Market Watch

Amazon Launches Android Application Store


Display Driver IC Forecast


Online retailer Amazon has launched its own mobile application store in the US, the Amazon Appstore for Android. The store offers more than 4,000 free and paid applications and gives users the opportunity to test content before purchase on a simulated Android device on their computer, a feature not currently offered by Apple or Google. Personalised recommendations and Amazon's 1-Click payments are also available, alongside a promotional free app of the day feature. The store is only available to US customers. Due to operator restrictions on third party application stores outside Android Market, AT&T users are unable to install applications from Amazon's store.

Developers set a list price for their applications, for which they receive the industry standard 70 per cent revenue share. When Amazon imposes a discount it guarantees developers 20 per cent of the list price, maintaining its business model of discounting products.

Analysis
There are many third party application stores already in the market; however Amazon has some key advantages. Firstly, its large customer base gives it a wealth of customers' credit card details already on its systems, providing users with an easy to navigate and trusted billing system. Furthermore, Amazon already has a considerable amount of consumer trust, both in online retailing and on mobile platforms thanks to its online store and the success of its Kindle and mobile retail applications. The online store layout mirrors Amazon's retail offering, with ease of discoverability a key aspect. Amazon's 'test drive' feature, enabling customers to demo an app online before purchase, is likely to prove a popular feature.

Developers will hope the increased ability to monetise content via Amazon's store will be enough to offset the lower revenue per application they could receive when Amazon discounts their content.

Unlike Google, which has taken a fairly hands-off role when it comes to approving content for its store, Amazon will play a more active part in ensuring that its store offers higher quality apps, albeit with a smaller catalogue.

Apple and Google use their application stores to drive adoption of their platforms and hardware respectively. For Amazon, the move is more about establishing a footprint for itself in this key part of the mobile content ecosystem, rather than initially generating huge revenues from its cut of Android app sales. Geographical limitations, operator restrictions and expected heavy discounts needed to drive consumers to its store will initially limit Amazon's direct revenues from app sales.

Until now, most developers have had little success in monetising apps from Android Market. IHS Screen Digest research shows total revenues were only €77m in 2010, compared to €1.3bn for Apple's App Store.

Amazon's store provides an alternative distribution platform to Google's Android Market; however Google may well have a positive view of Amazon's Appstore as it will encourage developers to produce high quality content for its OS serving to further drive consumer adoption of Android devices.

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