Lowenstein: Could Amazon outmatch iTunes with an Amazon App Store?

[1]Rather quietly, Amazon launched a revamped version of their wireless store, AmazonWireless.com [2], in July. The focus is on sales of phones and accessories, and is a response to the success that other third-party retailers, notably Best Buy and Wal-Mart, are having with wireless. Notable as this new initiative is, I believe Amazon could be a much broader and more significant player in wireless. In fact, I think they could give the Apple App Store juggernaut a serious run for its money should they decide to enter the fray.

As the largest online-only retailer, Amazon's involvement in wireless has been at the periphery and rather scattershot: phones and accessories, the Kindle, and a mobile version of Amazon.com that works well on a number of platforms. But they have an incredible array of assets and tools that could make them a much more potent force in wireless applications and content. Let's break this down.

First, if one wants to use Apple's App Store as a benchmark, the iTunes distribution platform--storefront, billing, PC penetration, synchronization, breadth and depth of content, and so on--is the asset that others in the "app store" business (BlackBerry, Android, Microsoft, Ovi, Palm and others) will have the most difficulty replicating. The vertical integration provides a superior user experience, but there is demand across the ecosystem for an alternative to Apple's "command and control" model, that supports a breadth of devices and platforms.

Amazon has the potential to match or outflank iTunes in a number of ways: 

• Vast array of content. Amazon has methodically built an arsenal of digital content, from music to movies, games and TV shows, rivaling iTunes in breadth and variety of business models (buy, download, rent, stream and so on). This content can be effectively leveraged into mobile formats where appropriate.
• Links to its other storefronts. Amazon sells physical products in just about every conceivable category. Information about product interest and purchases could be used to recommend purchases of mobile applications (just bought this game for your Wii? How about the mobile version?), or to deliver targeted ads to support free or lower-priced apps. Between physical products, digital content, AmazonWireless.com and mobile apps, Amazon could extend its lead in delivering the most complete on-line shopping experience--from either a PC or a mobile device.
• Payment system. Amazon's payment system has long been the benchmark in Internet retail. They enjoy the same advantage as iTunes in already having account relationships with tens of millions of customers that can be leveraged across various categories of content. This is an area that has also been Achilles heel for some of the other competing app stores.
• Search and discovery. I have written in other columns [3] that the next important phase for app stores is a more personalized, contextual search and discovery experience. This is one of the weakest aspects of the iTunes experience, if one compares the recommendation engines and personalization tools pioneered by Amazon and other state-of-the-art sites, such as Netflix and Pandora.
• Analytics. Amazon is in a rarefied class of companies with regards to the data it has about subscribers and their preferences, if one multiplies customer relationships and stock-keeping-unit count. If used effectively and appropriately, this data could be an invaluable differentiator in guiding app developers, creating a more relevant shopping experience for customers, and experimenting with different content and payment business models.
• Cloud services. Amazon's work in this area could be leveraged in numerous ways: from the sheer enormity of the back-office infrastructure that will be needed to support content, to a more Web-centric experience as mobile devices are equipped with better browsers.

There is palpable frustration that the current app store nomenclature is too tied to a device, OS or operator. There are four or five notable companies, such Handango, Handmark and GetJar, that have taken a "shopping mall" approach, offering content and applications for numerous feature phones or smartphone operating systems, on a direct-to-consumer and/or white-label basis. Some of these firms have also become development shops for apps and/or are offering tools that help to improve the experience with other app stores.

So, do we really need another player in an already crowded field? I would argue yes, if Amazon's unique capabilities are effectively leveraged. The mobile content space is also becoming ripe for consolidation. The relationships and capabilities built over these many years by the Handangos and Handmarks could be attractive as acquisition targets. This has certainly been a pattern among the big Internet players--Google, Microsoft, AOL, Yahoo and others have all acquired firms in the mobile space in recent years.

Amazon is one of a select group of companies in corporate America that has a track record of continuously evolving, expanding and pioneering, while consistently offering a good user experience, and maintaining high levels of customer satisfaction. If they ever decide to get serious about mobile content, they could be a viable force. 

Mark Lowenstein [4], a leading industry analyst, consultant, and commentator, is Managing Director of Mobile Ecosystem [5]. Click here [5] to subscribe to his free Lens on Wireless monthly newsletter. To view an on-demand version of Mark's recent webinar, "Mobile Dashboard: Wireless Trends and Directions," hosted by FierceWireless, please click here to register [6].