In his appearance yesterday on 60 Minutes, Amazon CEO Jeff Bezos acknowledged that the company sells its Kindle Fire tablets at cost.
Instead of squeezing a margin from its hardware sales, Amazon generates revenue from Kindle Fire users in other ways. It encourages them to download from Amazon's vast digital library of apps and media, view ads, and access related services like e-commerce.
In a new report from BI Intelligence, we dig into available data on Amazon's unique mobile strategy. Amazon has achieved respectable results in terms of app downloads and app revenue on Kindle Fires, and yet is often left out of mobile platform analyses that focus on Apple, Google, and Microsoft.
Here are some of the key numbers behind Amazon's Kindle Fire ecosystem:
The Kindle has not managed to achieve real scale globally: The Kindle line, including e-readers, took only a 2% share of global tablet shipments in the third quarter of this year, according to BI Intelligence estimates. That share will bounce back in the fourth quarter, since Kindle sales are strongly influenced by holiday gift-giving. However, due to competition from low-priced Android tablets, Kindle isn't likely to be more than a slice of the tablet market.
The Amazon Appstore is also generating strong revenue results. Popular Kindle Fire apps are generating 59 cents of revenue for every dollar earned by top apps in the Google Play store, according to a Distimo study. Download volumes are about half those on Google Play for top app titles — impressive considering how many more Android devices are in circulation.