Amazon has announced the launch of their Kindle 2 product today, and it is rightfully getting a lot of attention. I’ve used the first iteration of the Kindle, and it’s an excellent ebook reader. I can easily see someone using it as a replacment for their books, especially with its ease of instant gratification—just buy the books via Amazon and immediately download them. However, in terms of growing the category, my business development sense tells me that Apple is a real player here.

The iPhone, which as close to the holy grail of convergence as we have right now, is also an ebook reader. For the people that utilize smart phones (and that number increases everyday), the question will quickly become: “Why do I need a Kindle when I already have an iPhone or G1?” This is not an idle question, as the ebook readers on the iPhone are already formidable.

There are two iPhone ebook readers that I use, and they are both excellent: Fictionwise’s eReader and Lexcycle’s Stanza. Of course, an excellent device without the content is a recipe for failure, so it is important to note that both Stanza and eReader allow the immediate purchase and loading of ebooks via various sites, including Fictionwise’s ebookstore, which is one of the largest on the Internet. So for users looking to buy and consume ebooks, the Kindle is far from an exclusive answer.

Amazon will (and does) go to great lengths discussing the usability of the Kindle, deriding small screen experiences as hard on the eyes. This is simply not an accurate portrayal of the iPhone reading experience, which—while not as nice as the Kindle—is more than acceptable for 99% of consumers. And, frankly, that’s enough.

Where Amazon can really do some damage is with exclusive deals. Content is and always will be king. Even if the Kindle were much worse than any other ebook reader but it had all the bestsellers while others didn’t, it would be the popular choice. The same goes for Stanza or eReader. If Amazon can arrange deals with authors that block out other ebook sites, Amazon would have a significant advantage. You can expect these deals to be announced soon and for those announcements to increase in frequency. Still, Apple has some significant weight behind their brand, and if they decide to support Fictionwise, for example, this could be an interesting battle.

Update: Amazon is apparantly going to launch a Kindle App for mobile phones. This makes the focus by Amazon much more on the digital bookstore play than the hardware play. This is a very different strategy than Apple, which makes a minimal profit on its music sales when compared to its iPod and iPhone hardware sales. On a certain level it makes sense, as well–the pricing and margins for ebooks are signifcantly better than 99 cent songs.