Amazon’s strategy is more like China’s or an aggressive program of quantitative easing. By printing money and putting it in the hands of Kindle Fire owners, Amazon will increase the demand for Kindle Fire content. More importantly, because Kindle Fire developers will expect higher future demand, they’ll have an incentive to invest in creating things for people to buy. It’s a developer subsidy, but with several advantages over Microsoft’s approach. For starters, since the subsidy directly passes through customers’ hands rather than being hidden from them, it builds goodwill and brand loyalty. More importantly, it avoids the problems with Microsoft’s central planning. The basis of competition is still who can make the apps people want to buy not who can talk executives into writing a subsidy check.
Crucially, this means the opportunity is there for independent developers and new startups. All we know is that by printing coins and showering them on the user base, Amazon will increase the volume of sales. That spurs effort by developers across the board, which should make the broader ecosystem more attractive to customers.
And where does the money come from? Let’s go back to those bonds. Amazon’s three-, five-, and 10-year bonds pay interest rates of 0.65, 1.2, and 2.5 percent respectively. That’s nothing. In fact, in inflation-adjusted terms, the three- and five-year bonds literally pay less than nothing. Apple is earning huge profits, then stacking the money up in a vault where its short-term securities earn less than inflation in today’s low-interest environment. Amazon, by contrast, is taking advantage of those low rates to skate by on razor-thin margins and even take on debt to strengthen its ecosystem. It’s a great strategy that other companies—and for that matter national governments—could learn a lot from.
- More Here
Crucially, this means the opportunity is there for independent developers and new startups. All we know is that by printing coins and showering them on the user base, Amazon will increase the volume of sales. That spurs effort by developers across the board, which should make the broader ecosystem more attractive to customers.
And where does the money come from? Let’s go back to those bonds. Amazon’s three-, five-, and 10-year bonds pay interest rates of 0.65, 1.2, and 2.5 percent respectively. That’s nothing. In fact, in inflation-adjusted terms, the three- and five-year bonds literally pay less than nothing. Apple is earning huge profits, then stacking the money up in a vault where its short-term securities earn less than inflation in today’s low-interest environment. Amazon, by contrast, is taking advantage of those low rates to skate by on razor-thin margins and even take on debt to strengthen its ecosystem. It’s a great strategy that other companies—and for that matter national governments—could learn a lot from.
- More Here
No comments:
Post a Comment