The Macalope Daily: Business model misunderstanding


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There are not many truths the Macalope holds to be sacred, dear readers, but he has heard it said that if you were to put the articles written on Forbes’s website end-to-end, you could walk across this great nation of ours touching nothing but stupid.

And he sees no reason to doubt this.

Today on our journey across America, we will step on Pascal-Emmanuel Gobry’s “Apple And Amazon Earnings Show Once Again Jeff Bezos Is Steve Jobs’ True Heir” (no link, blah blah).

Yesterday Amazon and Apple reported earnings at the same time, which made it even easier to contrast these two outstanding companies, especially now that they compete directly.

Ah! So, naturally, the contrast is between Apple, which reported “revenue of $36 billion and net profit of $8.2 billion—its ‘highest September revenue and earnings ever,’” and Amazon, which reported a loss of $274 million.

No, according to Gobry’s analysis, the big contrast is between iPad sales, which were down from the prior quarter but still up 26 percent from last year, and his made-up assumption that Amazon’s loss must be driven by huge Kindle Fire sales, which he says Amazon sells at a loss. Amazon, of course, does not report Kindle Fire sales numbers, so Gobry is pulling this from places that things should not be pulled.

If you put that next to Apple’s lower iPad numbers, it suggests that the Kindle Fire is eating into iPad sales in a significant way.

Because there are no other factors that could possibly explain this! Just think of how well Amazon would be doing if its losses were even larger!

Gobry goes from this unvalidated assumption to ALL HAIL THE IPAD-KILLING KINDLE FIRE in 3.5 seconds.

The Kindle Fire is not a success because it imitates the iPad. The Kindle Fire is a success because of the ways it doesn’t imitate the iPad: different form factor, different pricing and business model, and its own content and apps ecosystem.

Now, the Macalope suspects the Kindle Fire is selling at least fairly well, but that’s total supposition on his part, based on nothing more than anecdotal evidence. At least the horny one has actually seen people using them, unlike pretty much every Android-based tablet that came before it. But to blame a quarter-over-quarter drop in iPad sales on the Fire, the updated version of which wasn’t even announced until the third month of the quarter, is magic candy thinking.

It’s still early days. But my lesson of those earnings is that Amazon is crushing it in the tablet market, and it’s got Apple playing defense.

All because Amazon reported a loss.

Gobry doesn’t address the obvious flaw in his lauding of Jeff Bezos if this is true. If Amazon’s big loss is due to selling a ton of Kindle Fires, shouldn’t that loss have been offset by the company selling lots of content? That is, after all, the whole idea behind selling the Fire so cheaply. If handle sales are so good, how come people aren’t buying razor blades?


[Editors’ Note: In addition to being a mythical beast, the Macalope is not an employee of Macworld. As a result, the Macalope is always free to criticize any media organization. Even ours.]

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