Amazon Underground: Amazon May Finally Have A Vital App Store And Why That Matters

Amazon Underground

To become a king maker you have to know how to build a throne. Or something like that.

One of the main reasons the Fire phone flopped was its utter lack of apps. Smartphone may have the ‘phone’ part in its name but it is very much a pocket computer. Computers fall and rise with the software available for them. Or, more generally, platforms are only as valuable as they are able to attract all sides to come to them. (For computer platforms those two sides are end users and application providers.)

I explained why that matters to online merchants in my analysis of the Echo/Alexa platform. Here is a summarization:

  1. If one is in a position to play a greater role in the changing technological landscape (like Amazon) it makes sense to have a go at it. The time of the neutral web/browser environment is over.
  2. To play a greater role, to be the master of one own’s fate -to become a platform provider-, one has to build a viable general interest platform. (We are just talking about B2C platforms here. B2B is obviously different.) To be more precise: An online merchant can not merely build a B2C commerce platform and expect to be playing at the same level consumer behemoths like Facebook, Android or iOS operate on.
  3. Thus, apps and app stores.

Amazon had in the past a surprisingly hard time to establish a thriving app store. Hence the Fire Phone problems. (It is arguably not that big of deal for the Fire tablets as those are mainly used as couch browsing devices and portable TV screens. Phones are more personal, as in a bigger part of our lifes, and hence they depend more on different apps for different people. But even so: If Amazon can create an attractive app store environment for developers the company could potentially make a big crack in Google’s Android armor. There is certainly a place for a second tablet app platform besides the iPad. (Android tablets apps are lacking in quality and number.))

Amazon Underground, an app store with a unique pricing model, may finally get traction and in the process provide a way in for Amazon. Amazon Underground started in August 2015. The Verge:

Underground gathers and displays apps and games that are “actually free” as Amazon calls it — with no hidden costs like in-app purchases. (…)

Amazon says users of Underground have access to over $10,000 in free apps and in-app purchases through Underground that would normally cost them if purchased through Amazon’s regular Appstore. (…)

To keep you from paying the in-app fees some of the apps and games in Underground routinely charge, Amazon has worked out a deal with developers where it pays them on a per-minute played basis.

Now, eight months later, Amazon Underground seems to be growing quite well. Wired:

As with its hardware sales, the numbers Amazon shares aren’t absolute. Instead, they’re percentages, so it’s impossible to say exactly how Underground sizes up next to Google Play and the App Store. (Hint: Still very, very small!). The growth has been significant, though.

Royalties paid to developers are up 3,600 percent since Amazon Underground launched in August. They grew 50 percent from December to January alone. The number of developers on the platform has more than tripled since launch, and the customer base has grown 870 percent.

Interestingly, experiences by game developers with Amazon Underground also hint at huge holiday sales of Amazon’s Fire tablets. Wired:

The initial response, Westbergh says, wasn’t especially impressive. But an influx of Fire tablet owners around the holidays resulted in a “huge spike” in daily downloads and new users.

Like Amazon, Westbergh also declined to provide hard numbers. The developer does say, though, that Goat Simulator revenue on Underground has outperformed its Google Play version by as much as 30 percent. That’s especially impressive when you remember that it’s comparing a five dollar app to a model that pays Coffee Stain Studios $.002 per minute of engaged user time. (…)
“Once Underground can prove that an average game can do at least as well as on other platforms, I think that’s the turning point,” says Westbergh. At this rate, it shouldn’t be long at all.

Yes, the pricing model of Amazon Underground is limiting the kind of apps that can thrive there.

But: Once a certain amount of apps are on the platform and a certain amount of end users are as well the virtuous cycle kicks in.

Amazon Underground is not the end game for Amazon’s app efforts. It is the beginning. Amazon Underground helps Amazon crossing the uncanny app-less valley.

Looking at it from this perspective, it makes sense that Amazon Underground is also available as an app on Android: Just like that it becomes easy for a lot of users to use Amazon Underground. The effect: A bigger potential audience for participating developers. For those developers it is irelevant if Underground users are on a Fire device or a regular Android device.

Only for Amazon it is not irrelevant: Underground is a very clever way to get a lot of apps (games mainly) to its Fire device line.

Of course, Amazon’s Echo/Alexa is also already a vital platform with a voice interface whose “apps” are called “skills”.

So, will Amazon in the near future have two successful general interest B2C platforms at its disposal?

More on this topic:


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