Pando

Amazon's going to invest $55M in its hardware division. Now it just needs to take hardware more seriously

By Nathaniel Mott , written on September 24, 2014

From The News Desk

Amazon's hardware ambitions are about to become a lot more serious.

Reuters reports that the company plans to invest $55 million over the next five years in its Lab126 division, which made the Kindle and is responsible for Amazon's hardware projects. This will allow the division to focus on new products such as wearable devices and so-called Internet of Things hardware that would allow people to buy goods with the press of a button.

Amazon hasn't made any secret of its increasing interest in hardware. Just this year it released a set-top box called the Amazon FireTV, refreshed its Kindle e-reader line, made its debut in the smartphone market with the Fire Phone, and updated its tablet offerings with low-cost options. It's also testing a handheld device that will allow consumers to buy groceries from its storefront.

Some of those products make sense. It's hard to justify the purchase of an e-reader that doesn't have access to the Kindle Store, and the FireTV brings Amazon's digital content offerings to the forefront instead of burying them inside another company's product. Dash, the grocery-focused product, also seems like a no-brainer for anyone who wants to avoid traditional grocery stores.

Other products, especially the Fire Phone, aren't as appealing. Consumers don't necessarily want a smartphone dedicated to making it easier to buy things, and it shows: the Guardian reported in August that Amazon is unlikely to have sold more than 35,000 Fire Phone units. Would a smartwatch, or what I'm hoping Amazon won't call Fire Glasses, fare any better?

That depends on Amazon's willingness to abandon its main goal -- selling things to people through devices that it makes little or no profits on -- to focus on the hardware itself. The company is capable of producing good products; the Kindle e-readers are fantastic, and if I didn't have a PlayStation 4 I'd probably choose FireTV over any of its popular competitors.

The problem is that buying something just to make it easier to buy other things doesn't make much sense, even if it seems like the natural end to the industrial complex's relentless capitalism. People want to use their phones to play games and communicate with friends; they don't always want to have the option of adding whatever's in front of their phone to their Amazon shopping cart.

Put another way, Amazon needs to give people a reason to buy its hardware products, and that reason can't be limited to "it's really good at scanning barcodes" or "it automatically adds things to your shopping cart -- with free Prime shipping!" or the products are never going to catch on. Given this new $55 million investment, it would be foolish to allow such consumer apathy to continue.

[illustration by Brad Jonas]