Tuesday, April 5, 2011

Amazon Takes a Shot (or Two) at Apple

It seems Amazon has decided to take a shot at Apple's seeming dominance in both the digital music and the Smartphone application marketplaces. Apple revolutionized personal music players when they introduced the iPod, which was the heir apparent to the Walkman and Diskman players of the 80's and 90's. Then, they came up with the iTunes store, where they sold a billion songs downloads by 2006. The iPod grew into the iPhone, and the apps started coming. Apple expanded the iTunes store to include the AppStore for iPhone apps, and hit a billion apps in April of 2009, just two years ago.
Growth of the iPhone was driven greatly by the technological sophistication of the product, but the Apple brand was a major contributor to its success. Many people wanted to own the Apple logo on their cell phone. Of course, the exclusive marketing with AT&T as a cell phone carrier made it necessary for iPhone owners to be AT&T customers. This exclusivity may have been a good decision for Apple's bottom line, but that would only have been a short-term benefit. As soon as Google dived into the Smartphone market, the game changed.
Customers of other networks now had an alternative to the iPhone. There were always going to be people who were locked into a contract with Verizon or T-Mobile, that couldn't switch. As soon as Android-based Smartphones became available, they started eating into Apple's dominance in that market.  At first, a lack of apps would tend to hold back some demand, but as Android expands its market share, app developers enjoy an expanding customer base for their apps, making development an attractive proposition. Android has now caught up with Apple in terms of market share, and the new phones are extremely attractive.
The results of this competition are that Apple is marketing the iPhone to Verizon customers, and AT&T is buying T-Mobile. Meanwhile, Amazon offers free cloud drive storage to Android users, and has the Amazon MP3 store with as many selections as the iTunes Store. At the same time, Amazon is opening up the market for free and paid Android apps with the Amazon App Store. Apple responds to this new threat by suing over the name App Store, which is a lame response for a once-proud innovator.
It remains to be seen how this will all shake out. The availability of the iPhone to more potential customers via Verizon may be just in the nick of time. But it may be too late to stem the tide of Android, once amazon puts its weight behind the platform.

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