Bloomberg News

Amazon Debuts Virtual Currency for Purchases on Kindle

February 05, 2013

Amazon.com Inc. (AMZN:US), the world’s largest online retailer, plans to introduce virtual currency that can be used for purchases on the Kindle Fire tablet to entice more developers to create programs for the device.

Starting in May, consumers will be able to use Amazon Coins to buy applications and virtual merchandise sold within games, the Seattle-based company said today in a statement. The company will give customers “tens of millions of dollars” worth of the currency, which will be accepted in the Amazon Appstore.

Amazon has been targeting developers to improve its app store, giving programmers the ability to make more engaging games and help it chase Apple Inc. (AAPL:US)’s lead in the tablet market. Apple’s share of the market slipped to 44 percent from 52 percent in the fourth quarter, from a year earlier, while Samsung’s share more than doubled to 15 percent, according to researcher IDC. Amazon’s market share slipped to 12 percent from 16 percent.

“The Kindle Fire user base is simply under-utilizing the available apps, and this is an attempt to light a fire under those users and create some momentum in downloads and usage,” said Brian Blair, an analyst at Wedge Partners in New York. Blair doesn’t have a rating on the stock.

‘Substantial Opportunity’

Developers will continue to get the 70 percent revenue share from purchases made with the coins. After the coin giveaway ends, customers will be able to buy the tokens using Amazon accounts, the company said.

“Amazon Coins is an easy way for Kindle Fire customers to spend money in the Amazon Appstore, offering app and game developers another substantial opportunity to drive traffic, downloads and increase monetization,” the company said.

Amazon has released tools that let developers add more features to games for its tablet, including tracking high scores and monitoring awards won during play. The company also rolled out in-app purchases in April -- enabling programmers to charge for digital content and subscriptions within applications.

In-app features provide extra revenue for developers, which take a 30 percent commission from every in-app purchase on Amazon’s site.

Even with its new features, Amazon is playing catch-up with Apple and Google Inc. (GOOG:US)’s Android mobile operating platform. Amazon currently has more than 68,000 apps in its store, compared with 4,000 when the store debuted in March 2011, the company said. Google and Apple have about 700,000 apps apiece in their stores.

“We do not expect Amazon Coins to drive tremendous growth,” Kerry Rice, an analyst at Needham & Co., said in an e- mail. “The best way for Amazon’s Appstore to compete with those of Google and Apple is to have more apps,” said Rice, who has a hold rating on the stock.

Amazon shares rose 2.7 percent to $266.89 at the close in New York. The stock has risen 6.4 percent this year, compared with a 6 percent gain in the Standard & Poor’s 500 Index.

To contact the reporter on this story: Danielle Kucera in San Francisco at dkucera6@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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Companies Mentioned

  • AMZN
    (Amazon.com Inc)
    • $324.91 USD
    • 1.23
    • 0.38%
  • AAPL
    (Apple Inc)
    • $524.94 USD
    • 5.93
    • 1.13%
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