
Amazon’s Echo Chamber - dko
http://dcurt.is/amazon-has-no-taste
======
hkarthik
Scathing and harsh, but probably pretty accurate.

> No one makes money selling media for consumption anymore. That market is
> quickly and brutally dying. The media market is now so efficient that all
> profit is completely sucked out of the equation by the time you get to the
> consumption delivery system, to the point that it is barely possible to
> break even.

This part resonated with me a lot. The media market was always a race to the
bottom. iTunes only proved there was a market, not that it could be profitable
once there a multiple entrants with closed ecosystems competing for attention.

I think Amazon is full of smart people, but they need to focus on what they're
good at to increase their profits. Their core businesses simply aren't
profitable enough for them to try to compete with Apple and Google. They
should fix that problem first and then turn to the more ambitious projects.

~~~
patio11
_No one makes money selling media for consumption anymore._

This is a common belief among people in tech. It is also disastrously false.
Frozen has sold 1.2 _billion dollars_ worth of tickets. The related IP alone,
to say nothing of merchandising, will be sold for decades to come, and bring
in additional billions.

You know the DVD, a dead format that can be trivially pirated? Yeah, they sold
3.2 million copies of Frozen. _In a day._

~~~
robryan
"all profit is completely sucked out of the equation by the time you get to
the consumption delivery system"

Is this false though? For all the success of the itunes store I seem to
remember it not actually making a lot of profit from content?

~~~
nandemo
> _[A Macquarie Capital researcher] expects that this year alone, Apple 's
> iTunes, software and services business should generate about $30 billion on
> a gross revenue basis, which would be more than 83 percent of S&P 500
> companies. [...] Schachter believes earnings before interest and taxes
> through iTunes, software and services will account for 21.8 percent of the
> company's profits this year._

[http://appleinsider.com/articles/14/03/24/itunes-and-app-
sal...](http://appleinsider.com/articles/14/03/24/itunes-and-app-sales-
projected-to-grow-to-20-of-apple-profit-by-2020)

------
schwabacher
Echo seems really smart to me - the reason Amazon is in hardware is because
they are terrified of 'ok google, order me lighbulbs', or 'hey siri, i need a
new pair of socks' becoming the way people shop for things online.

Amazon made Echo for 'alexa, order me wheat thins', and all the question
answering and music playing is just window dressing.

~~~
cwilson
I really don't think being terrified of competition is a good reason to create
something, so I hope that's not why they are doing this.

I'm struggling to find a reason why ordering anything via Echo is a good idea.
I wouldn't use Siri to order anything, so I'm not sure why I'd want to do this
either. I like to research things before I buy them and so do most Amazon
users (even if it's a quick glimpse at the overall rating). Do I have to have
a long Q/A session with Echo to determine which specific type of socks I'd
like it to order? It seems faster to just do this myself via my phone or
laptop.

I'm not going to switch to Google Shopping because I can tell my phone to
order things. I use Amazon because Amazon is the best place to buy things (for
numerous reasons), and until that changes talking to my phone or a device in
my house ins't going to effect this decision.

This just feels like a solution that no one was asking for, and that's
generally the worst kind of product.

Edit: After multiple people pointed out that this WOULD be useful for re-
ordering certain types of things (mainly food/kitchen stuff), I agree it would
be useful for that purpose. That said, I think Amazon should be marketing this
with that in mind, and the first place this should live is your kitchen, not
your living room.

~~~
jedberg
> I'm not going to switch to Google Shopping because I can tell my phone to
> order things.

Have you tried Google shopping with Voice integration? It's pretty amazing.
You say "Ok google, buy me Triscuts" and four hours later, there's Triscuts at
the door.

If my grandpa were still alive I would totally set him up with this.

------
nikcub
There are a few ways of thinking about Amazon, here is one: they can invest
back into new products in the same way Google do but at a larger scale since
they don't have the pressure of returning profits to shareholders and Amazon's
distribution and infrastructure is more likely to be complementary to followup
hits than Google's search ad business.

In this hit based model, they can afford more than a few misses and they have
already had plenty of hits (AWS, Kindle).

As an investor your question is: would you rather Amazon invest $50-300M
trying things out with the advantage of their brand, position and
infrastructure - or do you want them returning that money, pay tax on it only
for you to have to find somewhere else to park it?

> No one makes money selling media for consumption anymore.

This couldn't be further from the truth. Cable is dying and tech and media
companies are currently running a multi-billion dollar race in working out who
will own whatever platform is next (Amazon buying streaming rights, building
tablets and phones etc. is part of their version of what they hope next
platform will be - winner(s) take hundreds of billions in market cap).

It is so untrue that as soon as Time Warner dropped their print and cable
businesses Murdoch offered $85 billion for the content business that remained
_and they turned him down_.

