Can Amazon take on Apple's app store?

The online retail giant is rumored to be launching a marketplace for tablet PC and smart-phone apps soon.

By InvestorPlace Oct 8, 2010 9:20AM

Credit: (© Amazon.com)
Caption: Amazon Kindle
Image File Name: Kindle_072910Some folks sounded a death knell for Amazon (AMZN) just a few months ago as Apple (AAPL) was making a splash with its newly minted iPad. But after a sleek upgrade to its flagship e-reader and a recent drop in Kindle prices to $139, Amazon proved it could compete with the glamorous -- and pricey -- iPad by carving out a lower-priced niche.


While that strategy has been highly profitable, Amazon is now investing in a bold move to take the fight to Apple and, really, any mobile device, including those with the upstart Android OS from Google (GOOG).


Amazon's weapon? An online app store that could suck up as much as a third of the marketplace and feature the hottest new mobile applications.


The success of Amazon and its digital book offerings makes it a perfect competitor in the app arena. Amazon sold three times as many Kindle books in the first half of 2010 as it did in the first half of 2009.

And just this week we learned that Amazon's online marketplace limits folks to five entry-level Kindles per order. While Amazon does not release detailed figures on e-reader sales, that built-in bottleneck indicates demand is still remarkable for the low-priced gadget.

Amazon is clearly the biggest fish in the pond when it comes to e-readers and e-books, and while that's great for now, it is a dangerous position if the company can't find new sources of revenue. The apps marketplace is an untapped gold mine and a logical next step. Post continues after video:

Still, details are sketchy. The Wall Street Journal reports developers don't know when the store will launch or even what it will be called. But, the Journal says, the dollars and cents are clear, with Amazon reportedly getting a 30% cut of app sales. That's on par with Apple and Google.

Amazon has about 80 million U.S. users visiting its site each month, and that’s a big audience to tap into. After all, the company managed to add HDTVs and shoes to its marketplace and win out by its sheer volume of customers. Why not with apps, too?

But it’s worth noting that Amazon is already starting way behind in the apps game. Google's website has 80,000 apps, but unlike under the control freaks at Apple, those are largely unorganized and not screened as strictly for quality. Even with Apple’s hands-on meddling, the company’s App Store boasts about 250,000 apps.

Competing with those existing apps won’t be easy. But if Amazon can pull it off, the world’s largest marketplace can add tablet PC and smart-phone apps to its already impressive array of products.

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