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Here's why Amazon should build another smartphone

  • Amazon's first smartphone, the Fire Phone, was a dud
  • Access to Alexa and other services could make a new one a winner.
  • Amazon just needs to make a few tweaks to its execution, and partner closer with Google.
Amazon.com founder and CEO Jeff Bezos presenting the company's first smartphone, the Fire Phone, in June of 2014 in Seattle, Washington.
Getty Images
Amazon.com founder and CEO Jeff Bezos presenting the company's first smartphone, the Fire Phone, in June of 2014 in Seattle, Washington.

Amazon's first smartphone was a dud, but thanks to advances in Amazon's technology and a boost around its brand, it's time for Amazon to give the market another shot.

First, some history. Back in 2014, Amazon launched a device named the "Amazon Fire Phone." You'd be forgiven if you've already forgotten about it. In fact, the phone sold so poorly Amazon had to take a $170 million write-off on the attempt.

Handout: Amazon Fire Phone 2
Amazon

The phone failed for several reasons, chief of which was the device simply couldn't offer what other products on the market did. It was buggy, had no access to popular Google apps such as Maps, Gmail and more (even though it was built on Android) and didn't have any "must-have" features. The Fire Phone was also exclusive to AT&T and, before Amazon quickly dropped the price of the device, was too expensive if purchased without a carrier contract.

Handout: Amazon Fire Phone

At the time, it felt weird to see Amazon enter the smartphone market. It just wasn't a brand anyone really thought could change the smartphone market, and it was pretty clear the company was doing little more than testing the waters. Amazon, at least in my eyes at the time, was a relatively boring company that sold tablets and e-readers but wasn't really good at other hardware.

Then Amazon started to introduce and sell products that people began to love. Devices like the Amazon Echo and Echo Dot, which allow us to play music and control parts of our home, seem to be cherished by everyone who owns one. Folks love other products like the Amazon Fire TV Stick, too, which is cheap and provides access to Amazon's store, Alexa and streaming content for free with a Prime subscription.

CNBC Tech: Echo call
Todd Haselton | CNBC

These devices helped Amazon establish itself not only as an online retailer, but as a maker of creative and useful hardware. Alexa, Amazon's smart AI assistant that powers some of those devices, is becoming smarter and more useful than ever.

Alexa should be the heart of Amazon's new smartphone

The smart assistants on our smartphones are going to become more and more important. They already tell us when we should leave for work to avoid traffic, alert us to our next meeting and remind us to buy flowers for Mother's Day. They're only getting smarter.

The good news for Amazon is that Alexa is one of the best personal assistants out there.

CNBC: Huawei Alexa featured
Todd Haselton | CNBC
CNBC: Huawei Alexa featured

Now that Alexa has matured, Amazon has AI that could make its smartphone truly great. Alexa has thousands of abilities and can be used for much more than competitors such as Siri and Cortana, and is arguably only matched by Google Assistant.

I can use Alexa to order paper towels, play music and check a sports score. And, thanks to a new feature rolled out last week, I can even use Alexa to place make phone calls and send free messages. Within just a few years, if not sooner, I think Alexa will know more about me than I do, and only Google seems like it's going to be able to predict more than ever. Amazon should seize the opportunity to get Alexa in as many hands as possible.

Alexa isn't enough to build a winning smartphone, however.

But Amazon can't rely on Alexa alone to build a great smartphone.

Amazon will also need to change its game plan and license Google's full suite of products, something it didn't do last time. That means out-of-the-box access to Google's app store, Gmail, Chrome, Maps and more. It should also offer some of the same incentives it did when it launched the first Fire Phone, like free Amazon Prime for a year.

Mike George, VP Alexa, Echo and Appstore for Amazon, speaks during the LG press conference at CES in Las Vegas, January 4, 2017
Rick Wilking | Reuters
Mike George, VP Alexa, Echo and Appstore for Amazon, speaks during the LG press conference at CES in Las Vegas, January 4, 2017

Amazon could cut the cost of its smartphone, too, and sell an unlocked device that could be purchased direct on its store and that would work across U.S. and international carriers.

Manufacturers like Motorola, Huawei, Alcatel and others all build good smartphones that can cost under $300. Anything more, and I think Amazon risks competing too closely with big hitters like Samsung and Apple.

Yes, you can get Amazon's apps and services on other smartphone platforms, but a single device built around Amazon's services and Alexa, one that could provide on-demand voice access to the smart assistant, unlimited access to Amazon's music and video services, and with a low up-front cost, would be very appealing.

Let's recap

Let's take a look back at the key takeaways that Amazon needs if it wants a more successful launch:

  • Alexa needs to be the heart of the smartphone.
  • Amazon needs to license Google's services, such as Gmail and Maps. Access to the Google Play App store will allow customers to do more with their phones.
  • Amazon should offer a free year of Prime with each service, which it did originally.
  • The phone needs to cost much less than the original, and shouldn't be exclusive to a wireless carrier.

CEO Jeff Bezos has suggested there will be iterations of the device, so let's see one.