Two Underappreciated Views Regarding New Amazon Kindles: Kindle Fire Likely to Drive Amazon Store Sales and Advertising is Subsidizing Device Adoption

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Two Underappreciated Views Regarding New Amazon Kindles: Kindle Fire Likely to Drive Amazon Store Sales and Advertising is Subsidizing Device Adoption

Two Underappreciated Views Regarding New Amazon KindlesLittle talked about in the hoopla on Wednesday were the Forrester Research findings reported by the Wall Street Journal:

“Tablets still account for only a small percentage of overall e-commerce, but they are punching above their weight. While the conversion rate—orders divided by total visits—is 3% for shoppers using a traditional PC, it is 4% or 5% for shoppers using tablets, says Sucharita Mulpuru, an analyst at Forrester Research.”

It goes on to share feedback from several retailers that not only do tablet users push the buy button more frequently, their average order size is larger. Many are beginning to rethink user interface design used by mobile device shoppers.

If Amazon can drive store sales with their new Kindle Fire I wonder if there is a cooperative opportunity for retailers and other tablet manufacturers to explore. Looking at Walmart’s 10-year stock performance vs. Amazon (and Apple and Google) they might want to get the WalmartLabs team refocused.

Is advertising the fourth leg of the Amazon chair?

What allows Amazon to offer lower priced Kindles is their ability to subsidize that discount with advertising (bottom of home screen and screen saver, not while reading). This is another piece of infrastructure they’ve been building—like cloud computing—over the last few years. They’ve been selling display and text ads online for some time but it’s the LivingSocial connection that I find interesting.

Local ad sales are notoriously difficult. You have to invest in salesperson coverage at the local level to sell the ads and then follow through by delivering advertising results for your advertisers. The challenge is to keep these two efforts in sync.

The investment in LivingSocial is clearly strategic. Look for even more integration as the installed base of Kindle devices grow.

I would not be surprised if in a few years Amazon will have four broad divisions: retail stores, cloud infrastructure services (AWS), hardware devices and advertising.

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