Amazon offers a new product to developers for its Kindle Fire tablet line. Source: Amazon.
When it comes to mobile display advertising, nobody beats Facebook (FB +1.81%). It would be pretty hard to, considering the app consumes a huge portion of time spent on mobile devices. Last year, the social network took a 34.7% share of the mobile display ad market, according to eMarketer.
Still, there are opportunities to compete with Facebook by finding a niche and delivering a superior product. Amazon (AMZN +0.26%) may have just delivered exactly that to mobile app developers with its new, creatively named, "Advertise Your App on Amazon" product.
As the name implies, the new product helps mobile app developers advertise their apps on Amazon's Kindle Fire tablets and its less-successful Fire smartphone, as well as other Android devices. The focus on apps designed for Amazon's app store could help Amazon make a dent in Facebook's dominance of the app-install ad space.
Amazon's advantages
One of the biggest advantages Amazon has is prime real estate for advertising -- the wake screen on ad-supported Kindle Fires. Amazon knocks a few bucks off the price of its hardware in exchange for showing "special offers" to consumers in the lock screen or wake screen of its devices. The new "Advertise Your App on Amazon" allows developers to access that prime real estate where ignoring ads is much more difficult than in a news feed on Facebook.
For developers who have optimized or developed their apps specifically for Fire tablets, it's particularly compelling, because there's likely nothing else out there that converts as well. Facebook started offering the ability to target users on Kindle Fire tablets in December, but those ads are competing with all the other advertisements on Facebook, as well, pushing down their return on investment. Facebook saw a 285% increase in ad prices last quarter, which is great for Facebook, but not so great for developers promoting their apps.
Nonetheless, an app installed on a Fire tablet is often worth more than the same app installed on another Android device, so a premium price might be worth it. Amazon points to a study from NewZoo that found 64% of users who download games from Amazon's app store spend money on mobile games compared to 37% for Google's (GOOG +1.99%) (GOOGL +1.71%) Google Play Store. Other studies have found similar trends with Amazon monetizing app downloaders better than Apple and Google.
Combining Amazon's valuable real estate and highly valuable user base, Amazon ought to attract a significant share of mobile app advertisers from Facebook's platform by providing them better returns on investment.
Not just for Fire tablets
While Amazon's new product is only available to developers with an app in Amazon's app store, it doesn't limit them to its own app store. If developers choose, they can advertise their Google Play version of the app across Amazon's Mobile Ad Network, which mostly reaches Amazon's own apps like IMDB and just a few others. Last year, Amazon took a less than 1% share of mobile display advertising revenue.
But just because Amazon's mobile ad revenue is small doesn't mean it's not valuable. And most developers who've taken the time to make their app compatible with both Google Play and Amazon's app store would likely benefit from exclusive access to the inventory compared to other Android developers without a presence in the Amazon app store. That fact may spur more developers to port their apps to Amazon if others see success with "Advertise Your App on Amazon."
Facebook shouldn't worry
Although Amazon is encroaching on an area where Facebook dominates, the social network doesn't have much to worry about. As mentioned, Facebook saw a huge increase in its ad prices last quarter, and continues to see demand outstrip its ad inventory. With the increase in native video views on the platform and other ad formats, Facebook is sure to see a continued increase in demand for advertising, and a willingness to pay high prices.
Amazon could increase its mobile display ad revenue by 100% or 200%, and still only take a few percentage points of market share. Ultimately, Amazon will see benefits elsewhere by attracting more customers and developers to its app store, which helps drive device sales. A few hundred million in ad revenue won't really move the needle for the company that brought home $89 billion in revenue last year. In other words, taking ad share isn't Amazon's endgame, so Facebook will always have the advantage considering ad revenue is its primary focus for revenue.
