By David McQueen

Using its trusted brand plus growing content and ecosystem, Amazon has just created new e-reader segments whilst dramatically dropping their prices to make way for a fully-fledged touchscreen tablet device, the Kindle Fire. With a 7” screen the Fire is smaller than the iPad and is driven by the Gingerbread Android OS.

It is distinct from the Apple iPad in that the device is all about the personal cloud as synching and downloading is carried out wirelessly using free cloud storage. To iterate the importance of the cloud the company also announced a new browser technology, Amazon Silk, that has the ability to ‘predict’ what users are likely to click next and then start downloading the content.

At $199, the Fire is sure to be a highly disruptive product in the tablet market, particularly in the lead up to Xmas, and not only with other tablet manufacturers but also those that have yet to embrace cloud services. It is arguably the use of the cloud that could be the real game-changer in the tablet market although the Fire is going to put a lot of competitive pressure on both the Nook (from Barnes & Noble) and other tablet manufacturers in the 7” space.

The Fire is quite clearly a consumption device and will support side loaded Android apps. It will ship with 8GB of memory with no announced products to be launched with varying memory capacity. However, there was no announcement about inclusion of cameras in the device or 3G connectivity so it appears to be a straightforward business model. However, I’d expect further iterations and product differentiation to follow if the Fire proves successful, including a 3G version. And when will we see an Amazon smartphone?

Amazon will finally prove to the world that size doesn’t matter but value for money does, which will be a big lesson for RIM with its Playbook and for other players who have already tried to launch tablets with 7" or less. I believe this launch will mark the second phase of the market development for tablets, where product differentiation, brand competition, and price elasticity will be the main drivers.

About the author

David McQueen is principal analyst at Informa Telecoms & Media.

http://blogs.informatandm.com/authors/david-mcqueen/