Amazon May Be Giving Out Free Cell Phones

amazon_logoInternet retail giant Amazon is considering introducing its long-planned smartphone for free to consumers, reports Amir Efrati and Jessica E. Lessin. The device is rumored to be offered free even if users do not sign up for a wireless plan.

Why would Amazon absorb the hardware costs? Its a gambit to generate revenues, even profits, from content, advertising, and e-commerce. Its also a gambit that is fairly risky. The Seattle behemoth has to tread lightly – cell phones are something users keep with them almost constantly – if advertising gets intrusive, people may just buy a different phone, to be ad-free.

Privacy is also a likely concern. Typically, consumers do not think highly of free things (which is among the reasons why we have to pay the daily dollar fifty for our newspapers, for example), and building emotional equity may also be a challenge.

How will a new late-blooming entrant fare? The cell phone market may still have room for players in the higher-end and the lower-end of the price spectrum; people are moving from plain vanilla cell phones to feature-rich smartphones, people are also refreshing their phones faster.

On the other hand, BlackBerry is dying a slow and painful death, and Nokia’s device business just got acquired by Microsoft. Other than Samsung, Android on smartphones is not making companies rich. A player like Amazon may have a hard time gathering market share, and offering free phones may be one way to go about throttling the competition.


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