Amazon’s Appstore Aims to Compensate For Android Marketplace’s Weaknesses

Amazon’s entry into app store sales today promises to deliver what Google hasn’t been able to so far — real paid downloads and in-app payments for Android developers.

The company, with millions of credit cards on file and 1-click ordering, might be able to convince consumers to pay where Google Checkout has so far had a complicated user experience. Although to be fair, Google is in the process of overhauling its payments solutions and will launch in-app payments to consumers by next quarter.

Because of Android’s open nature, expect a tight race between Amazon, Verizon and others to be the next best marketplace alongside Google’s officially sanctioned one. At the very least, Amazon’s debut should pressure Google to fix up many of its marketplace’s existing problems like discovery, opaque rankings and payments.

While Amazon’s app store doesn’t come pre-installed on Android phones, the Seattle-based company is trying to compensate and attract consumers in a number of ways:

1) Amazon is allowing customers to “test drive” apps, or use them on a simulated Android phone within the web browser before they buy. This should help prevent the returns problem, where consumers install an app only to return it minutes later. It used be a more severe problem when Android Marketplace’s returns window was 24 hours; it’s now 15 minutes.

2) They’re also giving away a single paid app a day, which is probably the result of many lucrative deals for Android’s top developers. To get it, consumers will need to install the official Amazon appstore application on their Android handset.

3) In what will be a big attraction for its store, Amazon is giving away Rovio’s latest title Angry Birds Rio, a tie-in with a Twentieth Century Fox feature film (reviewed here today). They’re also providing ad-free versions of Rovio’s Angry Birds and Angry Birds Seasons. This was probably the result of an eight-figure deal between the two companies. Rovio said to us recently that its Android revenues are now roughly even with iOS.

4) Amazon is also leveraging the personal recommendation technology it has refined over the past several years to suggest apps to users. It’s using data from previous purchases of other types of goods like books. So if you’ve bought cookbooks before, Amazon will recommend recipe apps.

5) And then the real tricky part: Amazon says consumers can access the app store on the web or directly on their phones, once they’ve installed the Amazon Appstore application. But the app store application, unsurprisingly, isn’t available in Android Marketplace, presumably because it violates the marketplace’s terms of service. Installing the application is actually a somewhat complicated eight-step process. Consumers have to enter their e-mail addresses or phone numbers on Amazon’s website, change their “Applications” settings on their phone, wait for a notification, then download an .apk file and open it. In the long-run, Amazon will need to pursue partnerships with carriers — the first will be Cellular South, and then perhaps launch long-rumored Android-based Kindles with a pre-installed appstore.

For developers, Amazon says it has a number of benefits (in addition to having millions of credit cards on file):

1) It vets apps to make sure they function correctly and don’t crash. The net effect is to ensure that consumers feel safe in downloading apps and don’t run into problems like the series of virus-infected apps that Google had to remotely delete earlier this month. That could lead to greater downloads per user in the long-run because consumers won’t hesitate to buy apps for fear of malicious ones. Amazon also reviews an app’s graphics, videos, animation, and text to make sure they’re clear and readable.

2) It’s hard to fully understand how this will affect developer revenues in the long-run, but Amazon retains control over pricing of apps. It has the ability to put them on sale or change their price in order to improve the overall health of the marketplace. The company will either give developers 70 percent of the purchase price (what Amazon actually sells the app at) or 20 percent of the list price (the developers’ desired price, which can’t be larger than what the app retails at in other similar app stores).