Amazon And Free Stuff

I’m reading Amir Efrati and Jessica Lessin’s article about Amazon toying with the idea of giving a free smartphone to people.

Of course there’s a real issue here with the cost of the device: “Offering a phone for free would be a daunting proposition. Amazon would have to find a way to make up for the cost of manufacturing — on average, $200 per smartphone.”

In 2010 I had a good source saying that Amazon was trying to figure out how to give a free Kindle to its Amazon Prime members – the best and most loyal Amazon customers who pay a yearly fee for free shipping and (now) premium digital content.

They had the same problem then – they’d do it, said my source, “Just as soon as they can work out how to do it without losing money.”

I’m not sure they’ll ever figure it out. Hardware costs and software development isn’t cheap. And if the product sucks because the hardware is dated or the software is iffy, then people won’t really want it. The kind of customer who’ll live with a sub par free product probably isn’t who they’re targeting.

Still, it’s a tantalizing idea, and one that clearly keeps coming up at Amazon HQ.

12 thoughts on “Amazon And Free Stuff

  1. Zack Below says:

    They could do hardcore advertising on free devices for certain period of time after it is activated?

    • Michael Arrington says:

      yeah they could, but I don’t see the “right” kind of consumer going for that.

    • Gautam Tambay says:

      Even hardcore advertising is unlikely to recover the cost of a $100 device in a few months. Facebook does pretty hardcore advertising and still only makes ~$5 per year per active user from advertising.

    • Amazon already sells a version of the Kindle with advertising and it only costs $15 to have the advertising removed. I don’t see how “hardcore advertising” will be able to make up the cost of the device.

      Further, since it will probably be based off Android (just like the Kindle Fire), then I imagine there would be many people looking to root the device which would go against Amazon’s plans.

      I just don’t see the math adding up to be in Amazon’s favor of offering a free phone.

  2. Ryan says:

    Amazon deal maybe less about a free phone, but free level of service? $100 + Prime + Ads = Phone + 2GB + Calls/SMS.
    They already have the large data deals in place from the Kindle. Just a matter of making the formulas work.

  3. kremsr says:

    Amazon maybe less about a free phone, but free level of service. $100-$200 + Prime + Ads = Phone + 2GB + Calls/SMS.
    They already have the data deals in place from the Kindle, so it is just a matter of making sure the formulas make sense.

    As far as the partner situation, their OEM partners are going to be white-labeling the devices (you don’t see a Foxconn Kindle Fire), so I don’t see the Google situation being a major issue.

  4. Richy says:

    I’m not convinced by this although I’m sure there is a market amongst the 50 shades of bingo wings crowd.
    The problem with the free phone \ kindle is it isn’t free and there are usually compromises to keep the device price down. I don’t want to pay extra for prime to sub ownership of a ‘free’ but paired down tablet or phone. Any price saving would be negated by having to rebuy apps on the amazon store (they should have allowed you to transfer licenses like adobe do for pc mac). I’m sure theres a market but is it one that spends a lot? Enough to justify something like $100 a year of device subsidy plus any potential service subsidy?
    If anyone can do it amazon can I guess.

  5. engineer says:

    I think it’s really unfortunate, and shows how bereft of journalism the “tech reporting” scene is that this kind of story gets any play. This is obviously smoke put out by Amazon PR. And like all the other hype based on falsehoods (Eg: how well the kindle is selling, for example) The “Tech” “journalists” just report it as fact.

    Consequently Amazon gets to seem “innovative” and the journalists get a story.

    It shows a lack of integrity, Arrington, for you to not mention that this BS is coming from Amazon PR.

    It shows how little self respect you have that you don’t point out that you’re doing nothing but spreading propaganda for Amazon here.

    And if you don’t realize how you’re being used in this way then you really aren’t too bright.

    Notice there are no Press-Releases-being-printed-as-fact about how great the “success” of the android kindle is anymore… now we would all know they are absurd, but the damage has been done.

    Done by mindless unthinking dunces like you.

  6. Giving away free gifts is a great plan but I’m sure that the possible plan of how it could be done without losing money wins the day. This is a topic they have brought up on more than one occasion so they should consider burying it and never mentioning it again unless they have a plan that suits them since that’s what they are looking for.

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