Apple iPad Intrudes on Amazon Kindle e-Reader Space 167.0

Market leader Amazon hits back with Free!
Yesterday at 0947 GMT (5:47pm Friday Manila), Amazon sent me the email at left offering a free download of Kindle for PC. Quickly, Amazon shots back across Apple’s bow.

I would have taken the offer. I do buy a lot of books (like two a week).

At the typical price of books I buy, I will save between US$15 to US$25 per book delivered in Manila against the usual US$12 per download. Thus, a Kindle DX, that has similar screen size as the iPad and sells for US$499, will pay back quickly, in 25 weeks or six months and, by downloading, also avoids about ten days of shipping time per book.

I cannot take the offer though because I am a Mac and not a PC user. Amazon was rumored to release a Kindle for Mac in November 2009 but with the release of iPadon Thursday, I can kiss that free software goodbye. (Note my Twitter post at 4:23 am Thursday, Manila time in the Tweetdeck image below.)

Market Leader Response.Still the email offer today is just the right marketing response for Amazon.

As market leader in the e-reader space for books, a wholesale response say by a price reduction will be too big a hit for Amazon and, more importantly, will not affect iPad too much.

Note: Another way for Kindle to respond is to say that “Kindle is cool … to the eyes.”

While the iPad can be used to buy and read books, the Amazon Kindle is superior for reading books and newspapers because of its screen which is made using e-ink technology that has the color of real paper. Its matte finish allows for longer reading because it has no glare.

For Amazon, the disadvantage of e-ink in future applications is that it does not allow a touch screen – that is why the Kindle has a keyboard. This limitation has implications for future Amazon strategy as below.

The iPad screen on the other hand is made from new LED technology (to conserve power) but is brighter. Thus it will be superior for quick read through of magazines, for example, where color is important.

It may eat up a bit of the Kindle market because it is multipurpose. Even then, if PC users can get the e-reader for free, they may opt not to buy the iPad for the reader function as they can do as well with their notebooks or netbooks.

If the iPad offer is expanded by Apple to be stronger on business applications then it may really eat up the Kindle. But Apple is does not want to go in that direction as it fears that iPad may cannibalize on the sales of MacBooks, the Pro and the Air.

Future Amazon Actions. Two reasonable scenarios will unfold for Amazon to defend the Kindle, and more importantly book sales, against Apple.

Firstly, they can convince a third party to continue and release a free-to-download Kindle for Mac. This will slow down iPad’s growth in the e-reader space that, in the medium-term, may not be that agressive, in the near term, if we interpret Apple’s business strategy correctly from the product x price matrix below.

Secondly and more important, Amazon will in the long run need to introduce a variant of kindle that allows more lifestyle and e-commerce features. This can only be done with an LED display for the bright colors and would go take the battle directly against the iPad.

Amazon has to do this soon as their total e-commerce product scope is now much bigger than books.

Apple iPad Positioning. Apple’s strategy, from the product x price matrix above taken from its website today, 1/30/10, has the iPad focused on bigger things. In fact, the iPad is not primarily a book reader.

Obviously, Apple looked at two overlapping product ecosystems in finalizing the iPad concept – the ecology of Apple’s product itself and of the wider and global hardware system.

Apple Ecosystem. From the price range of US$499 – US$829, it nicely fills a hole in Apple’s product range – in the continuum between lifestyle products like the iPod at one end to business use like the Macs at the other extreme.

Still, as in math, an average is just a concept and not a real thing. Thus, the consumer must have the iPhone or iPod at the lifestyle end, the iPad in the middle, and the Macs for business use. That business assumption may not happen in real life especially given the financial situation. (Note: See my corrected Twitter post at 6:43 am – first posted at 4:25 am – Thursday Manila below.)

Hardware Ecosystem. In the wider hardware world, the technology bells-and-whistles like the screen and the Apple brand equity that is introduced with the iPad may provide a temporary and short-lived push but, very quickly, competition copy and introduce the features at both ends and take out the iPad’s positioning from underneath it.

Apple must seek a real consumer or market need to serve that is a different dimension from those already served by the bookends like portability, screen features, and effective price x value offer.

At the business end, one such need to be serve that could be uniquely served is as electronic clipboard with such simple functions as inventory taking, time and motion study, nurses’ recording (i.e. eliminate need for transcription), etc. for the field with consolidation functions.

This would require more software like handwriting recognition to work.

At the lifestyle end, Apple must encourage the development of more apps in traditional applications like games, etc that make use of the better features and to justify the higher price.

As I noted in one of my Twitter posts on Thursday (4:27 am, Philippine time) a few hour after Steve Job’s introduced iPad, I do not see a new vision of future technology.

It even seems like the typical Clayton Christensen’s victim of success product concept, an over specification vulnerable to disruptive counterattacks.
The product portfolio play also speaks of optimization rather than real innovation in the market.

Nor does the iPad seem to create a market with the better technology or its combination.

I do hope, for Apple’s sake, that consumers pick up on a new applications for the iPad and that the company is quick to see, take advantage, and reposition the iPad brand.

Only with meeting a need is a real share of mind captured and a franchised category created.

And that has been, that is Steve’s Job’s hallmark – from the Mac, the iPod, and the iPhone – to the world.