Amazon.com’s (NASDAQ:AMZN) new app store has the benefit of massive resources and the company’s history as a retailer of digital goods, but it’s also unique for being the first app outlet that isn’t directly controlled by an operating system or a hardware manufacturer’s host device. By releasing on Google’s (NASDAQ:GOOG) Android platforms, Amazon is taking advantage of Google’s open policy to broaden app sales beyond platform holders like app-store king Apple (NASDAQ:AAPL).
Taking on Apple is a gamble, to be sure, but if Amazon’s experiment is to survive and thrive, here are four obstacles it will need to clear.
Apple
Apple is hurdle No. 1 with a capital H. First, Apple filed suit against Amazon to halt them from using the name Appstore name, claiming it violates Apple’s trademark. Even when those semantic arguments get worked out, Amazon’s real success will only come when its store is available on multiple platforms, much like its Kindle app. This includes convincing Apple to allow another devoted app market on its platform. Apple blocked Sony (NYSE:SNE) from releasing the Sony Reader e-bookstore on the grounds that Apple won’t distribute competing storefront software.
Tuesday’s debut of the Amazon’s app store means Google is still on board with a competitor’s store appearing on smartphones and tablets that run on Android. Like Apple, however, Google is leery about sharing space on Android. The company banned Gamestop’s (NYSE:GME) Kongregate gaming app in January on the grounds that it doesn’t distribute third-party app stores, even though it wasn’t a full app storefront. Kongregate was allowed back into the Android market, but the flip-flopping proved that Google is still unsure of its strategy when it comes to distributing competitors.
Exclusive content
Amazon’s major selling point is that it will offer Android users a selection of apps of higher quality than those generally found on Android’s store. This is because Amazon screens and approves apps, much like Apple does, rather than putting up most everything submitted. This is a good strategy, but Amazon needs to secure more apps that won’t be available anywhere else. They’ve already started the process with securing exclusivity of Angry Birds RIO, a cross-promotional release of Rovio’s popular game with the new movie from News Corp.’s (NYSE:NWS) 20th Century Fox. More releases like that will popularize the service quickly.
Brand confusion
On a long enough timeline, Amazon’s goal must be to make all of its digital storefronts a single outlet. Why have the Amazon Appstore, the Amazon Kindle Store, and streaming video service Amaon Prime all separate when they’d be better served under the singular Amazon name that defined online entertainment retail for a decade? Until the downloadable media and software market is better defined, Amazon is stuck with numerous brands, and it has to figure out how to keep consumers informed on which is which. Cross promotion — ads for the Amazon Appstore inside the Kindle Store and vice versa — is one way but that may confuse consumers rather than inform.
As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.
