Amazon's Android Appstore Will Lean Heavily On E-Commerce Mechanics

Amazon officially stepped into the mobile applications ring last week by opening up a platform to developers that will eventually make way for an Android superstore.

To get a bigger picture of the retailer’s plans, we caught up with Aaron Rubenson, category leader for Amazon Mobile Services, and Ameesh Paleja, general manager for the Engineering Division of Amazon Mobile Services.

The one message that was exceedingly clear was that Amazon’s app store efforts will lean heavily on its years of retailing experience in an effort to change the way applications are marketed and sold on phones today.

So far, the shopping experience on Google’s Android Market has been disappointing. Developers have had to deal with sub-par marketing techniques and inadequate payment methods. Likewise, customers have to wade through thousands of applications that are difficult to pay for.

The difference in the approaches of Google and Amazon are as easy to explain as saying that one was built by a search company and the other a retailer.

“We have a lot of infrastructure and technology to maximize revenue. At the end of the day, our hope and goal is to leverage the systems we have built and to bring it to the app world,” Rubenson said. We can have a broad array of merchandising and marketing tools available to get developers’ apps in front of the customers and make them really simple to buy.”

To break it down, there’s at least three ways Amazon can differentiate itself from Google’s own Android Market: pricing, recommendations and payments.

Pricing: This is by far and away the biggest differentiation between Amazon’s Appstore vs. the Android Market, or even Apple’s App Store. When it comes to price, Amazon will decide how much to sell a game or application for — not the developer (although he or she will have some influence).

Amazon will set a sales price for an app, and developers will set a list price. Developers will earn 20 percent of the original list price, or 70 percent of the sales price, whichever is greater. The benefit of this model is that Amazon has the resources to monitor sales across the board and come up with a strategy that will maximize sales much faster than a developer or publisher would normally be able to react.

Recommendations: Amazon will also be able to increase sales by making recommendations that are based on a consumer’s wide range of interests, spanning across all of Amazon, including books, music, movies and more — not just apps. Apple and Google don’t have that insight because they don’t have such a wide variety of inventory. “That tech and the recommendations right now are so-so, there’s a lot opportunity to improve,” Paleja said.

For instance, Amazon would know if you bought a fancy cooking utensil and could recommend a recipe app, or cooking game.

Payments: This is also a huge differentiator. While the app store will initially only be available to consumers in the U.S. that’s expected to change. It has “tens of millions of customers who have credit cards on file” in dozens of countries worldwide.

Google’s Checkout payments system, which is one of the only payments systems available on the Android Market, doesn’t have that scale or scope. It’s flawed to the point that in some countries users can only download free apps. Often times, consumers have also not gone through the trouble of signing up for Checkout. Amazon’s payments system is more comparable to how consumers have a credit card stored in their iTunes account.

Despite Amazon’s list of competitive advantages, it is not the only third-party trying to make better app stores. Other companies, such as PocketGear, which recently got funding from the investment arm of Google’s CEO Eric Schmidt, and GetJar has a head start in working with developers. Carriers and handset-makers are also prepping developer programs.

It’s not clear when the store will be open to the public, other than that it will launch sometime this year. The store will support both free and paid apps and will be available both on Amazon’s homepage and both handsets and tablets.

Unlike Google, Amazon will have an approval process for apps, which has the goal of making sure apps work and don’t impair the device, but it won’t be selective based on content. “We are big believers in innovation, and that we’ll find a large range of innovation,” Rubenson said.

The two declined to comment on whether Amazon would share revenues with the carriers, handset makers or Google, although would confirm they are in discussions with a number of players in the space to get their app store on devices.

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