Putting a Match to Amazon's Kindle


I gotta be honest with you: from the moment I first saw Amazon's Kindle electronic book reader, I thought, "Oh wow, here's a product searching for a market, rather than an innovation addressing an unmet market need."

In my own mind, I gave the device little chance of success. I got a chance to play with an early version of Kindle as well, and while the display was nice, it still seemed a little clunky, and I still thought this thing was a flash in the pan. Not to mention what expertise Amazon could bring to the party as an internet pioneer trying to hawk a piece of hardware. I mean, look at the problems Microsoft had trying to sell its Xbox and Xbox 360.

A questionable product from a company with no experience selling anything other than itself. This was not a recipe for success.

Flash forward to today as Citigroup doubles its Kindle sales projections, from 190,000 to a whopping 380,000 units this year. If that number holds, it would mean better sales for Amazon than Apple enjoyed during its first year of iPod sales. And, well, look what happened to that!

I'm not suggesting that Kindle could approach, or even rival, the 200 million iPods that Apple has sold since them, but what if it could? Think of the possibilities. Investors certainly are, pushing Amazon shares to a seven month high, and digesting the report from Citi's Mark Mahaney who has been a kind of "reserved" bull when it comes to Amazon. I say reserved because when I talk to him, it's not a slam dunk that Amazon is the be-all, end-all net stock. There are always caveats and what-ifs. If the company executes. If sales growth and margin expansion continue. If eBay continues to sputter. If Kindle ever catches fire. If, if, if.

Well, he's taking that last big "if" out of the equation with his call on Kindle today. He writes that "Kindle is becoming the iPod of the book world...Kindle could be one of the top 'gadget' gifts this holiday season."

I had the chance to chit-chat with Amazon chief Jeff Bezos at the "D: All Things Digital" conference in Carlsbad a couple of months ago. I asked him to walk me through its finer points, and aside from his enthusiasm about the machine being so infectious, I began to see some possibilities. Electronically downloaded newspapers and magazines; the ultimate "student store" for college and high school students tired of lugging around 30-pound backpacks full of textbooks.

I can easily understand the allure of an iPod and 10,000 songs and videos at my finger tips, especially when I travel. But I couldn't necessarily grasp the need for having my entire library of books along for the trip as well. I guess the digital consumer is all about choice, and why not have the same choice of books, magazines, periodicals and everything else that you might have with music and videos?

Citigroup suggests that Kindle and related sales may reach $1 billion by 2010, or about 4 percent of Amazon's estimated revenue. That's up nicely from the original $400 million to $700 million range.

I go back to that demo with Bezos. He saw enormous potential in this device, not just for Amazon, but consumers and the company's investors. It appears Citigroup now sees that potential as well. I got it with iPod. It's a tougher sell with Kindle. But I'm coming around. Slowly.

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