This is a classic disruption strategy. While everyone else is battling for the same customers at the top end of the category, Amazon found a way to open the market to a huge swath of people for whom a $500 tablet just doesn't make sense.
Very few people who "need" an iPad will trade down to get one of these. But those tablets stuck in the middle will see their volumes fall to a product that's just good enough but a whole lot cheaper. The fact that Amazon is being launched with an integrated multimedia ecosystem guarantees it.
I totally agree with Harvey. Essentially there are those people who will always want the high-end Apple product, and for them cost is not considered a barrier. Others want something that costs a lot less and offers the key functions of content delivery, web access and email.
Both Apple and Amazon understand and offer something besides price that is key to category success in tablets: content. Both have vast collections of content that they continue to grow by the minute. All of the other tablet manufacturers and marketers out there simply don't have that. They rely, essentially, on others (notably Amazon and Apple's iTunes) for content. They're not even re-sellers, just also-ran conduits that make no money on the real product (aforementioned content). How key is content compared to hardware? BusinessInsider.com opined yesterday, we may see Kindle devices actually be free some day soon... since it is simply the last link of Amazon's content delivery chain.
From my survey of two (my partner, a Kindle-user and me, an iPad user), content access and its portability are the primary if not only reasons we use those particular devices. We both have laptops for all our computing needs, and smartphones for all our mobile needs. The Kindle and iPad fill this in-between need that is, for us, totally about content.
But that's not the only reason Amazon is will rock the tablet market in a huge way. They are going to do what others -- except, some might say, for Apple -- have not been able to really do: use cloud computing to do the heavy lifting of browser functions, making browsing fast, easy, and (most importantly) invisible. The best thing for complicated technology is for it to work really well without you knowing it. I hope I am correct in thinking Amazon's Silk browser will deliver on this in such a huge way as to dramatically change the way web surfing technology works.
Here's a group of Amazon geeks to explain it, and they explain it quite well...
I love my iPad. But something tells me that we'll be getting one of these in the house this Christmas. If I order it early enough.
[cross-posted on my course blog, J646 Overtime]