Amazon Raises the Stakes in Mobile Commerce, But Business Model Challenges in Media Remain

Over the last few weeks, Amazon has been on the move to enhance and extend app developer monetization opportunities distributed through its branded Amazon Appstore, and supported across all platforms including Android smartphones, tablets, and Kindle Fire. The in-app billing capability, announced on April 10, extends monetization beyond one-time sales to ongoing purchases within the app, including expansion packs, virtual currency and subscriptions. Then, on April 17, Amazon announced that it was planning on eliminating the $20 upper-limit restrictions on in-app purchases, which is also enhanced greatly by parental control features and Amazon’s existing one-click checkout process.

While much later than Apple and Google to support in-app billing capabilities, Amazon is certainly in a better position now than it was six months ago to further developer monetization, particularly as Android smartphone users increasingly rely on Amazon’s storefront as a source for app content despite the differential in the sheer number of apps available – tens of thousands for Amazon compared to 400K+ for Google Play.

According to NPD’s Connected Intelligence SmartMeter nearly one-third of Android users accessed the Amazon Appstore from their smartphones in March, up from just 18 percent in August 2011. This in concert with the success of the Kindle Fire, as well as the company’s superior merchandising capabilities and user experience focus (i.e., one-click payments), makes it appealing monetization platform for app developers and publishers.

The real question in in-app purchases lies in the underlying business model, and whether or not they are flexible enough to support media companies’ monetization, particularly in subscriptions. As it stands now, Amazon Appstore follows the standard 70-30 business model for in-app purchases as it does with paid apps, but there does appear to be some level of flexibility baked into the in-app model as the developers’ guarantee of its 70 percent is based on the list price and not the Amazon retail price point charged to consumers.