Chat With Austin Carr About His February Feature: The Real Story Behind Jeff Bezos's Fire Phone Debacle And What It Means For Amazon's Future
Join Austin Carr and Noah Robischon as they discuss the real story behind Jeff Bezos's Fire phone debacle--and what it means for Amazon's future. This event will begin at 1 p.m. ET on Tuesday, January 13th, but you can start submitting your questions now!
In June, after roughly four years of development, Amazon CEO Jeff Bezos unveiled the Fire Phone, arguably the most high-profile product launch in his company’s history. Bezos had personally overseen the intense effort, and on stage at an Amazon event, he heralded the device’s industrial design and novel 3-D Dynamic Perspective features.
But despite the hype and anticipation, Amazon’s phone became one of the biggest flops of 2014, after customers and critics widely panned the product. The Fire Phone’s price has since been cut to just 99 cents (with contract), and Amazon has taken a $170 million write-down largely related to unsold inventory.
The blunder shines a light not just on Amazon’s ups and downs in the consumer electronics space, but also on its struggles to unearth its next gusher of revenue as the growth of its retail business finally begins to slow. The secretive R&D group behind the phone, Amazon’s Lab126, has launched a slew of promising products—Fire TV, Echo, Dash—in addition to its popular Kindle line of tablets and e-readers.
Read The Feature Now: "The Real Story Behind Jeff Bezos's Fire Phone Debacle And What It Means For Amazon's Future"
Join Austin Carr and Noah Robischon at 1 p.m. ET today for a discussion on what’s next for Amazon as it drives more and more into competition with Apple and Google. Have any questions or comments? Start submitting them now!
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Today I'm talking with senior writer Austin Carr about his February cover story. Get ready for some all caps: THE REAL STORY BEHIND JEFF BEZOS'S FIRE PHONE DEBACLE AND WHAT IT MEANS FOR AMAZON'S FUTURE.
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When we published this story last week it blew up our charts, there was a ton of interest in the piece because he got inside and told the real story of what happened in the making of that phone. And that's where I want to start. Austin: How badly did the Fire Phone flop?
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Oof, where do I begin! It flopped bad. According to my sources, the Fire Phone sold just in the tens of thousands of units in the weeks following its release. Interesting aside: As the phone launched, employees were super eager to see what the sales figures were, so they started watching ancillary data: browser usage, FireFly usage, etc. The numbers, as one source told me, were "pathetic, just embarrassing."
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Worse, as they saw activations rise, employees had to remind themselves that total included the number of activations at every AT&T store across the country, meaning the numbers were even worse than they were seeing.
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Why did Jeff Bezos want to make a phone in the first place? Amazon had plenty of other products on the market, why go up against the iPhone?
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Well, as we point out in our feature, there are solid reasons for Amazon to want to control some aspect of the hardware -- they usually boil down to not wanting to be so beholden to Google and Apple (e.g. the reason you aren't able to buy e-books through the Kindle store is because Apple would take a 30% cut of sales).
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But I think a more interesting point is why Bezos wanted a high-end phone! There are many many theories on this front, but the high-level consensus I got, as we said in our story, was that the Fire Phone represented a "repositioning of the brand away from being so utilitarian and toward becoming more of a lifestyle brand like Apple"
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Arguably, there were also very practical reasons to lead with a higher-end phone, too. From what I've heard, with tablets, Amazon started with low-end devices, and have since tried to transition into higher-end devices, but it was a more difficult transition. If Amazon started with an expensive phone, it’d be easier to make transition to selling cheaper phone, from a branding perspective, rather than vice versa.
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Amazon actually had white papers on this, apparently.
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Bezos is legendary for undercutting the competition, mainly on pricing. But with this phone he tries to compete at the top end of the market. What was the plan for making this work? Better features? More apps?
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Yes, I think it really came down to creating a device that could compete directly against Apple's iPhone and higher-end Samsung devices. And to do so, the company not only had to differentiate hardware but also the software, which led to its Dynamic Perspective 3-D features, as well as FireFly, a sort of Shazam for products, which wasn't originally intended for the phone but found its way there nevertheless.
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I've been told that Jeff was just totally enamored by the potential of 3-D. So much that, as one source told me, he wanted the 3-D features more than anything — the phone was just a vehicle to deliver them to the customer.
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Here's a good example of Dynamic Perspective in action, if you haven't seen it before.
by Noah Robischon via Instagram 1/13/2015 6:16:34 PM -
I love that video. Bezos jumps through hoops to describe what would make Dynamic Perspective interesting. The truth was, though, few employees inside the company could imagine any applications that would make the feature worth the cost, beyond flashy 3-D lock screens (shown below).
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Tell us about the group within Amazon tasked with building the phone, Lab126.
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Lab126 is a fascinating operation: It was actually started in Silicon Valley as a subsidiary of Amazon for tax purposes. The group was originally tasked with building the Kindle (which it did so with outside design firm Pentagram), and it would go on to release a slew of fascinating projects over the years. Each one of these so-called "science experiments" is labeled a letter of the alphabet: Project A, B, C, etc. Project B was the Fire Phone. Project D was Echo, and so on.
