Amazon has announced the Kindle Fire, a 7-inch tablet that runs a custom Android interface that focuses on content consumption. If this device was in the $499 range I would call it a flop, but Amazon is only charging $199 for it. I’m not sure if this is really competing with the iPad, and it likely isn’t, but if that’s the case than is Amazon trying to compete with anyone? Is the closest competitor the iPod touch or has Amazon just opened up their own, new, market segment?

The iPod touch is the logical comparison based on the Kindle Fire’s price point alone, but will anyone actually buy this instead of an iPod touch? Maybe, but I’d guess that the only people who would either (a) already have another iPod that suites their portable music needs or (b) don’t listen to music often enough to justify the purchase of a somewhat-dedicated music device. In other words, I wouldn’t be surprised if this ends up as a Christmas gift to a ton of teenagers that got to open up an iPod under the tree last year.

It’s certainly not a bad market to go for, especially when your price point is low enough that all of us geeks are going to seriously consider picking one up and all of the existing Kindle fanatics are going to consider upgrading as well.

I never thought I’d be writing this about a 7-inch tablet, but Amazon has a real winner on their hands here. The price point combined with the slick user interface and speedy performance puts this device on the level of the iPad. But, because of it’s price point and size it doesn’t really compete with the iPad directly. Sure, there will be some that are willing to settle for a Kindle Fire instead of an iPad to save a few bucks but I think the majority of potential iPad owners are going to buy an iPad regardless. If anything this just opens up tablets to a segment of the market that would never be willing to spend $499 on a device like this.