Seattle-based online retail giant Amazon.com, Inc. and Marlboro, Massachusetts-based software startup Kinset, Inc. are hoping to redefine their respective markets, just as the iPod/iTunes/iTunes Store redefined the music industry in the digital age.

Amazon, fresh on the heels of unveiling its own digital rights management (DRM)-free music store , announced a new hardware product, the Kindle eBook (product page is here). Meanwhile, Kinset's 3D store technology hopes to entice retailers to create a virtual online store that mimics the real world, complete with stocked digital shelves (the solution page is here). Is the book broken and in need of a high-tech replacement? Do consumers long for digital re-imaginations of already successful online stores? Maybe sometime in the future, but in today's market, both most likely both ideas will fall flat.

Digital books -- even round 2.5 -- still don't make sense 

A few years ago, eBook readers were hot -- at least in terms of vendor investment and media acknowledgment. In 1998, NuvoMedia's Rocket eBook and Softbook's Reader were launched (both companies were acquired by interactive program guide provider Gemstar International Group in 2000; the company debuted follow-on RCA/Thomson built devices in late 2000; by 2003, the renamed Gemstar-TV Guide International stopped production of its readers and shuttered its content site). Microsoft released its Microsoft Reader software designed to make it easier to peruse titles on portable screens. The then-popular PalmPilot was not to be left behind -- it, too, could be loaded with digital books. Early Windows CE devices also battled for the non-existent but supposedly emerging market, adding eBook presentation to their PC-like list of features. Even Franklin of organizing fame was in the game. It offered its own reader, the eBookman, which is now marketed by ECTACO and lives in consumer electronics (CE) obscurity. 

The first generation of readers and software did not fare well. But unknown to most consumers and even the tech media and pundits, a second-generation effort, the Sony Reader, has been on the market for over a year. But like its forefathers, it has also failed to gain traction (product page is here). While Sony's recent mixed record with portable CE devices (a successful portable game platform, the PSP, and repeated unsuccessful portable music players) leaves open the possibility that perhaps the Reader's failure is related to Sony design, implementation, and marketing, the more likely and obvious answer is that consumers don't find these devices compelling.

Enter the Kindle 

So what about the Kindle eBook from Amazon? Like the current Sony offering, its hardware is light years ahead of those first-generation products. But the real issue is not screen resolution or battery life. It isn't even an easy, iTunes Store-like buying, managing, and syncing experience. As has always been the case, the challenge is that the Kindle's and its ecosystem -- the reader device, the software, the associated stores, and the content -- are not of significant consumer value enough to overcome the reigning reader champion -- the time-tested hard- and softcover book.

Here are the top problem with eBooks:

• Paper books aren't broken ... and digital books don't add enough. There just isn't much of a compelling reason to invest in digital books. Unlike music, consumers don't need access to hundreds of digital books or access digital book playlists. And unlike portable or in-vehicle GPS devices, a digital copy offers no real advantage over the analog version. Newspapers and magazines are, and they are being replaced by more current and searchable online properties. For example, if you are interested in celebrity gossip, tmz.com has up-to-the-minute coverage of the latest Britney Spears custody news, while the paper version of Us only appears each week. Similarly, your local paper's sports page is, at best, hours out of date -- sports fans will have already read the stories at the online newspaper site or a magazine site, such as si.com (Sports Illustrated).
  
  
• Book readers like the look & feel and navigation system of the old analog models. Digital books encased in eBook readers don't elicit some of the core emotional responses of reading. For example, you can't see the book mark -- a real one or just a handy receipt -- to see exactly where in the book you are. You can't display your digital books around your house. Unlike with LCD photo frames, a digital display of the virtual spine of your books makes no sense.
  
  
• eBook devices compete with more important devices that do much of the same thing. A comparison of eBook readers isn't all that useful, but comparing the Kindle to Apple's iPod touch makes more sense. The iPhone-like iPod touch has a full-featured Web browser and Wi-Fi networking, enabling commuters, travelers, and anyone else to visit their favorite content sites when near a networking hotspot. And don't forget computers. For business travelers, a notebook computer is often a necessary evil (in terms of weight and size). And with the ability to surf the Web, watch movies, manage music collections, and read digital books, the notebook can deliver more. Sure, it's a bigger device -- and its clamshell form factor does not promote book reading -- but it makes more sense to carry one device than two.

Perhaps the most promising new effort in terms of portable content devices is bendable plastic screen technology, but even there, consumers will be only willing to carry so many devices. With multi-function phones/multimedia players with moderate screens, the eBook reader will find few converts.

Digital stores don't need 3D representations

Kinset describes itself as "the leader in the development of 3D immersive online stores" and says that its solutions are aimed at "the needs of high fidelity retail shopping." The company made a little bit of a slash by securing a New York Times article and Boston Globe story on its soon-to-be-released technology. But while Kinset -- or more likely, its public relations firm -- gets a gold star for attracting high-profile mainstream press coverage, the PR coup won't translate into a financial windfall.

It's important to never say never in terms of technology adoption, but it is unlikely this type of solution will become common in the next five years. Why? Because:

• Non-3D online stores are booming. Despite "low tech" features, stores that feature static images and text like Amazon.com are doing well. Navigation -- using product categories and search boxes -- may not be as cutting edge as 3D navigation, but it works and consumers are comfortable with it. Even a non-Web solution like Apple's iTunes Store does not rely on 3D navigation, and business is booming.
  
  
• Retailers have yet to embrace even Web 2.0/RIA solutions. NRG has spent years talking to and following the advances of rich Internet application (RIA) and AJAX vendors like Laszlo, Nexaweb, and Adobe, but despite impressive technology demonstrations, the most recognizable stores have not embraced the technology. In fact, with Amazon's public Web services, almost every vendor in the Web 2.0 space has created an interactive front end to the store, but none has been able to secure a deal to overhaul the store's primary interface.
  
  
• Consumers see stores as utilities, and fancy interfaces can slow down shopping. In the retail world, companies spend millions of dollars on physical store layout. For example, compare the interior of a Wal-Mart to a Target or Best Buy outlet. The layouts of the latter are arguably more advanced, yet Wal-Mart remains the largest retailer in the US by a large factor. Adding 3D interfaces will force consumers to relearn online shopping, and the navigation techniques will only appeal -- or be familiar -- to the small sub-segment used to 3D games, such as first person shooters (e.g., Halo and Call of Duty), role playing fantasy games (e.g., Blizzard Entertainment, Inc.'s World or Warcraft 3D game; see the product page here), and virtual worlds (e.g., see Linden Research, Inc."3-D virtual world" Second Life; product page is here).
  

Final thoughts

In the technology world, its unwise to say a technology will never take off. Undoubtedly, digital books and 3D online shopping will be much more mainstream in 2020, but for the near term, expect the Kindle and the Kinset-powered store to disappear in short order.

Current technology -- whether paper books or current online stores -- function fine, and the leaps of faith needed to embrace these new approaches will take a long time to become mainstream. 

By: Tom Rhinelander, NRG Analyst