It's no surprise that Amazon is launching an app store for Android. The ecommerce giant has come a long way since it started selling books online. Today, Amazon is rapidly evolving into a content company. And mobile apps are already a big part of the digital content business.
But despite Amazon's brand and size, there's no guarantee that it will become a successful player in the mobile app space. Apple is the 800 pound gorilla, and history isn't exactly conclusive when it comes to Amazon versus Apple. While Amazon's Kindle seems to be holding its own with the iPad, its MP3 store has hardly put a dent in the success of iTunes.
Amazon does have two big things going for it with its app store, however: Android has a lot of momentum, and Google's Android Marketplace has left developers with a lot to desired commerce-wise. These two things might be enough for Amazon to build a successful business selling mobile apps.
For Amazon to be successful, however, it won't just need to market its app store to consumers; it will need to market it to developers. And a clause in its developer agreement is causing some controversy. The clause pertains to app pricing, and gives Amazon the final say when it comes to what an app will be sold for. Technologizer's Ed Oswald explains:
Developers would still get to say what they’d like to sell their application for, an MSRP if you will. But Amazon does not guarantee that’s what its customers will pay. Instead, the retailer may choose to sell the app at a discount — just like Amazon does for other items on its site — or even give it away for free.
The developer would receive 70% of the selling price, or 20% of the MSRP, whichever is greater. So for example if a developer wants $5 for his or her app, but Amazon sells it for $3, the developer gets $2.10. If Amazon decides it wants to charge nothing for it for whatever reason, the commission drops to $1
Oswald calls this a "raw deal for Android developers" but is it really?
While there's no doubt that some developers will have ideological reservations over Amazon's terms, the truth of the matter is that pricing products, including mobile apps, can be really, really difficult. The right product at the wrong price can be just as unsuccessful as the wrong product at the wrong price.
Amazon, of course, has some expertise in the area of pricing -- and probably more so than the average developer. Its expertise, of course, doesn't guarantee that it will perfect the art of app pricing, but many developers may find that Amazon is far better positioned to take on the really difficult and important task of pricing than they are. And it has every incentive to; Amazon, like Apple, is taking a 30% cut of sales. Its goals are largely the same as those of the developers who will be participating in its Android app store: maximize sales.
The risk for developers is that Amazon will make a mistake with their apps, and a mistake could harm their apps' value going forward. But given the challenges Android developers looking to charge for their apps have experienced thus far selling through Google's Android Market, chances are that more than a few will be willing to trust Amazon. And if Amazon's app store takes off, that might turn out to be a good thing.
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