Mar 23, 2011

What does Android AppStore mean for Amazon?

Amazon's intent to open it's own Android AppStore is old news. There was much speculation about more fragmentation of Android with multiple AppStores apart from Android Market. The fragmentation is very likely given Android is an open mobile platform for anyone to the following without requiring the blessing of Google.

Build apps, build phones/tablets, sell apps, even penetrate consumer electronics, cars and anything that provides a source of power.

The choice of word to describe differs with perspective. It's like the glass is either half full or empty depending on the eyes of the beholder. To me, what's happening in the Android space is the norm and is just the beginning. This is especially good for developers as the Android Market isn't putting up a great show as the Apple's AppStore. Amazon has showed it's prowess in online B2C commerce through amazon.com. So, selling Android apps is just another commodity as far as Amazon is concerned. It knows best, how to sell to consumers online.

Is Android AppStore a huge investment for Amazon? Probably a fraction of it's operational cost. Imagine it being just another web portal hosted on it's massive AWS web farm. Even hundreds of thousands of apps would be tiny data for it's data farm.

What about the ROI on AppStore? More than anything else sold on it's website. There is no shipping cost. No cost maintaining the inventory in a warehouse. I can't imagine a lot of supply chain cost either. And, finally the whopping 20/30% cut on every app sold would add up to a large ROI.

What is the probability of success? Being late to the party is sometimes good for business. You avoid being a guinea pig. Amazon would have learnt a lot from Apple AppStore and Android Market evolution. 

Is there an advantage to Amazon? Apple and Google built the app stores from groundup with no prior experience in online business. Amazon on the other hand is just expanding it's list of products sold online by adding Apps to it's web store. Does it need to be a tech whiz to do this? Not at all. That burden is delegated to  developers. So, Amazon is better at this game than Apple and Google.

Can it be without risks? Hard to imagine any form of risk. The worst would be Amazon writing off the store, which won't affect it's bottom line or business prospect. 

Amazon has built it. Will they come? Most probably will. Given, Amazon has lot of existing customers, it won't be hard to sell more to them. Especially it's online webstore feature "Customers who bought this also bought.." is the easiest way to start selling apps. The apps market for themselves. Angry Birds is a good example. It will be lot easier and probable for someone to buy it on Amazon than Android Market. I can imagine someone making a purchase on Amazon for anything related to Android being recommended a certain App and eventually selling it. 

Where is the competition? There will be more such Android AppStores in the future and therefore the price war, which is good for consumers. Selling Apps in volume is like volume licensing of software. Amazon can cut the competition by providing better deals to app developers and making it up on the volume. Doesn't need any explanation.

Android App Store is a very logical thing for Amazon to do. And, could turn out very lucrative if Android continues the pace of adoption the way it is now!