Amazon Underground – the app store insurgent

Recently Amazon launched a new app store Amazon Underground for Android users, which replaced the Free App a Day program. It features not only items from the Amazon shopping app and the whole catalog from its app store, but paid apps for free – $10 000 in actually free games, in-app levels, lives, currency, called in-app purchases or payments (IAPs). The Amazon app is accessible only in four countries – USA, UK, Germany and France, and users can download Amazon Underground only from the company’s site, because Google Play Store does not support other app stores. Apps which involve streaming or run continuously are excluded from the offer #Actually free. OfficeSuite Professional 8, Frozen Free Fall, Star Wars Rebels: Recon Missions, Angry Birds Slingshot Stella, Fruit Ninja, Jetpack Joyride and Goat Simulator are already available for free download and use.

Amazon works with developers to create a new business model for monetization of mobile applications. Instead of  in-app purchases, the retailer is paying per minute ­– the developer’s revenue is based on the time consumers spend using the app. The rate for the developers is $0.0020 or €0.0018 per minute, so that they can earn money from every user. The ads and visuals for the new app store are presenting the idea of a rebellious platform, which can replace the freemium monetization strategy.

Freemium reign

Actually, there are several monetization methods for mobile apps – free and paid apps, subscription or ads-based and freemium (Hainsen and Hanssen, 2013, 23). The most popular is the freemium business model. Furthermore, data from the analytics company App Annie showed that 95 % of the worldwide revenue in iOS in 2014 was earned from freemium apps. The most popular and grossing app games on both Android and iOS, such as Game of War, Clash of Clans and Candy Crush Saga, are using this monetizing technique. The freemium strategy involves free download of an app and in-app purchases of levels, stages, digital goods, currency or premium version of the software (Hainsen and Hanssen, 23). The biggest advantage of the freemium model is the exposure of the app, because initially it is free. The developer accesses a wider audience. This effect is documented by Kristina Shampanier, Nina Mazar and Dan Ariely in MIT (2007, 742). Their experiments proved that free or zero price is the best marketing strategy as almost all participants chose the free item. Many researches are conducted into the mobile software ecosystem and the customers’ behavior (Ghose and Han, 2014, 1470) (Liu, Au and Choi, 2014, 326). Their findings suggest the idea that the freemium strategy affect positively on the revenue of paid features or versions of a certain app – the number of purchases increases.

However, the freemium model has its problems. According to an ABI research only a small number of users purchases IAPs, so the full functioning app is available to few customers (Hainsen and Hanssen, 25). In addition, developers count on big spenders to earn revenue. Moreover, tech press analysts and bloggers comment on the dissatisfaction of app users with IAPs, micro-transactions and waiting time. Because of that, developers search for a monetization model which will improve the mobile software ecosystem.

Uprising against freemium, innovation in app monetization or edge over competitors

The new model of Amazon Underground guarantees revenue from every customer for the developers and a wider audience to use the full features of apps. But this innovative platform should not be viewed only as an insurgent app store to fight the tyranny of freemium. In 2014 the Federal Trade Commission (FTC) in USA filled a lawsuit against Amazon and Apple, which billed parents without their consent for in-app payments, made by their children. So actually the new app store is a way for Amazon to distance the company from a problematic monetizing technique, which users and developers dislike.

Furthermore, the new business model, which is introduced through the app store, is a chance not only for independent developers to get a stable revenue and to gather a user base, but for the company to occupy a bigger share in the mobile software ecosystem and to be a viable competitor of Google and Apple. According to the developer documentation, Amazon Underground offers only apps which are distributed through at least one other app store and use IAPs or payment up front as a monetization method. Clearly, an important motive for the company to introduce the innovative platform is to take the lead in the direct competition with other Android app stores.

In my opinion, a competition in the mobile apps business has only advantages for the customers and developers. On the one hand, users get free apps and better experience. App stores cater to customers’ needs for convenience and quality. On the other hand, a stable revenue for the developers provides innovation and mastering user experience.   Independent entrepreneurs have better chances in an ecosystem with different marketplaces. To sum up, an innovative app monetization model may improve the mobile software business, but only time will show if Amazon Underground is the true insurgent.

References:

Abbany, Zulfikar. “In-App Purchases: A Mobile App Developer’s Key to “Consumer Lock-in”.” Deutsche Welle. 2015. 10 September 2015.  <http://www.dw.com/en/in-app-purchases-a-mobile-app-developers-key-to-consumer-lock-in/a-18314128>.

Barrett, Brian. “Has Amazon Cracked the Problem With In-App Payments?” Wired. 2015. 7 September 2015. <http://www.wired.com/2015/08/amazon-underground-in-app-payment/>.

Dillet, Romain. “Amazon Underground Features An Android App Store Focused On “Actually Free” Apps.” TechCrunch. 2015. 7 September 2015. <http://techcrunch.com/2015/08/26/amazon-underground-is-an-android-app-store-with-only-actually-free-apps/>.

Dredge, Stuart. “Amazon Underground Aims to Make Android Apps and Games “Actually Free”.” The Guardian. 2015. 7 September 2015. <http://www.theguardian.com/technology/2015/aug/27/amazon-underground-android-apps-games-free>.

“FTC Alleges Amazon Unlawfully Billed Parents for Millions of Dollars in Children’s Unauthorized In-App Charges.” 2014. Federal Trade Commission. 11 September 2015. <https://www.ftc.gov/news-events/press-releases/2014/07/ftc-alleges-amazon-unlawfully-billed-parents-millions-dollars>.

Ghose, Anindya, and Sang Pil Han. “Estimating Demand for Mobile Applications in the New Economy.” Management Science. 60. 6 (2014): 1470–1488 .

Haines, Jøran Christiansen, and Alexander Hanssen. “In-Application Payment from Mobile Apps: A Study of In-App Payment.”  Unpublished Diss. (Master Thesis). Norwegian University of Science and Technology, 2013.

Introducing Amazon Underground. 2015. 7 September 2015. <https://developer.amazon.com/public/solutions/underground>.

Liu, Charles Zhechao, Yoris A. Au, and Hoon Seok Choi. “Effects of Freemium Strategy in the Mobile App Market: An Empirical Study of Google Play.” Journal of Management Information Systems. 31. 3 (2014): 326–354.

Shampanier, Kristina, Nina Mazar, and Dan Ariely. “Zero as a Special Price: The True Value of Free Products. ” Marketing Science. 26. 6 (2007): 742–757.