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Current Obsession With Kindle Sales Data Misses The Big Picture (For Amazon)

Discussions regarding the success (or lack thereof) of Amazon's Kindle on blog and news sites has reached a fever pitch over the last couple of days. Most of the discussion feeds off an estimate from CitiGroup analyst Mark Mahaney that Amazon would sell 378,000 units this year, reaching 4.4 million (a $1B business) by 2010. The predictions are revisions of Mahaney's estimates from earlier this year; revisions that TechCrunch's Mike Arrington may have provoked. Most of the discussion, bordering controversy, missed the big picture, if you ask me.

The discussion misses the same big picture that was missed when the Kindle e-book reader first shipped.

As many of the first reviews noted, the Kindle has its imperfections. I have a Kindle with me at most times. The same goes for my wife. I purchased one for her because I didn't want her using the one I have. More on why she'd want to do that in a second.

When you first start using a Kindle, the probability that you'll inadvertently flip e-book pages before you're ready to is about 100%. Some of the buttons aren't ideally located. The design may not be perfect and it mars the out-of-the-box experience. But Kindle users will get used to the imperfection in a few hours and eventually, they almost never have the problem again. It's just a matter of how you grip the device.

I'm looking forward to the back-lit version of the Kindle, should one ever come out. It might be a while. I agree with Amazon's decision not to back light the Kindle. There isn't much Amazon can do about battery technology and for the time being, I'd rather have the Kindle's incredible battery life (especially when it's wireless radio is kept off) than a back-lit display. Books aren't back-lit, either. For a few dollars, you can buy a book-reading light that can clip onto the leather-bound cover that comes with the Kindle (some don't fit). The next Kindle should have a means for connecting an Amazon-sold (separately) battery-operated reading light accessory designed specifically for the Kindle. Meanwhile, my wife and I get by without a problem.

My biggest complaint (and perhaps one where Amazon is short-changing itself, too) is that if a particular book isn't available from Amazon for consumption with a Kindle, I can't easily search for it with the Kindle, buy it anyway, and have Amazon ship it to me. Through its wide-area wireless connection (branded "WhisperNet") that relies on Sprint's EVDO-based network, the Kindle connects to the same Amazon account that you'd connect to if you were using the Web through a PC (the one with your mailing address, etc.). So, just because you can't read a book with a Kindle doesn't mean you shouldn't be able to buy it. In fact, Amazon "works" in the other direction. You can visit your Amazon account through any Web browser, buy a book, and have it delivered wirelessly to your Kindle.

On the downside, wireless delivery to a Kindle is the only choice when buying a book from Amazon's Kindle Store via a PC's Web browser. Much the same way Apple uses the PC as the conduit through which music is delivered to an iPod, Amazon should offer a similar option for loading Kindles with books bought from the Kindle store. Why? As said earlier, Amazon's WhisperNet network relies on Sprint's EVDO technology which, as a variant of CDMA, doesn't work in Europe where GSM-flavored networks prevail. If using the PC to route content from my PC to my Kindle were an option, then I could buy and load books into my Kindle while in Europe so long as I can find connectivity for my PC.

The Europe problem isn't just about buying books. It's also about taking wireless delivery of other paid content like the newspapers and blogs you can subscribe to with a Kindle. So, that's another feature that I'd like to see in the next Kindle.

The Good Far Outweighs The Bad
Between my wife and me, I'm actually less qualified to review the Kindle than my wife is, even though I'm the one with the tech reviewer's background. My wife has a nearly insatiable appetite for books and like many major-league book readers, she often has three or four books going at any one time. To her, the Kindle is revolutionary because of how it has lightened her load. Instead of carrying four books (or more when we travel) in her bag, she brings the Kindle, which weighs less and takes up less room than any one book she'd normally bring with her.

However, this space and weight-saving feature isn't unique to the Kindle. You can have the same benefits with Sony's e-Book reader. What you can't have, however, with Sony's e-Book reader is the way the Kindle is a client-side device that can wirelessly connect to and acquire its content from a source (in the Kindle's case, Amazon.com).

There are a lot of other upsides to the Kindle that my wife raves about. But I'm not going to bother because, as I said earlier, focusing on the Kindle to judge its design or to quantify its success completely misses the bigger picture with respect to Amazon and how the Kindle is more of a signal of things to come.

By 2010, Amazon may well have sold 4.4 million Kindles. But here's my prediction. By 2015, the Kindle (who knows what version by then) will be just one of many client-side arrows in Amazon's quiver. In other words, the Kindle won't be the only specialized device that can connect to Amazon's wireless commerce infrastructure. When CitiGroup's Mahaney labeled the Kindle "the iPod of books," he may have been way closer to the future than most people realized.

The big picture with the Kindle is not the Kindle itself. That's small potatoes. The big picture behind the Kindle involves three facets:

1. Amazon's wireless commerce infrastructure: People probably underestimate how much of the innovation it took to bring the Kindle to market wasn't in the Kindle itself. Sure, you can always buy something wirelessly with your PC or smartphone. Even from Amazon. But this is very different from that kind of buying because of...

