Peter Kafka

Recent Posts by Peter Kafka

Why Amazon Can Thrive Even if the iPad Eats Its Lunch

Amazon owns almost all of today’s e-book business. But by the time Apple’s iPad, the Nook from Barnes & Noble (BKS), and others finish chewing away at its market share, Jeff Bezos and company will end up with something like 30 percent of digital book business, says J.P. Morgan analyst Imran Khan.

And that will still be a very good business for Amazon (AMZN), Khan says. He figures that a smaller chunk of a much larger market will eventually generate $1 billion in incremental revenue for the e-commerce giant.

You can see his math and assumptions here (click to enlarge):

Khan’s point is part of a larger note making the bull case for Amazon shares, and he argues that his assumptions for the retailer’s e-book business are deliberately conservative.

That sounds right to me, though I’d add one caveat. Khan assumes that e-books will follow the path of music sales, which quickly moved over to digital following the introduction of mobile devices–specifically, Apple’s (AAPL) iPod. But there are several big differences between books and music, and the biggest one is that you don’t need a special device if you want to travel with books–they’re already mobile.

I know plenty of people who swear by their Kindles and tell me that they’re reading more than ever since they got the gadgets. And maybe they’re representative of the larger population. But if it turns out they’re merely very enthusiastic early adopters, we’ll need to rethink some of this math.

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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik