It’s Time for Amazon to Make a Phone Again. Seriously

Who cares about the Fire Phone flop? If Amazon doesn't make another phone, it'll squander its hard-won Alexa lead.
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By the time Amazon finally gave up on its Fire Phone, it had $83 million worth of inventory gathering dust in its warehouses—even though at that point, the phones only cost a dollar on contract. It remains perhaps the biggest flub of Jeff Bezos’ career, a missed shot at getting a foothold in smartphones, the most important new consumer product in generations. Not quite three years later, it’s time to try again.

Yes, Amazon got burned on smartphones the first time around. And yes, if anything, the market has become even more squeezed. But the stakes for Amazon are too high not to give it another shot—especially if it can avoid its earlier mistakes.

Alexa Phone Home

The Fire Phone whiff didn’t just cost Amazon roughly the GDP of Iowa. The Everything Store lost the chance to carve out a slice of the mobile generation, to evolve itself beyond a shopping cart and into a platform. Even if it hadn't been so hammily executed, though, the Fire Phone came too late. iOS and Android had already cemented their shares of the market.

Today, Amazon finds itself with a significant lead in voice, the defining consumer technology of our time. Without a smartphone of its own, it could squander that lead. A voice assistant isn't worth much when it can’t assist you beyond your block.

Alexa lives on iOS and Android already, but behind a veil of taps, buried within the Amazon app. Even a recent hands-free smartphone integration, in the HTC U11, provides a neutered experience.

“Alexa is never going to achieve true first-party status and integration on a third-party smartphone,” says Jan Dawson, founder of Jackdaw Research. It could, though, on a smartphone of its own. The benefits create a virtuous circle: The more you use Alexa, the better it gets. The better it gets, the more you use it. Alexa’s blindness to what you do away from home, then, makes it as useful in the long term as a cookbook that's never heard of protein.

“For them it’s a traffic game,” says Michael Facemire, mobile analyst with Forrester research. “For these services to work you have to go from speech to text, and from text to intent. The only way to really get that down well is to have tons and tons of interactions. The more data, the better.”

Thousands of recordings of people setting kitchen timers won’t cut it. To reach its full potential—or even just to keep up with Siri and Google Assistant—Alexa needs to understand your full range of experiences. It needs not just a spot on your phone, but top billing. And right now, there’s only one way for Amazon to get it.

Basic Pitch

Let’s dispense with the notion that there’s anything special about making a smartphone.

A few years ago, maybe. Especially if, like Amazon did with the Fire Phone in 2014, you felt compelled to pack in parallax whistles and bells on the software side. Now? Even Polaroid has a smartphone, or at least slapped its name on one. Smartphones have become so thoroughly commoditized, they may as well be surge protectors.

Amazon failed spectacularly at selling an overstuffed, overpriced, 3-D-for-some-reason smartphone. But you know what it’s great at? Selling surge protectors. And USB cables. And LED bulbs. And over 1200 other commodity items it lumps under the AmazonBasics brand.

Again, Amazon doesn’t need a mobile flagship. It doesn’t need lovingly chamfered aluminum. It just needs scale.

How does it get there? The same way it shipped millions of Echo devices. Make a pretty good product at a compelling price, give it a marquee banner ad on the homepage, and watch the sales roll in. It doesn’t take a Spielbergian imagination to picture it: A $99 AmazonBasics phone–the "Fire Phone" branding is still toxic at this point anyway–preferably running stock Android with a thick Alexa patina, but all Google services intact. (A stripped down version of Amazon’s Android-based FireOS, with the Amazon Appstore instead of Google Play, would be more likely but less broadly appealing.) Better still, make it available only for Amazon Prime members, or at least give them a steep discount. Call it a Prime Phone. It's got a nice ring to it.

If that sounds like malarky, remember that Amazon already does exactly this—just with other companies’ phones. Prime members can pick up any of nine models, from Alcatel, Motorola, Nokia, and Blu, for discounted prices of $200 all the way down to $50. And note that Amazon's already rumored to be experimenting with budget smartphones for developing markets. (Amazon says it doesn't "comment on rumors and speculation" as a general rule.) Even if that holds up, why limit itself, regardless of how its first attempt turned out.

"In terms of not succeeding before, I don't take that as information that they're not willing to do it now," says David Hsu, professor of management at the Wharton School of Business. "All of these companies are trying to make these investments they feel are going to be important, and it's pretty clear from the success of Alexa that this going to be one of the next big battlegrounds."

It makes no sense, then, for Amazon not to put itself back in the mix in every major global market that offers Prime. Not with so much at stake, and when it could potentially dominate the low-cost category. Alexa may be the reason Amazon needs a phone, but Prime would make it possible.

Prime Candidate

Everything Amazon does, with the exception of its massive AWS cloud, points back to Amazon Prime. Amazon has 80 million Prime subscribers, according to recent research from Consumer Intelligence Research Partners. On average, they spend nearly twice per year what non-members do.

Confidence that Prime members will spend more in the long run allows Amazon to offer Prime benefits on the cheap: Emmy-winning streaming video, two-day shipping, unlimited photo storage, and much more as part of the base package; a streaming music service that undercuts Spotify; steeply discounted diapers. Amazon can charge less than its competitors because it knows it’ll make it back in volume. An affordable phone would fit perfectly into that mix, both as a member benefit, and a way for Amazon to goose memberships and sales.

“Amazon is willing to put pricing into play,” says Hsu. “I wouldn’t be surprised to see them offer a premium phone—it may not be as premium as a Google Pixel, but quite good—at something that tries to bolster Prime.”

Even if an Amazon smartphone redux isn’t on the immediate slate, the rise of voice assistants will eventually make it a necessity.

“Mobile device success is still driven by apps and web experiences. People aren’t buying iPhones because of Siri,” says Facemire. “But they will in the future,” as smartphones rely less on apps and more on slices of experience. It’s the difference between unlocking your phone, scrolling to Dark Sky, and tapping, or just asking out loud what the weather’s like outside.

With over 15,000 skills on board, Alexa lives closer to that future than Google Assistant or Siri. To get there, though, Amazon needs to give it a smartphone home of its own—before it winds up stuck in the present.