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The group was just around 100 employees 4-5 years ago, but it has since blown up to roughly 3,000 employees, focused on hardware and software in Sunnyvale, Cupertino, and more locations.
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Was Bezos aware that everyone on the design team thought his championing Dynamic Perspective was a mistake? His reaction?
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Thanks for the question, Gregg, you've asked some great ones already and we'll hopefully have time to answer them all.
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The dissatisfaction with Dynamic Perspective was something that Bezos became aware of over time, definitely. In the beginning, the company struggled to create a working prototype. In fact, the original demo was just a Nexus phone/tablet with a handful of traditional webcams attached at each corner. Apparently when they were testing it in the early days, some even got motion sickness from the tests, so it was always clear there would be difficulties with the program.
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But Bezos is never one to let his teams off easy. He drove them hard on the feature, and turnover was super high -- leaders were fired on the project when they failed to deliver.
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From what sources told me, though, as the company was transitioning from its first iteration (codename "Tyto") to second ("Duke"), many employees were hoping they’d drop Dynamic Perspective from the road map, because it was causing so much trouble and delaying the project so much. But Jeff apparently told employees that he’d rather cancel the phone project altogether rather than remove its 3-D software elements.
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Some of the people on the Lab126 team have years of experience in ID and product development. Why did the designers there go with that Dynamic Perspective feature instead of pushing back harder on Bezos?
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Interestingly enough, some say Bezos' choice to pursue Dynamic Perspective came down to a design decision. As phone devices continue to get larger and larger -- just look at the iPhone 6 and iPhone 6 Plus -- one challenge is how to operate them if they don't fit in our hands. I use an iPhone 6, and many times I need to really reach my fingers over to click something or use a second hand.
Bezos knew this was going to be a challenge going forward, especially with tablets and different form factors. But when Dynamic Perspective, which uses very innovation head-tracking technology, there is a huge amount of opportunity for hands-free interactions. -
For example, if you are using the Fire Phone while reading a news article, when you look down, the article will scroll automatically.
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This isn't perfect -- and the market has clearly indicated it's not that appealing -- but I think there is some potential to create some unique UXs with Dynamic Perspective.
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When the phone was "done" was it provided to a broad base of users to see if they liked it? If so, how was it received?
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Issue is, sources also told me that roughly 90% of the Dynamic Perspective features can be accomplished with just the gyroscope. That is, if you want to scroll a news article without using your hands, you can just tilt the phone down, and it'll do the same thing as if you moved your gaze down.
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Thanks again, Gregg. They did do a lot of user testing, especially with Dynamic Perspective, since there was so much potential for it going wrong. Perhaps unsurprisingly, from what I heard, it was actually super well-received. But perhaps that's the problem with such a novel, gimmicky feature: Obviously when you see it the first time, it's pretty cool -- it has that "wow" factor -- but by the 10th time, what's the point?
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Do you think Amazon will end up scrapping all of their mobile plans as a result of the Fire flop? Or do you think that obtaining mobile market share is imperative to Amazon ever becoming the company that Google fears it could become?
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Good question, Andrew. I think the answer is no: The company has invested too much, and many of their mobile efforts (like the Kindle) have been successful. They cannot give up on this market. And Bezos has said publicly that he'd pursue more iterations of the Fire Phone. I think it will really come down to what Amazon does after the Fire Phone that will affect there plans going forward. Will it be a low-cost phone? A different form factor?
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Interestingly enough, there were actually a lot of really awesome features -- rumored or otherwise -- that I heard about during the process of my reporting. For example, many had hoped Amazon would take over the carrier relationship and remove the hassle of working with AT&T. Imagine if you could just seamlessly pay for your phone bill through Prime? Imagine if there were no longer needs for contracts?
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If you're just joining us, we're getting the back story about our February cover story, you can read it here.
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One source told me Amazon was working on a feature that would always have a complete back-up of your phone, ready for order. So, say, you broke your phone or dropped it in the Hudson River, you could just go online on Amazon, and a perfect replacement would arrive the next day. How awesome would that be!
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Amazon seems to be in a bajillion businesses these days. Just today they announced another original TV series, this one directed by Woody Allen. Meanwhile, they are also selling a line of environmentally friendly diapers. What does Amazon gain by stretching into all of these different areas?
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That is the million-dollar question, and the truth is, I don't have a good answer for you. Often, these businesses mesh well with each other, and many times they end up competing with each other. It might seem like the long-term aim is to get more customers signing up for Prime, but it's a super expensive way of doing it -- to make original content, and phones, and so on. Ben Thompson has an excellent post on these challenges -- he calls this strategy “double bank shot.”
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Here's a great Ben Thompson blog post about it:
stratechery.com -
Amazon has never been profitable, yet investors continued to support Bezos's vision. Why are investors hammering the stock since the #FireFlop?
