buy tablets other than the kindle fire (hint iPad). I expect the ratio of free to paying customers on Amazon’s platform to be much worse than on Apple’s.
So don’t be surprised when Amazon doesn’t see the returns they expect from their sell at cost or below strategy. I believe that the customers Amazon attracts with their price focussed marketing will only lead to customers who are less valuable to amazon’s content ecosystem than the average customer is to Apple’s content ecosystem, and Apple has already established that content ecosystems are a platform feature rather than an income generator.
Apple beefs up iCloud security in Mountain Lion Apple Mail.
The screenshots are from my iCloud email account preferences in Apple Mail running Mountain Lion 10.8.0.
You see in the first screenshot that there is no password set for the iCloud account. Strange. Investigating the authentication method in the advanced section of the account settings shows a new authentication type, “Apple Token” (second screenshot)
And when I went to check my keychain for my iCloud account password it wasn’t a stored copy of my password, it was a token. Bravo.
The main case is about how to manage paid upgrades to your current app in the app store. Everyone seems to assume that if you put a new app “Product version 3” in the app store then you have to remove “Product version 2” in case customers accidentally buy it and wish they had bought version 3. The dilemma is that if you remove “Product version 2” you can no longer send out bug fixes or maintenance releases for the old software. It is gone from the app store.
Now i can’t remember if it was John Siracusa or Marco Arment but one of them was so close to what I think the answer could be that they could almost taste it. Case in point is Angry Birds Space, Angry Birds Seasons, etc. When Rovio brings out a new version of the game they don’t call it “Angry Birds 3”. Its marketed as a new product. Its exciting and worth paying money for all over again. The trick is that they still have the old, original Angry Birds in the App store and they’re still selling new copies of it too.
I don’t see why this can’t work for regular apps. When you make a new major release of your product why can’t you continue selling your old product? Apple has laid the ground for this with the iPhone 3GS, and now the iPhone 4. Both phones are still on sale despite the iPhone 4S being the new shiny phone. You can keep your older app supported with fixes and sell more of it to price sensitive users by lowering the price drastically. Worried about dropping support for an older OS? No worries! The old version can remain working and the new version can be the flag bearer for your product.
This can also be an alternative solution to offering trials in the app store. You could think about upgrading the old version to look like the new version, maybe upgrade everyone to the new version, but just don’t include the newest headline features of the the new release. The only difference between one version and the next that is perceptible to customers is what it looks like and what new things it does.
The trick is seeing a shiny, new version of your app listed separately in the app store as a marketing opportunity for both the old version and the new version. Its an opportunity to reach more price conscious customers and an opportunity to upsell people to the new version. It doesn’t solve not being able to give current customers upgrade pricing, short of having an early bird sale of the app for everyone, but then again the version that the customer has isn’t going to stop working on them. People should expect to have to pay for a new interface design and new features to support the people building the tools they use for doing cool things.