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Why Amazon Shouldn't Make a Smartphone, But Will Anyway

Stocks in this article: AMZN AAPL BBRY GOOG MSFT SSNLF FB

NEW YORK ( TheStreet) -- Rumors abound that (AMZN) will come out with its own smartphone. In the long run, that's probably a questionable venture, but Amazon will do it anyway. It's inevitable. Here's why.

Recently I saw a promotional line about a newspaper. "You read it; it doesn't read you." In the Internet age, those days are over. Devices that just sit there and provide a service no longer work in business models that depend on collecting information about how the customer is using the device.

Because modern smartphones help a particular tech giant pry into a customer's preferences and habits, it's important to create a desirable public image for the company and an attractive environment (user interface) on the smartphone. That's the game of our times and requires great expertise.

In contrast, consider that we don't really have too much allegiance to particular hardware. Smartphone hardware is very miniaturized and built in far away places. The vendor can control the tactile feel, the display quality, and some other human factors, but eventually every company follows the best, winning designs. If Apple's (AAPL) iPhones were made by a different company than Hon Hai/Foxconn, would we care?

For example, ask yourself who makes the hardware for the Amazon Kindle Fire HDX tablet. Few know and fewer care. (Answer: Asus.) That doesn't mean that hardware advances mean nothing. But if customers made a choice on hardware alone, the iPhone 5s (with its 64-bit processor, Touch ID and a secure enclave in protected hardware, not software) would totally dominate the market.

The Pledge

What happens in the smartphone marketplace is that we pledge allegiance to a particular company. The carriers battle in the background to be the preferred pipe and Asian companies battle for rights to make the hardware, but the truth is, we pledge allegiance to Apple, BlackBerry (BBRY) Google (GOOG)or Microsoft (MSFT). Those who have a distaste for Apple fall into the Android camp and select the hardware maker that pleases them the most.

Samsung (SSNLF) knows this. The company struggles with its efforts to please the customers, but it knows that the customer's heart is really with Android, not their hardware. That's why Samsung is desperate to divorce itself from Android, according to Digital Trends and Business Insider. Samsung wants to create its own customer relationship with a home grown user experience and be loved for it.

In the end, that's why Amazon will probably make its own smartphone. That's what tech giants do these days. It's why you've heard rumors about a Facebook (FB) smartphone.

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