The success of Google’s (NASDAQ:GOOG) Android open-source mobile operating system appears to be open to debate despite many investors branding the tech giant one of the best stock picks. While some evidence suggests it’s the fastest-growing force in consumer electronics — a new Nielsen report found that 40% of smartphones purchased between June and November 2010 were Android-based –some Wall Street analysts view the platform as an irksome gnat soon to be crushed by Apple’s (NASDAQ: AAPL) iPhone.
Kaufman Bros. analyst Shaw Wu told investors in a Dec. 22 note that the iPhone is “essential” for carrier Verizon’s (NYSE:VZ) future in the smartphone sector due to slowing sales of Android phones like Motorola’s (NYSE:MMI) Droid.
The battle between these two operating systems is far from over, but Apple is maintaining a commanding lead on at least one front of that war: applications. The company’s App Store has become the public face of digital software sales for tablets and smartphones, and while developers have found some success on Google’s Android Market, it lags behind Apple’s in terms of support.
By the end of the year, Apple may face a serious digital storefront competitor on Android devices but it won’t be from Google’s Market. The original 800-pound gorilla of e-commerce, Amazon.com (NASDAQ:AMZN), is opening its Amazon Appstore this year. If developer support proves strong, Amazon could repeat the same success it has had in the e-books market with Kindle and take the lead of downloadable software sales on connected devices.
The Amazon Appstore has far more in common with Apple’s App Store than with the Android shop. Unlike Google’s storefront, Amazon will rigorously curate its new storefront, looking to maintain a quality level comparable to Apple’s store. Amazon told TechCrunch, however, that it plans to be more lenient than Apple in allowing certain apps onto their store, especially non-exclusive apps –Amazon’s store will not have exclusivity requirements, at least at first.
What distinguishes Amazon’s storefront from all other app markets so far is that the retailer will dictate pricing rather than the developer. Developers can set a price for its app when first submitted, but Amazon is free to change that price later, heavily discounting it to spur sales as it gets further from its initial release.
As is common with most digital media sales, the sale split will be 70% to the developer, 30% to Amazon, though Amazon is promising to pay developers 20% of an app’s list price even after the retailer institutes a steep discount.
It’s easy to see that Amazon is hoping to leverage the same pricing strategies that have made its core retail website such a success. By setting prices itself, Amazon can undercut both Google’s Android Market and Apple’s App Store while presumably still keeping developers content with a significant payout for apps that are already seeing sales slow down.
It seems likely that, provided the Amazon Appstore is successful, Amazon will merge its disparate storefronts on smartphones and tablets into an extension of Amazon.com. Apple has staved off Amazon before — iTunes maintains its sizable lead over Amazon’s digital music store — but its App Store might just meet its match in Amazon’s Android store.
As of this writing, Anthony John Agnello did not own a position in any of the stocks named here.
