Amazon sells Android apps - why this move and what's the impact ?

This week, Amazon opened its Android app store.
Why is Amazon moving in this direction ? Is it just for money earned selling these apps ?

There are probably much better reasons for this move.

First, Amazon is by far the most successful Digital Shopping Mall in US and Europe. As any shopping mall, there is no reason why not to sell a product which is sold somewhere else. Amazon can not sell Apple iPhone and IPad apps since Apple behaves as a high end brand, restricting sales in its digital, fully controlled experience iTunes store. It's thus about "one-stop-shopping" and comprehensive digital goods proposition.

Second, through this move, Amazon clearly positions itself in the M-commerce business. Amazon becomes fully relevant for Android mobile users and the market place can collect mobile phones numbers of their current customers or recruit new customers. This critical information added to the Amazon account will further enable the giant to further close the loop, possibly engaging in mobile advertising or couponing.

That leads to the third and probably the main reason. Facebook, Apple, Google and Amazon form the FAGA quatuor heading to the same M-commerce expected nirvana, each attacking from a different angle. Google already partially controls the mobile platform real estate, a very good advertising machine and an emerging cash desk. Apple has a fully controlled platform real estate, an emerging advertising machine and an efficient cash desk. Facebook probably has the most efficient platform real estate, (now even extending to feature phones through latest acquisition), including the most innovative advertising machine and is currently building a cash desk.
Amazon is the king of E-commerce, already having all ingredients online but missing presence on mobile. Through this Android store, Amazon penetrates for a low budget an efficient mobile platform real estate to complement a too small Kindle footprint. Amazon is thus strengthening its position in this FAGA quatuor.

The next question concerns the impact on device vendors and mobile apps ecosystem. Will this help or arm Google ? Does it impact Apple ? What about Amazon selling windows phone 7 apps  or Blackberry apps ?

This Amazon Android app store on one hand is an additional factor demonstrating to consumers the openness of Android ecosystem. It can only thus increase relevance of Android phones. On the other hand, it probably arms Google in its quest to spread its Google Checkout, so important in the FAGA war.

Apple is probably not directly impacted, keeping their closed ecosystem and currently suffering (a lot of people would like to suffer this way) the consequences around censorship and too obvious dominance.
BlackBerry apps mainly concern business and are probably less relevant for both Amazon and Blackberry.

The open question remains for Windows phone and especially in the context the Nokia deal. Nokia stopped its unsuccessful OVI store. Amazon could probably be a good partner for Nokia selling special Windows phone apps. But will Microsoft authorize this or will Seattle monster engage in FAGA war to make it FAGAM ?

Future will say ...

Benoit Quirynen

Racer mobile phone - the name of the winners not written in the press release

Racer, the new Android phone sold below symbolic threshold of 100 UK Pounds, produced by ZTE and distributed by 3-UK, has been announced this week. This is probably an important milestone in the mobile phone history. Funny enough, the name of the true winners is not written in the press releases.

The announcement indicates an important smart complementary offer; 3UK granting a volume data bucket of 150MB for top-up on a prepaid account.

3UK and ZTE are obviously mentioned in the press release.

Through this launch, 3UK, desperately tries to attack its strong competitors with an appealing offer for youngsters. Vodafone, T-Mobile/Orange and O2 are able to follow when they decide. If the phone is a success, it's just a question of months to come back to a similar balance between telco players on the island.

On the other hand, ZTE makes a step towards a position in the top-5 mobile phone manufacturers but there is still a long long way to run.

Funny enough, the name of the big winners of this important milestone is not written.

Android is mentioned but Google is not. Through its "free licensing model", Google will win the scale battle with Apple. Google copies the Windows model used by Microsoft against Apple during last century. Google does not directly produce cash through this kind of offer. But advertising inventory (display and search) will indirectly grow at an higher pace and this growth is directly linked to G revenues.

The name of the other winner is Facebook, with the same logic of increased inventory, since target of this phone is most probably youngsters, heavy Facebook users. This can be extended to myriad of mobile phone application providers.

Names of losers are rarely written in press releases.

We can not say that Apple will loose with this kind of move but it defines the borders of a profitable corner.
Apple, luxuriantly trapped by the very high value of his brand and its vertical approach - mandatory to change the game at the beginning but limiting the scale during next phases of growth -, will loose against Android in terms of mobile OS market share. As a consequence, iAds, advertising initiative from Apple, will then probably be restricted to high-end brands while Google presents a universal inventory for any brand, any shop.

This announcement now materializes another level of danger for Nokia. Lost in Symbian, Meego, Linux mobile OS announcements, Nokia is still the number one but does not manage to tease interest of developers for applications - the next criterion for people to buy a phone.

Moreover, the whole telco market could start to see ARPU (average revenue per user) declining faster at this stage. Through this offer with such a pricing for device and data, number of data users could reach a tipping point where messaging traffic could start to significantly migrate from charged SMS to free instant messaging.

This only if the Racer phone is good and is a commercial success.

To be continued ...

Benoit Quirynen

Mobile advertising : slow growth rate or normal growth ?

Today, ABI research publishes new figures about mobile advertising. Worldwide market would reach 1.2 B$ in 2015. In 2006, analysts were announcing 12B$ for mobile advertising in ... 2011.

According to the same "ABI research" study, yearly market would reach today 313 M$, a bit more than 40 times less than expectations of 2006, 4 years ago. Last year, other analysts were predicting 5B$ for 2014.

Should we burn all analysis and even do the same with analysts ? What will be the actual figure in 2015 ?

Nobody actually knows. Figures published today sound much more accurate and realistic. On one hand, online has become much more mature, draining budgets from other media. On the other hand, mobile advertising starts to represent something, not necessarily the formats thought in 2006 but new formats, focusing more on respect of consumer. Moreover, start-ups and some big players started to grasp some requirements to build a scalable market.

Why is this so slow - reaching 10% of initial forecasts 5 years after initial target ?

The crisis probably did not help, directly hurting the amount put in the advertising envelopes. Moreover, analysts are sometimes paid by people expecting hockey stick shapes and thus tented to grow the figures.

But the main reason probably concerns the complexity to move an ecosystem and to understand the consumer expectations, complexity certainly underestimated by analysts. It took nearly a decade before Google generated decent revenues with significant volumes from search.
Some will argue that Facebook appeared on the market in 2006, now federating a bit less than 10% of "planet earth inhabitants". But Facebook had the chance to grow organically with no regulatory constraint (until now !), no need to make agreements with thousands of telcos worldwide (each with a different strategy), no need to align with local partners. And Facebook generated around 800M$ in 2009, mainly from advertising.

Will Facebook revenues continue to grow significantly ? At the end, it's a question of impact and volume. Does a "social ad" on Facebook prove the same impact as a permission-based targeted mobile ad ? Can Facebook compensate a possible lower impact by higher volume of "automated optin" ?

Will telco seriously engage in the race or will they passively wait for over-the-top players and device manufacturers to take the whole cake ? Will another Facebook or I-Phone phenomenon emerge in the mean time, keeping mobile marketing as a "second life" or "MySpace" ?

Considering all these constraints and resistance, if mobile advertising market reaches this 2015 figure, it's perhaps not so bad. But it could turn to be much more. It all depends on all of us - consumers.

To be continued ...

Benoit Quirynen