~~~
pgodzin
> they can invest back into new products in the same way Google do but at a
> larger scale since they don't have the pressure of returning profits to
> shareholders

Can you elaborate on this? Google tries plenty of "moonshots" that may never
return profits to shareholders

~~~
nikcub
I meant that Amazon are doing the same as Google. They have similar revenue,
Google has twice the margin but is banking $10B+ p.a while Amazon spend all
and beyond. They are both maneuvering to capture these new markets using their
existing advantages.

For some reason Google investing in projects makes a sense for a lot of
people, while for Amazon it doesn't even though it has produced business lines
outside of their main that have more revenue and margin than anything Google
have done.

------
boynamedsue
"No one makes money selling media for consumption anymore."

Is that really true? No one makes money selling music, apps, or books on
iTunes? Netflix doesn't make money selling a media consumption service? HBO
doesn't make money selling premium content?

Those are all examples of media. And they're all capable of making money for
their creators and distributors.

~~~
baddox
The next two sentences are

> That market is quickly and brutally dying. The media market is now so
> efficient that all profit is completely sucked out of the equation by the
> time you get to the consumption delivery system, to the point that it is
> barely possible to break even.

I don't think he's claiming that copyright owners can't make money selling
copyrighted material. It sounds like he's claiming that the delivery networks
can't make money.

~~~
danhak
And Netflix is not a delivery network?

~~~
cwyers
They don't really want to be anymore, which is why they're spending so much
money on original programming.

~~~
waterlesscloud
Amazon is also at least nominally getting into entertainment production,
though so far they're doing a pretty clumsy job of it.

~~~
cwyers
Amazon does a clumsy job at a lot of things. It's incredible. Their shipping
and logistics? Top notch. Their server operations, including AWS? Very good.
Their website UI? Pants. Utterly pants. Using the Prime Instant website to
watch video and using Netflix to watch video is like the difference between
night and day. Netflix is well-organized, provides helpful recommendations,
and has meaningful categories. Amazon, meanwhile, uses the exact same UI for
buying books as it does for browsing streaming movies. And it uses that same
UI for office supplies, groceries, clothes and caskets. (Okay, maybe not
caskets.) And it's a mediocre UI for all of them.

EDIT: I checked, you can totally buy caskets on Amazon. Wow.

~~~
mcphage
Is pants good? Or bad? Or... what?

~~~
cwyers
Pants is bad, yeah.

------
ars
Despite the title this has nothing to do with the product from Amazon called
Echo.

So I call it clickbait.

Maybe call it Amazon's Echo Chamber instead.

~~~
dcurtis
I titled it that on purpose, to allude to the new product. I hate clickbait.

I changed the title anyway.

