Amazon Subsidizing Android Phones for Prime is a Blueprint for Other Hardware Products

Amazon subsidized smartphones

Amazon announced today that the company will start offering subsidized smartphones to Prime subscribers. Smartphones will have ads on the lock screen and, more importantly, will have Amazon apps pre-installed.

The Verge:

Right now the deal only applies to two smartphones — the new Motorola Moto G and the BLU R1 HD — neither of which is available yet in the US, but are expected to ship on July 12th. The lock screen ads are not dissimilar from the ads that appear on Amazon’s Kindle e-readers and Kindle Fire tablets with “special offers,” as Amazon calls them.

But it’s the first time that Amazon has subsidized non-Amazon devices with its special offers ad platform, and it underscores Amazon’s commitment to selling its services — even if it means showing up in potentially obtrusive ways on inexpensive or commodity hardware. (Amazon didn’t show ads on its own Fire Phone, which was almost unanimously deemed a flop.) (…)

As with on Kindle and Kindle Fire tablets, the ads will appear on the lock screen of the smartphone. But they’ll also appear below notifications that pop up on your lock screen. So, if you get a Gmail or Facebook notification, an ad will show up below that.

These aren’t just Amazon ads driving you to buy more Kindle books; ads from other marketers will appear as well.

I don’t think this is the manifestation of the rumor we discussed back in January about Amazon negotiating with smartphone OEMs with regards to pre-installed services at factory level. Back then I wrote about a possible route:

An always-on Alexa voice interface, integrated at factory level -maybe with a dedicated separate microphone-, could provide differentiation for partnering OEMs and might be allowed by Google’s contracts (by not being actively forbidden). (I have not seen current versions of those contracts. The ones I have seen –some leaked to the public years ago– don’t forbid this.) Amazon could also help with distribution and create attractive bundles, for prime subscribers for example. (There are rumors Amazon Prime might be part of this new initiative. I would be surprised if it weren’t.)

One other aspect that speaks for Amazon as a partner: Android OEMs are starved for profits. At this point most of them will try anything.

The Verge is right here, this is blueprint for other product categories as well:

The subsidized hardware also hints at what Amazon’s future strategy may be in verticals where it has not established its own hardware footprint, like phones. This initial launch feels like something of an experiment, but it’s possible Amazon could strike similar deals with other hardware manufacturers whose products it sells on its site.

But still, this is not yet a significant increase of Amazon’s mobile footprint. After all, Prime subscribers most likely are already using Amazon’s mobile apps anyway.

From the press release:

The BLU R1 HD and Moto G feature Android 6.0 Marshmallow with Google Mobile Services, including Google Maps, Gmail, YouTube, and Google Play. A single sign-on experience provides Prime members easy access to their Prime benefits through the most popular Amazon apps, including tens of thousands of movies and TV episodes with Prime Video, over one million songs and playlists with Prime Music, unlimited photo storage and backup with Prime Photos, one free pre-released book a month with Kindle First, FREE two-day shipping on millions of items, and more. Customers also get access to thousands of apps, games and in-app items that are 100% free with Amazon Underground, and can shop a personalized selection of Amazon’s daily deals right from a new home screen widget.

With the integration of Amazon Underground,1 this might be another stepping stone towards an established mobile app platform. Something Amazon needs to get any further with the company’s own tablets and maybe smartphones again some time in the future.

More on this topic:

  1. Curious side note: As far as I know, Google’s Android contracts forbid a second pre-installed app store next to Google Play. Amazon Underground should not be allowed to be pre-installed. What is going on here? 

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  1. […] Amazon Subsidizing Android Phones for Prime is a Blueprint for Other Hardware Products […]


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