Speaking from the pulpit: Jeff Bezos at today’s event.

Posting from Santa Monica, Calif.: One of the most striking moments during Amazon’s press conference here today was a manifesto, of sorts, that was delivered toward the end of the event by Jeff Bezos.

Talking about the relatively low prices the company is charging for its new Kindle Fire tablet lineup, the Amazon CEO explained the company’s strategy with a single sentence that an accompanying slide called the “Amazon Doctrine.”

“We want to make money when people use our devices, not when they buy our devices,” he said.

He didn’t mention Apple by name during this part of the event, but the implication was clear: Amazon is taking a decidedly different approach than its primary competitor in the tablet market, and Bezos believes his strategy is better for the consumer and the company in the end — aligning their interests far more effectively, in his view.

Here are three key excerpts from his comments …

“We don’t need you to be on the upgrade treadmill. If we made our money when people bought the device, we’d be rolling out programs left and right to try to get you to upgrade. In fact, we’re happy that people are still using Kindle Ones that are five years old. They’re still reading on them, and every time they buy a book, that’s good for us. That’s alignment.”

“If we made a lot of money when we sell the device — if we allowed ourselves to make a lot of money when we sell the device, we’d be tempted to use that Kindle bookstore to make sure you only buy our devices instead of working so hard as our teams do on interoperability.”

“Let me point out here, too, I am not talking about the razor and razor blade model. We don’t like that model, either. That’s the model where you lose a lot of money when you sell the device and you have to make it up somehow. For a completely different set of reasons, that also misaligns you with your customers.”

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Comments

  • http://twitter.com/chrisamccoy Chris McCoy

    Today is the day the mainstream technology world (READ: Silicon Valley) stopped underestimating the brilliance of Amazon and of Jeff Bezos.

    • http://www.christopherbudd.com Christopher Budd

      And I think there’s a way in which the mantle of the cagey non-Silicon Valley tech giant who can outflank the competitors has passed now from Microsoft to Amazon.

      I’m not a cheerleader but this approach does remind me of ways that Microsoft elbowed its way past others who were ahead of them in the Gates era.

      Remains to be seen of course. But certainly something to watch.

      • johnhcook

        Fascinating insight Christopher. Thanks for the comment. Given Amazon’s growth in the recent years, they certainly are, in my view, the new “top dog” in Seattle (and Silicon Valley) tech.

        • http://twitter.com/chrisamccoy Chris McCoy

          With the Amazon attack on hardware and a likely forthcoming Googlerola attack on projector screens and keyboards, Apple should consider this advice: (try to) Buy T-Mobile for their spectrum AND/OR buy Disney to unbundle ESPN.

          Unbundle ESPN to weaken the cable cartel. They’ll struggle to retain subscribers once tier 1 live sports isn’t part of the equation. Once weakened, Apple is in position to gain access to cable’s fat pipe/spectrum monopoly via an FCC intervention.

          Then reinvent TV through a combination of devices, tier 1 content (live sports, pay tv), and the ability to deliver those streams to millions of homes and devices simultaneously (something OTT, 4G, and wi-fi just won’t do).

          Amazon is still playing in the tier 2 content ballgame, but using shipping as their beachhead and networked commerce as the moat, are doing a damn good job of it.

          • http://www.christopherbudd.com Christopher Budd

            Very interesting point in the last paragraph especially and very astute. One thing I was thinking is that Amazon is really the first company that’s really successfully bridging online and real-world commerce.

            Makes you wonder then if they might not snap up Netflix at some point. Netflix (for all their recent troubles) does bridge both as well with streaming and DVD by mail. It could enable them to shore up their content a bit more and expand their role in “dual world commerce”.

          • http://twitter.com/chrisamccoy Chris McCoy

            They need spectrum and/or tier 1 content rights. If they had spectrum, they could attract Tier 1 content owners. Without it, they can’t deliver prime-time programming to the masses in a live, scheduled format… Advertisers want PTP, and VOD is a tier 2 windowing/distribution strategy.

          • http://www.christopherbudd.com Christopher Budd

            Very good points. I admit I don’t know the world of rights/broadcast like you do so that’s a good point. I’m looking at it purely from a general business point of view.

          • guest

            You’re talking things that can run to billions each. Amazon made just $7m in net income last quarter. They barely have $2b in total cash on hand. As a strategic move your idea has merit. As a practical one, not so much.

          • http://twitter.com/chrisamccoy Chris McCoy

            Good points… So it’s Apple’s move. They have the cash, and will continue to rack it up via their massive profit machine in devices.

        • guest

          MS has gone from top dog globally to top dog in just Seattle. Now you’re demoting them to plain dog? ;-)

      • guest

        What about Samsung, who unlike Amazon has won head-to-head against Apple and made significant profit doing so? But I agree that of the two local companies the mantle of technology disruptor has passed to Amazon. MS has largely been neutered under Ballmer.