~~~
scoot
> I titled it that on purpose

Not originally - it was titled Amazon Has No Taste, and was changed to Amazon
Echo. Even the current title (Amazon's Echo Chamber) is link-baity IMHO.

~~~
MBCook
Amazon Has No Taste is a pretty good title if you ask me, it's an excellent
summary of the problem.

Amazon's Echo Chamber doesn't strike me as that bad, it also seems to describe
the problem decently. Amazon is big enough and has enough eyeballs that they
can make mediocre products appear to succeed for quite a while. Because of
that insulation the products don't improve nearly as fast as they probably
should.

------
sireat
Try being a small book publisher and dealing with Amazon. It feels like living
in Google or Paypal customer service world(ie if you are an edge case we do
not want you).

I've been helping a non-profit publish some books on Amazon and it has been
rather trying.

It is silly, the book comes out great printed through Amazon Createspace and
looks great on Kindle, but it gets taken off Kindle Direct Publishing because
it is not using English or one of the handful of supported languages.

Why not let people use other languages if they mark the e-book appropriately?

The official Amazon answer has been that they can not guarantee quality in
other languages and thus they do not support it.

The problem is that unless you are using one of the limited number of official
language Amazon will delete your e-book.
[https://kdp.amazon.com/help?topicId=A9FDO0A3V0119](https://kdp.amazon.com/help?topicId=A9FDO0A3V0119)

Welsh writers managed to raise up enough of a stink about it:
[http://www.walesonline.co.uk/news/wales-news/amazon-
sparks-l...](http://www.walesonline.co.uk/news/wales-news/amazon-sparks-
language-row-not-2582850)

Still it seems ridiculous that only way to get decent CS is through PR.

------
blobbers
Although the author is a bit harsh, I tend to agree with him on the aspect
that Amazon is largely creating second rate products and ultimately wasting a
lot of shareholder money (their inventory write down on fire phone inventory
was $170M).

The markets have been punishing them for their tactic of throwing it against a
wall and seeing if it sticks. Ultimately, I think what allows a company like
Apple to get ahead was the ability to say 'no', 'it isn't ready', 'do this
better', 'redesign that', 'this sucks - can the project'. Bezos does not
appear to run his company that way. It seems like he has a bunch of
lieutenants building things, but nobody telling them 'NO!'

The author highlights one thing: Amazon is trying too hard to be everything to
everyone, failing to excel in most ventures.

Don't get me wrong, I love their core business', use amazon prime, the web
services have definitely been a game changer and the kindle makes my life on
caltrain nice. But I'm certainly not going to invest in them until they start
to show that they've learned to say 'no'.

~~~
firebones
How expensive are these bets, in reality? To me, they seem like long options.
Minimal downside, but huge potential upside as they learn from each mistake
and gradually improve and create more exposure to the potential of a hit.

But in reality, it's not the hits that Amazon counts on--it's the recurring
revenue of Prime and Unlimited subscriptions and loyalty around lots and lots
of low-margin purchases. To keep those memberships coming, you don't need to
be a hit machine--you just need to keep offering incremental useful value,
mediocre as it may be alone, to add value to the subscription.

I think that's the angle. It's not that Costco hot dogs are the best hot dogs
in the industry for $1.50 (or $4.99 rotisserie chickens, or car buying
services, etc.), it's just that these items add enough value to enough
peoples' Costco experience that they renew memberships and spend a lot of cash
on low-margin stuff.

------
cyanbane
Great read and I agree with the majority of it.

This stood out though:

>Amazon’s retail strategy of being allergic to profit does not translate well
into hardware manufacturing.

Don't most gaming consoles sell at a loss? The pickup for the console maker is
on the publishing rights & distribution channels and the fact they take a
gamble that the hardware will get cheaper over the course of that hardware
generation. I had always though that it what Amazon was trying to emulate with
their hardware attempts.

~~~
cthalupa
>Don't most gaming consoles sell at a loss

Initially, yes. Nintendo has traditionally turned a profit on most of their
consoles (I'm not sure about the new one), but for the last several
generations Microsoft and Sony have been losing money on each console purchase
- at least initially. Later during the lifespan of the console the component
cost has usually dropped enough that they start to turn a profit

~~~
philwelch
Most console launches are supply-constrained and you can't buy one for months,
so why do they charge the normal $400 price at launch when people can just buy
them and resell them on Craigslist or eBay for hundreds more? If they launch
at a higher price they can just ride the demand curve downhill over time by
reducing the price and profit from the start.

------
brownbat
> They make a product, they market the product on Amazon.com, they sell the
> product to Amazon.com customers, they get a false sense of success,

Also called "success."

