Former WSJ reporter Amir Efrati reports Amazon plans to launch a smartphone that will be available for free, even to people who don't sign up for a wireless plan. Exact details about the phone and how Amazon plans to monetize this product are unknown, but it appears the goal is to grab meaningful marketshare in the smartphone market in order to be able to push its digital distribution and advertising platforms.
Amazon's free smartphone has reportedly been in development for at least two years. One of the reasons why it's taking so long is because Amazon struggled to find manufacturing partners that haven't committed to only making Google-approved Android devices. The online shopping giant wants to power its phones by a forked version of Android that doesn't preload any Google apps, but Google has signed agreements with numerous smartphone OEMs in China and elsewhere that forbid this.
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 — by steering device owners to shop for goods through Amazon.com and to purchase digital media and apps through its app store. It also sells digital ads and could show them to device owners, something it already does on the lowest-priced model of the Kindle Fire tablet.
Amazon’s smartphone strategy would be similar but perhaps more extreme than the one it used when it entered the tablet market in 2011. However, it’s difficult to determine whether to call the Kindle Fire, which is priced as much as $200 less than some iPads, a success. Some research firms say the Kindle Fire represents double-digit percent of U.S. tablet sales but it doesn’t appear to have slowed down rivals. It has far fewer apps that Google’s Play store and Apple’s App Store. It’s also difficult to determine how much it has juiced Amazon’s sales of digital books and movies and other online goods.