2. Network and Cost Embedding: The Kindle represents the first time a task-specific, commerce-oriented device (it's primarily for consuming text but MP3s and some images work on it, too) came with wide-area wireless connectivity transparently and freely built in. Pretty much all other digital devices that promise to work anytime, anywhere (OK, this only works where the WhisperNet is available) require both user involvement and expense to get the connectivity working. With the Kindle, you just turn it on. No configuration is ever required to get the connectivity working and all the cost is absorbed by Amazon. You'd think that in order to subsidize that kind of wireless infrastructure cost, you'd have to pay more for the product, much the same way you end up paying more to buy something online because of the additional expense of shipping. But...

3. Reduced prices: I've yet to encounter a book in Amazon's Kindle Store that doesn't cost significantly less than its physical counterpart. I've bumped into and purchased some books (e.g., Ken Follet's World Without End) and saved more than 70%.

Big Deal? You Betcha.
The next closest thing to this sort of acquisition of digital content on the go is being able to buy music on the go from Apple's iTunes Music Store with an iPhone. But even there, the iPhone and Apple's iTunes Music Store lag significantly compared with the innovation found in the Kindle and the infrastructure behind it.

First, the iPhone (even the new 3G iPhone) doesn't let its owners buy from the iTunes Music Store through its cellular connection. Any attempts to access the iTunes Music Store will activate the iPhone's dialog to connect to a Wi-Fi network. In other words, not only can't you acquire content anytime, anywhere (you need to be in a Wi-Fi hotspot), there may be additional expense involved in getting the sort of connection that's needed to shop. For example, the cost of connecting to a Wi-Fi hotspot in an airport. Then, there's the additional burden of technically getting connected. Granted, it's pretty painless to connect an iPhone to a Wi-Fi hotspot (but not necessarily a paid hotspot... those can be more challenging, depending on the authentication method). But it's not nearly as easy as what you have to do with a Kindle to get it connected: turn the wireless switch to the on position.

So, What's The End Game?
If Steve Jobs looks in his rearview mirror, there's a good chance he'll see Jeff Bezos pulling up behind him. The reason is because of how the infrastructure behind the Kindle poises Amazon not just for more better e-Book readers, but for how it positions Amazon to deliver all kinds of task-specific client-side devices that, like the Kindle, are frictionlessly enabled for the wireless shopping and/or delivery of not just books, newspapers, magazines, and blogs, but anything Amazon sells.

Imagine a Kindle-like device for audio and video. If it sounds far-fetched, remind yourself that Amazon already sells downloadable audio and video now. In fact, now with the help of special software that Amazon offers to PC and Mac users, sampling, buying, and archiving (into your "library") music from Amazon's MP3 store is as ridiculously easy as Apple makes it, with one difference being that the downloaded music can work just as easily with iTunes as it can with Windows Media Player.

Read that again: "Amazon's MP3 store". Perhaps the "MP3" part caught your eye. Amazon sells music in the player-neutral MP3 format, which means that the music can work pretty much anywhere. That's not the case with music downloaded from the iTunes Music Store, which can't be played back on non-Apple devices without some degree of user intervention and manipulation.

Already, Amazon has well-positioned both its commerce infrastructure and its music store to take on Apple. Arguably, both the infrastructure and the music offering are better than what Apple currently has in place. But the one thing that Apple has that Amazon does not is the device. With two of three puzzle pieces in place, it is hard to imaging Amazon not building or partnering for the third (for example, it could partner with SanDisk which, overall, is in second place after Apple in the portable digital entertainment player market).

Sidebar:Today, I run both Mac and Vista on one system. Vista runs in a VMware Fusion Virtual Machine. From Mac OS X, I run Amazon's MP3 Downloader/Purchasing software and I have it set to save anything I download into a shared directory that's accessible to both Mac OS X and Vista. Then, I have my iTunes installation on Mac OS X and Windows Media Player installation on Vista pointing to the shared directory in order to "library" any newly downloaded content. This enables me to sync my music and podcasts to both my iPod Touch (through iTunes on OS X) and my SanDisk Sansa View (through Windows Media Player on Vista) since VMware's Fusion makes the my MacBooks's USB ports accessible to Vista. Cool, eh?

Of course, the rules in the digital entertainment business are different than they are in the book space. The device doesn't have to be good. It has to be great. For this reason, you can rest assured that Amazon is studying both the iPhone and the iPod Touch as it contemplates the sort of user experience that will have the market saying "Uh oh, Apple." Sure, Apple has what appears to be an impenetrable position. But with the right offering (and provided Apple doesn't respond in kind) and with enough time (Amazon and Jeff Bezos appear to be very patient), it also has its weaknesses and there's no other player in the market that's positioned to exploit those weaknesses the way Amazon is. Especially given the breadth of offerings sold through Amazon.com (a superstore relative to Apple).

Now, for homework, what else beyond an e-book reader and some sort of iPod/iPhone-killing entertainment device might Amazon hitch to its online store? How about a refrigerator that shops Amazon for groceries? What else? Tell me using the comments below.

For Extra Credit: How does this change the way you think about your business?

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