Amazon Has A New 50 USD Smartphone With Android 6.0 Called Blu R1 HD – The Catch Is It Carries Ads

Joanna Stern, writing for the WSJ:

In life, you get what you pay for.*

*Exceptions: Costco wine, $1 New York City pizza and the Blu R1 HD smartphone, now sold by Amazon for $50. In those cases, the quality of the product far exceeds your low expectations.

Yes, you read that right, there’s an Android 6.0 smartphone that costs less than family dinner at the Olive Garden. It’s cheap, but it’s not, you know, cheap.

There’s a reason for that. Even though Amazon sells the R1 HD for as little as $50, on the open market it starts at $100. Why the discount? Ads. Sorry, “special offers.” Which are ads.

Furthermore according to the article the bill of materials for this phone cost about $75, according to IHS analyst Wayne Lam’s. This is taking into consideration approximate costs such as $20 for the screen + $6 for both cameras + $7 for memory + $40 or so for the battery and core electronics.

The Samsung Galaxy S7 retails for a starting price of $650, but its bill of materials? $225! That’s not exactly an even comparison, Mr. Lam points out, since premium phones cost more to develop and market, but you get the idea.

The Blu R1 HD feels far more like $150 than $50.

The thing that interests me here is the business model. I want to prepare a list for my own sake:

  • The biggest issue for Frugal Innovators is having the right business model.
  • Maybe it is so that scaling their solutions via volumes sold will take care of the margins.
  • Partnering with a bigger company can be a way to scale up.
  • Often selling at a low cost can also be subsidised with ads or products can be made accessible via low upfront costs and making them available for lease or rent
    Read the article on WSJ for a full review!