Will Amazon's Phone Be Held Back by Apps?

The online retailer is touting its Appstore as a place for developers to make money. Amazon wants to make sure it has enough of them as it launches its new phone.

Jun 30, 2014 at 10:16AM

Apple (NASDAQ:AAPL) has maintained its strong position in the smartphone and tablet worlds at least partially because of its App Store. Nearly all of the most popular apps are released for iPhone and iPad, and a number of top offerings are on those platforms exclusively. Google's (NASDAQ:GOOG) (NASDAQ:GOOGL) Android OS has also managed to build up a healthy number of apps, while Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN) have struggled to catch up.  

Microsoft has attempted to solve the problem with money. When Windows 8 was launched, the company paid some of the top app companies to port their products over to the new OS. Amazon, which has its Kindle tablets and Fire TV using a modified version of Android, has not done that, and the company has attempted to grow its app store offerings by enticing developers with its devoted user base and opportunities to monetize.

Jason Hellmann, Daniel Kline, and Jake Mann debated whether that would be enough -- as well as how many apps are really needed -- on the latest edition of Business Take, the show that gives you the Foolish perspective on the most important business stories of the week.

Where Amazon stands now
Amazon, which is generally pretty tight with data, said last week that the Amazon Appstore selection has nearly tripled in the past year, and developers continue to report strong monetization from the apps they offer in the store. The store now has more than 240,000 apps and games.

The company also touted its Amazon Coin currency system. Coins can be earned through gameplay and used for purchases in lieu of cash. Amazon claimed in its press release that customers have spent hundreds of millions of Amazon Coins on apps, games, and in-app items. The growth of its app store, the release said, has led to the number of new developers joining Amazon Appstore each month to nearly double in the last year. 

According to an IDC survey commissioned by Amazon, developers building apps and games for Kindle Fire are making at least as much money on the Kindle Fire platform as on any other mobile platform. IDC conducted a survey of 360 application developers for smartphones and tablets. The survey examined developers' experiences selling apps on the Kindle Fire platform. Here are a pair of the survey's findings:

  • 65% of developers said that total revenue on Kindle Fire is the same or better than developers' experience with other platforms.
  • 74% of the same developers said that average revenue per app/user is the same or better on Kindle Fire than other platforms.

"Developers tell us that they experience improved reach, greater monetization, and, oftentimes, higher revenue when they have their apps and games in the Amazon Appstore," said Mike George, vice president of Amazon Appstore and Games. 

If that's true, then Amazon may be able to maintain the developer base to keep its products competitive, despite the fact that its user base is dwarfed by the people using Apple iOS and Android-powered devices. This is also especially good news for the company as it launches its new Fire Phone; the presence of key apps -- or lack thereof -- is a deciding factor in why some people buy a certain smartphone. It's also tangentially good news for BlackBerry (NASDAQ: BBRY), which recently made a deal to give its customers access to the apps in Amazon Appstore.

How much do apps matter?
Apple and Google always tout the number of apps in the stores, but it's more about quality than quantity. It's important to have the most popular apps and the right selection.

It's important that a platform offers Angry Birds, for example. It won't matter as much if Apple and Android offer 2,000 Angry Bird copies and Amazon doesn't.

"I don't know about you guys, but I use about eight apps," Kline said. "It's about what apps they have and they don't have -- all the major ones.... I haven't switched to Windows Phone specifically because they don't have the Starbucks app, and I use the Starbucks app every day."

How important are apps to you? Would you buy or not buy a phone or tablet based on a specific app being missing? Watch the video below to hear Hellmann, Kline, and Mann discuss the topic, and weigh in with your thoughts in the comments section.  

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Daniel Kline is long Microsoft and Apple. Jake Mann has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Apple, Google (A shares), and Google (C shares). The Motley Fool owns shares of Amazon.com, Apple, Google (A shares), Google (C shares), and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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