You can make a business selling cheap crap with powerful marketing. It's not
noble, but it's probably the norm.

Amazon just hasn't realized yet that it needs to stop competing with Apple and
Google and start competing with SkyMall, As Seen on TV, and the dollar stores.

(Half joking. But only half.)

------
arjie
Loved the Kindle from the beginning. Cheap plastic is part of its advantage. I
take it places without the least fear for its safety. Cheap is good here.

------
dcw303
I agree that their strategy is broken, but don't believe it's due a lack of
taste.

I understood Amazon's hardware to be the opposite of Apple. Cupertino makes
their profit on hardware mark up, so it makes sense that everything you buy on
iTunes is as cheap as possible - standard complementary products theory. Since
Amazon has primarily got their (marginal) profits from selling you content, it
made sense that their ebook readers, phones, and tablets are cheap.

I don't get the Kindle Voyage. Premium priced hardware doesn't fit into their
model. And now the Echo. I can't even guess how they think they will make
money with this thing, or how it could generate more sales anywhere else in
the org.

------
greyskull
I kind of understand why Amazon makes mobile hardware. They control the
software experience and push Amazon storefronts over Google's. You get people
into an ecosystem and they become comfortable in it, so they stick.

They author says "No one makes money selling media for consumption anymore".
But surely a properly executed (key word: "properly") foray into mobile
devices is better for Amazon than staying out of it? If they can create a good
value proposition for the hardware and a good software ecosystem too, that
would be better for them then missing out on mobile consumption of all that
media they've put so much effort into.

Or am I just completely wrong?

------
charlesju
This is why it makes sense.

There are a LOT of people that use Amazon to buy things.

A lot of people don't know the difference between phones.

If Amazon has a giant splash screen saying it has a phone, naturally people
will buy it just because they don't know any better (eg. 65 yr old Grandmas in
Arkansas).

Additionally, Amazon is a long term company and they know that if they want
their foot in the phone game they need to start somewhere so they did.

They have never cared about hardcore techies or even their investors. They are
one of the most long term focused companies alive right now. They believe in
iteration like a religion and they understand the average consumer.

It makes sense because it will make cents.

~~~
ctdonath
This - so long as Amazon understands this.

Amazon has to remember they're in the product sales business, and their
hardware exists ONLY to facilitate sales where some customers otherwise have
trouble figuring out how to get it. Kindle is great for people who don't have
another ebook reader; make sure every platform imaginable has Kindle software
available. Fire is great for people who aren't buying into any other tablet
ecosystem; make sure good content consumption apps are available on all other
tablets. Fire Phone should be a decent phone for those wanting a phone and
otherwise uncommitted to other makers; make sure all other phones consume
Amazon content easily. Fire TV should be a fine media player; get Amazon Video
onto AppleTV and Roku ASAP. Amazon should view their own hardware as nothing
more than gap filler where customers haven't committed to other options which
should be pursued by Amazon with equal vigor.

For Amazon, exclusive hardware is dangerous. It should complement the
competition, not compete where others are superior.

------
apta
As a previous employee at Amazon, I was extremely surprised at the quality of
how they write software internally. When I heard about their new phone
endeavor while still there, I was not expecting anything to come out of it
quality wise, at least from the software side, and it seems they compromised
on the hardware side as well (I never examined one up close). I think anyone
that has worked at Amazon, and seen their internal processes would not be
surprised at this either.

------
soyiuz
The article and the thread miss the point. Echo is a consumer / market
research device. It gets an always-on sensor into some small percentage of
American households. This could be used to collect data on in-home behavior in
unprecedented ways. The seven microphones could probably be used to echo-
locate walls, movement, and furniture positioning. The rest is up to the
"always learning, in the cloud" part.

------
bkirkby
where the author sees an echo chamber that portrays false success, i see a
bias on behalf of the author that blinds him to some seemingly obvious truths.
others have already pointed out the demonstrably false assertion that "no one
makes money selling media for consumption any more." a statement like that
seems to only be able to come from a blind spot.

i bought 7 kindle fires for my household (i have 6 kids) largely because it's
the best deal you can get on a tablet and it performs it's function extremely
well (i.e. media consumption device coupled with some games here and there). i
don't think any objective measure of kindle fire can relegate it to failure
just because it doesn't have the premium experience you get with a tablet that
is 6 times the price. i personally do not think the apple experience is worth
6 times the price.

i've no idea if the the fire tv stick is going to be a good device, but the
fact that it cost me $20 coupled with the positive media experience i get on
our multiple fire tablets was enough to get me to buy one and try it out.

similarly, i can get amazon echo for $99 and i just signed up to try it out.
i've long wanted a device with the presence and interface of a star trek
computer. i'm skeptical that the technology is there yet to provide the kind
of experience that i know will enhance the life of my family, but it's promise
is exactly what i want and i don't see anyone else out there trying it esp. at
the price point.

i think it's a bit myopic to relegate all of amazon's hardware strategy to the
failure bin just because they had a clear failure in the fire phone. the other
devices all seem to offer compelling reasons to try them out (not the least of
which is price point).

------
pbreit
There's some truth there but also some misses. Besides the phone, Amazon's
hardware has been at least decent and in the case of Fire TV, the best. The
Kindles and tablets are more than usable. Even if only a speaker with a
handful of voice commands (the complete Siri-like experience is a stretch;
but, for example, voice search on Fire TV is excellent), the Echo looks to be
a reasonable product.

------
moeedm
Spot on.

A lot of people have recommended a Kindle to me but I've held off. I can't get
past the massive Amazon logo on it and the awful page turn.

