Amazon: Retailer or Platform Company?


Amazon’s App Store for Android has been denounced as “Rotten To The Core” by Shifty Jelly, a small Australian developer.  It would be safe to say Shifty Jelly’s experience as the “Free App of the Day” didn’t meet their expectations.  The headline complaint was that developers don’t actually get paid by Amazon when they’re the “Free App of the Day”, contrary to industry belief.  This resulted in at least one lede of “Apparently Apple isn’t the only company running an App Store with a penchant for secrecy” and generally conflating Apple and Amazon’s App Stores.

This is a misleading comparison.  Amazon’s philosophy towards developers is fundamentally different from Apple’s.  The Apple App Store is far more developer-friendly today. Shifty (it may be presumptuous but I’m going to leap to a first name basis here) also mentions in passing that Amazon retains the right to set pricing and write the product description, amongst other terms, for any app in their store.  This is far more important than how they compensate for promotional sales.  And Shifty is not the first developer to question Amazon’s approach.

Amazon is fundamentally a retailer. Their lizard brain comes from the same evolutionary tree as Walmart (and there was a fair amount of genetic transfer from Arkansas to Amazon in their early days).  Great retailers squeeze every last drop of blood out of their suppliers (here is a briny illustration of Walmart in action on this front).  The problem is that without a very conscious and explicit effort, Amazon will default to treating app developers as suppliers, triggering all sorts of behavior that it going to make it very hard to cultivate developer loyalty.  They almost can’t help but behave this way; it is the expression of their corporate DNA (and that is something I appreciate when I am an Amazon customer).  Retailers see applications as just another product that sits on their shelf.  And they unilaterally print the price tags for anything on their shelves and completely control the contents of any marketing materials they create. It is inconceivable to a retailer that someone else would be setting prices or deciding what goes in their weekly advertising circular.

This isn’t just one-off behavior for Amazon; they run the Kindle app store the same way.  It isn’t well known, but there is an SDK for Kindle (the device) and you can build apps for it (you can see various Kindle apps here).  I’ve now heard from developers about submission experiences for multiple Kindle apps and the approval process makes Apple look open, transparent and speedy by comparison.  Developers get heavy-handed guidance on what their price should be and once in the store, have no ability to change price, even to run a temporary sale.  Product descriptions are rewritten by people guaranteed to know less about the application and its customers than the developer.  Some of this is a function of a team that is running flat out (Amazon runs lean and has not staffed up for reviewing lots of apps, much less learning enough about apps to write accurate and persuasive sales copy for each app), but it also is a reflection of the basic fact they are a retailer.

Contrast this to Apple who are fundamentally a platform company (despite all those stores…).  Yes, they have a bunch of rules for what gets into the App Store, occasionally make a bad judgment call, stumble on political landmines or put their thumb on the scale to advantage their own products, but by and large they do pretty well by developers.  Once you’re into the Apple App Store, you control and can change your pricing and you get to explain to potential customers what your app does.

This cultural dichotomy between seeing developers as just another set of suppliers to be plucked versus partners to be cultivated is the biggest challenge for Amazon as they roll out what otherwise looks like a promising tablet strategy this fall.  Hopefully they will suppress the WalMart gene, recognize developers have a choice of platforms and at least meet if not exceed the Apple bar in order to build a vibrant application ecosystem.  Amazon has hired a lot of Microsoft people with platform experience who understand the care and feeding of developers.  They need to step up if Amazon is going build winning platforms.

4 responses

  1. Would you apply the same analysis and draw the same conclusion about Amazon Web Services?

  2. Prashant,

    Good point and one I meant to mention. AWS has other issues but no confusion about the importance of developer care and feeding. I assume that is because it isn’t an extension of the retail business, unlike the various App Stores. Hopefully some of the AWS mindset can be transferred.

    What is your perspective, having been inside AWS?

  3. As a supplier, I can set my price to the retailer, and then they can mark it up or discount it as they see fit – I still get paid my price. If Amazon wants to follow this model – great! But that’s not what they’re doing.

  4. There are a few things I learned within AWS:

    1. It took Amazon quite a while to understand how developers work. Transparency and openness is still a problem for them. Their PR organization is outstanding at what it does, but is very, very heavy into message control. As a result, crises that spin out of control on Twitter and require instantaneous customer response (as is the case with most developer-related crises in this day and age) take several days to resolve themselves because of Amazon’s unfortunate emphasis on controlling the message vs. informing the customer. They still haven’t fully understood the importance and relevance of Twitter as a customer communication vehicle, for example.

    2. Conversely, they are an extremely agile development organization. As you mentioned, they are a very lean organization. So, while that does limit them in terms of the magnitude of features they can take on, it helps them considerably in taking on smaller challenges, executing, turning around, and executing some more. I’d guess their development organization is 1/4th the size of Microsoft’s comparable efforts, yet they will consistently out-execute Microsoft at a 4x pace (if not more) in perpetuity. This speaks to both Amazon’s strengths and Microsoft’s glaring weakness.

    3. The retail legacy most certainly impacts AWS in unforeseen ways. You’ve no doubt heard quite a bit about their little crusade against state sales tax. Well, if a state rules that if Amazon has a presence within its borders it will have to collect sales tax, will damn well avoid the state. This is a constant pain in the neck for Amazon employees and an unproductive use of executives’ time.

    Overall, though, AWS is one heck of a machine. I adore their product and can’t imagine starting a company on anything but AWS. Whether they get success with enterprise developers and can find a way around Microsoft’s lock on the corporate developer’s desktop is something I can’t predict. But for us startup types, it’s AWS all the way.

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