Lessons from Amazon Kindle for other tech companies

One of the toughest tasks in the technology industry is jump-starting sales of a platform — a product that requires a lot of third-party content or software. A PC without applications is a doorstop; an iPod without music is just a piece of jewelry. Platforms have a chicken and egg problem: Content won’t be produced until there’s a big installed base of the product, but people won’t buy the product until there’s a lot of content available for it.
We were reminded of this problem when Amazon announced Kindle, its e-book reader. I posted a lot of analysis of the announcement on my personal weblog here; in this article, I’d like to talk about its lessons for the tech industry.
Kindle needs a large library of content in order to be successful. Here’s how some other platforms have tackled that situation:
Macintosh: Induce lust. Apple enticed developers into creating Mac applications through two technolust and money lust. It was possible to create much more innovative software on the early Mac than on MS-DOS, and the desire to create software art drove a lot of early Mac developers. The money lust came from Apple’s crew of evangelists, who persuaded developers that the Mac market was going to explode in size.
Netscape: Give it away free. Netscape (and the other early free browser vendors) made it so simple to add a browser to your computer that many people were willing to try it on a whim. This created a critical mass of browser-equipped PCs, making it worthwhile to create web pages. And the Web took off.
iPod: Rip content from elsewhere. The best source of music for early iTunes and iPod users wasn’t the online store, it was the user’s own stockpile of CDs. iTunes made it easy to create your own library of music from CDs and downloaded MP3 files. This made a critical mass of content available for the early iPods, driving a critical mass of users to the store.
Game consoles: Brute force. Companies making game consoles have traditionally used a brute force approach in which they pay to produce one or more “killer” games that jump-start sales of the platform, creating a market for other game developers. Microsoft’s use of Halo on the Xbox is a great example. A variant of this strategy is making the platform good at one function that drives sales, and then using the critical mass to branch to other functions. A successful example is the mobile phone industry’s addition of texting as a new feature of mobile phones, but this strategy has often failed when the newly added features didn’t fit with the core usage of the platform.
We’re not sure what Amazon’s strategy is to get to critical mass. The company’s decision to use Sprint’s wireless network as the main delivery mechanism for content means that it has to charge for every piece of information delivered to the device, even content that’s otherwise free. So each document sent to the device costs 10 cents, and subscribing to a weblog costs $1-2 per month per weblog. This prevents Sprint from using the Rip strategy.
A Kindle without books doesn’t have much value — you can access Wikipedia and there’s a dictionary built in, but almost no one would pay $400 for that. There are 90,000 “books” available for Kindle, but that figure starts to look sketchy when you realize that short stories are included in the total. Magazines and newspapers might help, but there are only about a dozen of them available so far. Amazon needs more e-books.
Unlike the early Macintosh, there’s no technolust factor driving creation of electronic books. We don’t think Amazon can get a lot of Kindle-only novels written. And at $399, Kindle is definitely not a giveaway product. So that leaves money-lust as the other motivator. To succeed, Amazon probably needs to convince the publishing world that Kindle is destined to sell in mass volumes. That is a high-expense, high-effort strategy.
The lesson: If you’re planning a product that depends on third party development, think very carefully about your strategy to get to critical mass. Creating the product may be the easy part; you have to make sure your company is prepared to follow through. In Amazon’s case, it has chosen a road that’ll require a lot of investment, a lot of patience, and a lot of evangelical savvy. It would be a big challenge for any tech company.