        • http://www.christopherbudd.com Christopher Budd

          That’s a great point about Samsung. Though I think they fall into the Apple camp of being “device” only and I think Amazon’s attacking with a device and service offering.

          But very good point. And a further point is what the Samsung/Apple suit means for Amazon (since they’re using Android on the Kindle). We might see Apple hauling Amazon into court soon from that.

  • http://www.christopherbudd.com Christopher Budd

    I think another piece of this doctrine is how their approach also differs from Google. Apple has the gadgets but no services, Google has the services but no gadgets. Amazon is trying to give you both.

    I went into some more detail in this comment on your earlier story: http://www.geekwire.com/2012/live-amazons-kindle-event-california/#comment-642250850

    • guest

      Apple has numerous services and Google has gadgets, both directly and via OEMs. There are other differences between Amazon’s approach and Apple/Google, but it much more nuanced than you’re suggesting.

      • http://www.christopherbudd.com Christopher Budd

        Sure. I actually have more nuance in my prior posting (I just didn’t repeat for brevity). In a nutshell, Google and Apple do have devices and services, respectively. But I argue there that in those areas they’re in the 3rd tier slot (or further behind). Amazon I would say is solidly #2 in both those areas and so is looking to leverage that in a “good enough” strategy to knit together a cohesive offering with greater value than the other two can offer.

        • guest

          When it comes to consumer, I disagree about Apple being a tier 3 services provider. iTunes? iCloud? Siri? I also don’t think Amazon is about “good enough”. If I were inclined to pigeon hole, which I’m not, I’d probably argue that Google is closest to assuming MS’s traditional role there. And to some extent that makes sense; Their primary customer is really advertisers, not consumers. Consumers are still a means to an end for them. That makes them quite fundamentally different from Apple or Google. OTOH, Amazon has shown little success translation market success into profits, unlike Google or especially Apple.

    • http://twitter.com/fijiaaron Aaron Evans

      Amazon has order fulfillment. Selling physical products online is what they do best. They imperil losing that by losing focus and trying to compete in software, hardware, or services.

      • http://www.christopherbudd.com Christopher Budd

        I don’t know that I agree at least on the service piece. Their cloud services is doing pretty well and is a leading provider from all I’ve seen.

      • guest

        Bezos apparently disagrees with you and happens to have made both work quite well so far. Also what you see as separate focus, he seems to see as extensions/enablers. I tend to avoid second guessing the business decisions of self-made billionaire founders of incredibly successful businesses. But that’s just me.

  • notbrownnosing

    For all this hype, Amazon still can’t make money.- http://www.geekwire.com/2012/amazons-razorthin-profits-thinner/ …and Kindles are totally the razor and razor blade model even if Bezos won’t admit it…

    • guest

      A very important point. But one which seems to prove they’re not the razor and blade model either. Although they do a lot of things in technology and are quite disruptive there, essentially they’re still a retailer with retail’s notoriously low margins.

    • Bob

      Hasn’t hurt their growth, ability to innovate, satisfy customers, or increase shareholder value. So what’s the real problem? MS makes lots of money. What’s happened to their growth rate over the last decade? Their ability to satisfy customers. Shareholder value? Who is ahead in the cloud? Tablets? Digital media? Sometimes when you have less you work harder and smarter.

  • guest

    Congrats to Bezos. He and Samsung are the only people I’ve seen with the guts to take on Apple directly and challenge the status quo. Everyone else is apparently too afraid. And both have already delivered their first products, gained share, and iterated quickly. They’re not still promising a v1 product and future competitiveness like MS.

  • http://twitter.com/fijiaaron Aaron Evans

    Apple makes a lot more when people use the device. Ever heard of iTunes? Or the App Store? There are tons of other micropayment options that depend on (read: give a cut too) Apple too — and let’s not forget the phone companies. Apple get’s a cut of profits from every phone call, email, and browse on their devices — something no other mobile manufacturer gets.

    And they make tons of money on the hardware.

    Amazon won’t release the numbers, but I will. Do you know what percentage of Kindle e-book purchases are downloaded to Apple devices? It’s almost 50%. Most of the other half come from Android devices or PCs.

    Amazon can’t claim to make money on Kindle hardware, because they aren’t selling any. Outside the northern downtown area of Seattle, the number of Kindles brandished by actual users is virtually zero.

    • Guest

      Thank you for releasing the numbers. From where did you get them?

    • guest

      “Outside the northern downtown area of Seattle, the number of Kindles brandished by actual users is virtually zero.”

      Can I have some of whatever it is you’re smoking?

  • DisQProf

    Apple still makes money when people use it’s devices: 30% of app sales, e-books, etc.

    I’m not an Apple fan boy, but Apple have done a superb job that will be hard to be matched by others (Amazon, Microsoft, etc). This may change though, just as DOSWindows over took Macs in the 80s and 90s.

  • Paul

    very good

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