Today during the company’s Q3 earnings call, Amazon CFO Tom Szkutak predicted record sales of Kindle and Kindle Fire products. He also said that since much of the profit from these products would come from digital purchases by consumers post-sale, the profits would lag behind the sales numbers.
“We’re tying to make sure that it’s something that we think that we can add value to We like categories that have a lot of different SKU’s, that are complicated in a retail environment.”
“Once a customer has purchased a device, what else do they buy? We certainly have some data now that we didn’t have prior to the launch [of the ad-based Kindles]. Once the customer purchases the Kindle and are carrying around this massive selection at their fingertips, they buy more content.”
Device, accessories and content, as well as ad-based revenue are all considered when Amazon is calculating the device’s lifetime revenue.
Amazon expects to have record sales of devices, but the revenue from content and ads would lag behind those profits as the users would be purchasing those afterwards. This is largely why Amazon’s revenue outlook for Q4 was lower than expected at between $16.45-$18.65 billion.
“In the three weeks since launch, orders for e-ink Kindles are double the previous launch,” said CEO Jeff Bezos. “And based on what we’re seeing with Kindle Fire pre-orders, we’re increasing capacity and building millions more than we’d already planned
“It will be very easy to access all of our digital content on Fire,” Szkutak said, adding that physical product would also be ‘easy’ to access. He didn’t specify how these would be made available though and didn’t answer a direct question about whether the Kindle Fire’s Silk browser would feature a direct search mechanism for Amazon’s products but did confirm that it would feature ‘links’ to Amazon.
This type of interface would no doubt assist Amazon in beefing up the trailing sales of a Kindle device, as users begin using them.
Amazon’s profit fell 73% in Q3 amid high investment in hardware and a product transition to the new Kindles. Amazon also reported that sales were up 44% to 10B for the quarter.