MAY 14, 2013 • Much like FaceBook and Xbox Live before it, Amazon.com introduced its own virtual coin currency. Amazon Coins can be employed to purchase apps, games and in-app items in the Amazon Appstore and on Kindle Fire. Existing Kindle Fire owners received 500 coins free (a $5 value). Amazon is selling coins in packs of 500 ($4.80), 1,000 ($9.50), 2,500 ($23), 5,000 ($45), and 10,000 ($90). In addition, Amazon says it intends to add more ways to earn and spend the coins on a wider range of content and activities. No Coins-specific changes are required for developers with apps and games currently in the Amazon Appstore.

Impact: A month ago Amazon.com introduced its In-App Purchasing API for the Android platform, with plugins for Unity 3D and Adobe Integrated Runtime. While Amazon is intent on the Android platform, there’s nothing stopping developers from also using the former’s purchasing solution in their games on browsers using the Unity or Adobe plugins. Now Amazon is pressing forward with its own in-app coin currency to further facilitate purchases on its Appstore. The retailer is vying with Google to see who can dethrone Apple’s App Store, and does have the benefit of not being limited to the Android OS. As we expressed in our recent report, while Android devices continue to outsell iOS smartphones, we tend to believe that Apple will continue on quite nicely while Google and Amazon duke it out over Android users. What Amazon lacks in direct access to consumers on Android phones compared to Google Play, the retailer can counter with price advantages. Amazon reserves the right to discount software sold on its Appstore as it sees fit – something that deterred developers who wanted assurances they received the amount of revenue per title sale they were expecting. But in a change for in-app content, now developers will receive 70% of whatever they intended to sell that content for, regardless of how much less Amazon ultimately sold it for. That’s a pretty sweet deal for developers that could make Amazon a much more viable transaction partner. Consumers like a discount, and the retailer is a trusted source, so that might be just enough to sway people away from Google Play. Another advantage of Amazon to developers is that Google Play doesn’t work on the Kindle Fire without hacking the device and voiding the warranty. As that tablet is probably the major competitor to Apple’s iPad, hooking up with Amazon opens up millions of potential customers.

Adding coins to the mix is one way that Amazon can recoup some of the difference between how much it sells in-app content and what it pays developers. Like other virtual currency purchases, Amazon won’t sell consumers coins in specific amounts. The hope is that people buy more coins than they can use, and then wait a while before they use the rest. That’s extra cash Amazon gets to keep until those unused coins are redeemed. For now, Amazon will continue to accept credit cards for Appstore purchases, but we can see a day when that may change to a coins-only policy, especially for in-app purchases.