amazon-fire-phoneYesterday, as expected, Amazon (Nasdaq: AMZN) founder and CEO Jeff Bezos introduced the Amazon Fire phone to the world.

Many focused on the device’s first-of-a-kind 3D display as the most exciting part of the Amazon Fire phone.

I think the phone’s Firefly feature is much more important, as it has the potential to make Amazon some serious money. The feature is essentially an audio/visual recognition tool that connects your real world to the digital world.

Use Firefly to snap a photo of your favorite candy bar and you’ll instantly be taken to more information about that product … as well as a link to buy it on Amazon or through one of Amazon’s partners. Use Firefly to figure out what song you’re listening to … as well as buy it in the Amazon Music store.

Firefly makes your phone a convenient tool for impulse-shopping, Amazon’s best effort to eliminate all the obstacles between a consumer and a transaction.

Firefly and the 3D display are cool but it’s one other feature that makes the Amazon Fire phone a revolutionary device.

Prime Ecosystem

The buzzword in technology right now is “ecosystem.” Apple’s (Nasdaq: AAPL) famed ecosystem makes it easy to sync information and move between your Macbook, iPad and iPhone. You can easily buy apps for any of these devices through the App Store and the content you purchase in the iTunes Store is conveniently accessible across your Apple devices.

The real power of Apple’s ecosystem is that it is so difficult to leave and, as a result, encourages repeat business and customer loyalty.

Amazon clearly understands the power of the ecosystem. It demonstrates this with the way it is building out its Prime offering.

I still remember when Amazon first launched Prime as an unlimited 2-day shipping membership. The annual membership of $79 probably seemed like a lot for all but the most die-hard of Amazon customers.

Soon after, Amazon added Prime Instant Video, unlimited streaming of a small-but-meaningful library of videos. Suddenly the now-$99 Prime membership seems to have a lot more value.

Last week Amazon added Prime Music, unlimited streaming of a small-but-meaningful library of music and yesterday it announced unlimited Amazon Cloud Drive storage for photos taken with an Amazon Fire phone.

For $99 a year – roughly $8.25 per month – Amazon Prime members get unlimited access to 2-day shipping, video streaming and music streaming. I’m a Prime member and I can tell you that it’s a sweet deal.

But it’s Amazon that gets the “sweet deal” out of the Prime relationship.

As it turns out, Amazon Prime members greatly outspend other Amazon customers.

amazon-fire-phone

Source: Statista

While Amazon doesn’t release any data regarding Prime membership, the story Amazon tells suggests that, not only do Prime members shop more than others, they also renew their Prime membership.

The Prime ecosystem keeps them coming back. And I think I know why.

As an Amazon Prime member I know that I can have anything I need arrive at my house in two days. Just two days ago I needed a cord to connect my Macbook to my projector. I could’ve driven to the local Apple store and bought it that day but instead I found it on Amazon for 30% cheaper. It’ll be here today.

The unlimited video streaming is just icing on the cake. I might not always find exactly what I’m looking for in the somewhat limited library but I’ll always find something I like. The same goes for Amazon Music.

For Amazon the ecosystem isn’t about getting you to buy their other devices like it is for Apple. For Amazon the ecosystem is all about Prime. The Prime ecosystem is all about getting you to buy other things from Amazon. That’s why the company sold the Kindle Fire for less than the cost to make the device.

The Amazon Fire phone will be revolutionary because it will get Prime into your hands and get you hooked on the Prime ecosystem. The company will even give you a free year of Prime when you buy the Amazon Fire phone. They already know you’ll come back for more.

DISCLOSURE: I personally own shares of Amazon and Apple.

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Published by Wyatt Investment Research at