Why Did Amazon Make a Phone? A Conversation With Jeff Bezos

Why Did Amazon Make a Phone? A Conversation With Jeff Bezos


JUNE 19, 2014 11:18 AM 13 Comments

Shortly after he introduced the new Fire phone on Wednesday, I spoke with Jeff Bezos, Amazon’s founder and chief executive, about the device and Amazon’s goals in the smartphone business.

Here is an edited transcript of the conversation. Sadly, it does not do justice to Mr. Bezos’s booming laugh, which punctuated many of his sentences.

Why did you make a phone?

Our product development process always starts the same way. We don’t start out by saying, “We have to build an X.” We say, “If we were going to build an X, how would it be different? How would it be better?” And it can’t just be different. It has to be different constrained by customers caring. It’s easy to be different if you don’t constrain it that way. But it has to be useful.

But are you too late into this market?

I think in the whole evolution of this, we’re still pretty early. I don’t want to judge before all the facts are in, but I think this wireless thing is going to be big.

If we go back in time just five, six, seven years, we’re talking about different players — Nokia, BlackBerry and others. Things change very rapidly in this area.

I was surprised that you weren’t competing on price so aggressively. This is essentially the same price as rival devices.

Well, it’s 32 gigabytes instead of 16, which is a big deal. So don’t forget that small fact! And it has Prime — for new or existing members, you get 12 months free.

But it’s a really premium phone. We’ve packed a lot of hardware, a lot of expensive materials into the phone.

Are you saying you’re not making a profit on the phone? When you launched the Kindle tablets, you said you didn’t want to make money when people buy your devices — you want to make money when people use your devices.

I’m saying we haven’t changed our approach. We look at it holistically.

I still see people using second-generation Kindles, like if I go to the beach. Gosh, that’s a six-year-old Kindle. And we don’t have to feel bad about that. We don’t have to wish they were on the upgrade treadmill. I like the alignment with the customer.

With the $199 phone — that’s the same approach.

The other thing that’s clear about the device is that it hooks you into buying from Amazon very directly.

We make those actions very simple. As we should. Guess what: One of the things people want to do with their phones is buy stuff, from Amazon and in general. So helping people take care of their shopping tasks is an important job to do in any smartphone.

But that’s not what the phone is about. It has to stand on its own as a fantastic phone. It even has to make phone calls.

And most exciting for us is third-party developers. It’s easy to add custom actions to Firefly [the Fire’s image-recognition system], and it’s going to be really interesting to see what they come up with.

It sounds like you’ve been using the Fire phone as your own phone. What were you using before, and what’s it been like to use this?

Well, Samsung. And the thing I’ve noticed is when I switch back to another phone, I’m still reaching for the gestures that work so reliably on Fire phone, like autoscroll.

For the design team, invention is about stepping back and finding those things in technology that aren’t ideal, but you’re so inured to them that you don’t realize they could probably be improved. Traditionally scrolling is not that good. It’s often a two-handed gesture. You’re interjecting your finger in front of the screen.

Once you get used to autoscrolling, you’ll be trying to do it on another device — and that’s a good sign.

How will you know whether this phone is working? What are your benchmarks?

We have a long history of getting started and being patient. There are lot of assets you have to bring to bear to be able to offer a phone like this. The huge content ecosystem is one of them. The reputation for customer support is one of them. We have a lot of those pieces in place.

It’s our job to keep inventing and to be patient. One thing leads to the next.

Is it too simplistic to point to one number — to say the phone is aimed at selling Prime memberships, say?

Yes, that is too simplistic. If you looked at the ratio of hard work in this to selling Prime memberships, that would be the hardest thing we could do. If you just looked at the number of machine vision and computer scientists, hardware engineers, you’re talking about thousands of people building this phone.

Now, all of these things are self-reinforcing. The phone will make Prime memberships better, and Prime looks great on this phone. It’s not that there’s no interaction between these elements. But to say that’s the primary purpose is too simplistic.

You showed a graph of Prime memberships rising sharply. Is that because of your media content?

I think so. It’s always hard to know for sure. But when we started Prime Instant Video, we started with 5,000 videos. People loved it. They didn’t say, “It’s terrible, it’s just 5,000 videos.” They said, “I bought this for fast, unlimited shipping, and I just got this really cool thing at no additional charge.” And now it’s 40,000 videos, including much-sought-after exclusives.

We can track people who are joining Prime for the first time, and we know if they’re coming from a page about free shipping or a page about Prime Instant Video.

With every passing year, that is shifting toward Prime Instant Videos. There’s one group of customers who start their membership because of Prime Instant Video, but they’re like, “I got this free two-day shipping thing.”

There’s this other group that starts with free shipping. That’s still the bigger group, and they’re like, “I can get this cool video.” All these things work together.


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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