~~~
sanderjd
Weird. My kindle paperwhite doesn't have an Amazon logo on it at all, I don't
see how the page turn could be characterized as "awful", and it happens to be
the far and away the best digital thing I've ever read a book on.

------
fidotron
The danger here is actually being so far inside the tech echo chamber you
can't see that they have an audience that really are buying their stuff. Yes,
the Fire Phone is a misfire, but they have built an incredibly valuable high
spending audience with the other Kindle devices.

------
MarkMc
I don't see why the the author finds it 'extremely hard for me to understand
Amazon’s consumer hardware strategy'.

The strategy is simple: If 100 million people only have an Amazon device (and
do not have a Google or Apple device) and one of those people wants to watch
the latest James Bond film or English Premier League final, then Amazon can
take a 30% cut of the price the user (or advertiser) pays.

Amazon's execution may fail because their hardware is crap and are losing to
Android and Apple, but their idea is sound.

~~~
adamc
There will never be a 100 million if the hardware is too crappy, and that's
why the strategy is hard to understand; you can't just assume the end point.

That said, Amazon's phone is the only product I thought made little sense. The
Kindles are successful and drive ebook consumption. Fire TV I have no idea,
but the Roku has proven that the basic idea has a market. What other giant
hardware stumbles has Amazon launched?

------
Zigurd
Its curious that selling to one's customer base amounts to an "echo chamber."
The Amazon Echo could be really nice. If I could tell it to play an audiobook,
I'd be very tempted. It's a truly new product in a world that has too few of
those.

~~~
cwyers
The problem with Amazon "selling to their customer base" is that they're doing
the old "cheap razors, make money on the blades" shtick, because they're
selling all their hardware at or near cost. So the correct measure of success
is how many more blades you sell, not how many razors. The author is arguing
that the low engagement after purchase due to poor quality undercuts how many
blades they sell.

------
rajivtiru
So you only used this title to piggy-back off the announcement of the actual
Amazon Echo?

And you don't even mention it in the blog post. Nice.

Edit: It appears the title has been changed. Sorry for the asshole tone above,
but I don't like clickbait.

~~~
cwyers
It used the launch of the Echo to talk about why Amazon hardware in general
isn't compelling. I really don't see how that's "clickbait."

------
sidcool
I absolutely disagree with the Amazon Fire phone being terrible. It's not the
best in the market, but not terrible at all. Very harsh judgement on the part
of the OP. I even suspect a malicious motive behind all the vitriol spewed
against Amazon.

