Amazon owning app distribution is irrelevant

Some people are writing about how Amazon is going to steal Android app market distribution away from Google. Not only is this statement incorrect, but it is a clear misunderstanding of how Google and Amazon think about Android. I’ve worked at both Google and Amazon, and have written apps for both iOS and Android, so I’m going to chime in.

Amazon won’t own the app market

Amazon is going to be one tablet manufacturer and maybe one phone manufacturer. Even if Amazon owns 20% of all Android devices, they will have the same share as Samsung and less share than HTC and Motorola have in phones (see below). Or, let’s be generous and assume that Amazon manages to sell the same number of total tablets as the iPad — 40 million by Apple’s count for both iPad + iPad2. That total number of Amazon tablets is as many Android phones as are currently being activated every quarter. Let’s get real: Amazon will not have the leverage to do any serious damage to Google’s hold on the pre-installed App Market bundled with Android (which powers both tablets and phones).

Android Manufacturer Market Share

Google does not care about app sales

Even if Amazon does own the app store, thinking about app sales is a failed attempt to apply Apple’s iOS model to a totally different ecosystem. Android does not work like iOS because Google has different priorities than Apple. Google is a search company. Owning the platform is Google’s way of making sure they own search — both on the web and for apps. Google makes over $30 billion in revenue from search. The revenue that flows through the app market to Apple is about $1 billion ($3B in sales, $1B flows to Apple). Google does not care about facilitating app sales because they can make 15-30x the money from search.

Furthermore, Google clearly believes that the web will win out in the long term and native apps are a stop-gap, so they are skating to where the puck will be — open and web based. Google saw this with AOL and hand curated directories like Yahoo in Internet 1.0 and is betting history will repeat itself. Even if apps stick around, Google wants to own search on top of the apps just like they do on the web and they’ll monetize the hell out of that. Google does not care about owning Android or the app market for app sales. They want to own search.

Amazon does not care about app sales

Kindle Fire is about selling more digital content and facilitating e-commerce. Apps happen to be one type of digital content, but they’re far from the focal point for Amazon. Amazon is the world’s biggest online retailer. They want you to buy stuff on Amazon.com. From free shipping, to Amazon Prime, to Kindle 1.0 it’s always been about getting you to spend more money on Amazon. Tablet users love to buy stuff online. The Kindle Fire is about facilitating old school e-commerce. Owning 20% of app sales is lame. Owning 20% of e-commerce on tablets is what Amazon is salivating over. Instant Video and having an App Market are nice secondary revenue streams, but a drop in the bucket to what Amazon does in it’s core commerce business. Amazon would make the Kindle Fire if they were guaranteed to make $0 on app sales because they will make billions on increased commerce.

Amazon “owning” app distribution is not only wrong, it’s irrelevant. It misses the point of Android and is a fundamental misunderstanding of Google and Amazon.

10 thoughts on “Amazon owning app distribution is irrelevant

  1. “Google wants to own search on top of apps” is prescient – think 5 years out, even if Open+web doesnt win out over apps, they want/need to own search/find/discover on top of apps. In that context, you’re right — amazon distribution of apps is irrelevant.

  2. I think you’re taking things too far by comparing numbers of phones with tablets. Amazon doesn’t have an Android phone.

    But they will most likely have the best selling Android tablet.

    They may own the Android tablet market.

    “Google does not care about facilitating app sales because they can make 15-30x the money from search.”

    Uh, you’re taking the overall figure for all search revenue and just applying it to Android. That’s not a fair comparison.

    “Google clearly believes that the web will win out in the long term and native apps are a stop-gap, ”

    … Yeah, that’s a big assumption based on a world before native apps.

    “Amazon does not care about app sales… Kindle Fire is about selling more digital content and facilitating e-commerce”

    You do realize that apps are digital content and are a huge growth market?

    1. Julian,

      Thanks for taking the time to respond.

      Android 4.0 and beyond is designed to run on both tablets and phones. From Google’s perspective they are gateways to search so it’s completely reasonable to compare them to each other. From Amazon’s perspective the user behavior around commerce is very different, which is why they’re going after tablets first. There are rumors they will build a phone later as well.

      I’m not applying the overall search numbers to Android. I’m saying that the amount of money they make off of Android pales in comparison to what they make off search today and what they will make off of mobile search in the future. App sales are going to be tiny compared to mobile search revenue.

      Yes, Amazon would love to sell more digital content — apps included. The gross margins would be awesome for a retailer, so it’s clearly enticing for them. But most of the transaction volume flowing through tablets is not going to be in apps. It’s going to be in traditional e-commerce. As I said in the post, the apps will be an awesome secondary revenue source for them. But what they really want are all of the e-commerce transactions for electronics, movies, ebooks, clothing, jewelery, and everything else that Amazon sells.

      1. “App sales are going to be tiny compared to mobile search revenue.”

        There is also monetization off of ads in apps. That is not search revenue. They did pay $750 million for Admob.

        “Apps will be an awesome secondary revenue source for them”

        I’m sorry, this totally contradicts your heading “Amazon does not care about app sales”.

      2. Very true – Google will do really well off of mobile advertising as well.

        If Amazon made $0 off of app sales for the Kindle Fire, they would still do it. Because they will make billions off of sales on Amazon.com

  3. How about this… Android’s meant to keep Apple in check…. Amazon’s doing Google’s job for them improving Android UX…..

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