Is Amazon finally understanding the value of ecosystem?

Written by on April 26, 2016 in Guest Blog with 0 Comments
REUTERS/Abhishek N. Chinnappa

REUTERS/Abhishek N. Chinnappa

Signs of progress at last.

Amazon is finally showing some early signs that it is beginning to understand the value that creating an ecosystem could bring to its bottom line.

Amazon’s has made some changes to its Amazon Prime as well as to its Twitch website which point to expanding coverage of Digital Life as well as understanding the importance of user numbers.

These changes are:

  • First. Amazon has added some new service levels to Amazon Prime.
    • In addition to the $99 per year tariff, there is now a $10.99 monthly that can be cancelled with one month’s notice and an $8.99 video only tariff.
    • This brings Amazon more into line with Netflix and Hulu but I hope that there is more to this tariff than just meeting these two.
  • Second. Amazon’s gaming video website, Twitch, is moving away from being just a place to upload video like YouTube and becoming more like a social network.
    • Twitch already had the facility for private messaging but with its new friend function, it is beginning to look more like Facebook than YouTube.
    • These changes could start to meaningfully improve the appeal of Amazon to users who are not hard-core gamers or shoppers but there is still a very long way to go.
  • To date Radio Free Mobile (RFM) has been of the opinion that Amazon has not had any real understanding of the ecosystem as it was making no real effort to make its ecosystem larger.
  • RFM research indicates that 100m users are needed for an ecosystem to hit critical mass but 300m are needed for real money to be made.
  • I think that any ecosystem that Amazon creates will be based upon Amazon Prime and to date, I believe that the requirement to take the free shipping option has been a hindrance to take-up.
  • Consequently, Amazon still has less than 50m users which I think needs to be massively expanded for Amazon to make the most of the digital assets that it has assembled.
  • A lower price point to enter the ecosystem is required as well as greater coverage of Digital Life and much greater cohesion between the assets and services that it owns.
  • The new Amazon Prime tariff is a step in the right direction but it needs to become even cheaper, or even free, for Amazon to really see the take up it needs.
  • I’m not about to forecast that Amazon will now become a thriving and vibrant ecosystem but importantly there are now signs that Amazon has understood what is required and that more changes and upgrades are to come.
  • I would also like to see Amazon integrate all of its properties together such that it can really understand its users as well as offer a more seamless and delightful user experience.
  • That combined with a much lower barrier to entry is what will drive user uptake and turn Amazon from a dabbler into a proper practitioner.
  • I continue to struggle with Amazon’s valuation as owners are already paying for profits which are not being made.
  • Consequently, I still prefer Samsung, Microsoft, Apple or even Alphabet compared to Amazon.

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Richard Windsor

About the Author

About the Author: Dr Richard Windsor is the founder of Radio Free Mobile which is an independent research provider. The research helps clients to understand and evaluate the players in the digital ecosystem and presents a unique perspective on how all the pieces fit together in an easy to read and digest way. The product is available on a subscription basis and counts members of the handset, telecom carrier, Internet, semiconductor and financial industries as its subscribers. RFM is the land of the one man band meaning that Dr. W. also makes the tea. .

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