Amazon Adds In-App Purchases to Woo Developers Away From Apple

Amazon.com Inc. (AMZN), the largest Internet retailer, will start letting users make purchases within the applications sold in its online store, matching a feature offered by rivals Apple Inc. (AAPL) and Google Inc. (GOOG)

The new software enables developers to charge for digital content and subscriptions, Amazon said today in a statement. Walt Disney Co. (DIS), Conde Nast, Gameloft and Dow Jones & Co. will be some of the first participants after testing out the service with Amazon over the past three months, the company said.

“Allowing for in-app transactions is now basic functionality for app stores, and this is necessary to help Amazon even the playing field,” said Colin Sebastian, an analyst at Robert W. Baird & Co. in San Francisco, who expects Amazon shares to outperform peers. “Without this, I think Amazon’s app store would be at a disadvantage.”

By making it easier to charge for items within apps, developers may be more likely to write software for Amazon’s store. The feature also provides extra revenue for the retailer, which will take a 30 percent commission from every in-app purchase. The apps are part of Chief Executive Officer Jeff Bezos’s strategy to increase demand for Amazon’s Kindle Fire tablet and other devices, as well as digital content in general.

Amazon, based in Seattle, is playing catch-up with Apple and Google with its app store. It currently has about 34,000 apps, compared with 4,000 when the store debuted in March 2011, the company said. Google and Apple have more than 450,000 apps apiece in their stores.

Revenue Growth

Selling items from within downloadable software will generate $5.6 billion in revenue in 2015, up from $970 million last year, according to research firm IHS.

Amazon is seeking more content for its Kindle Fire, the main challenger to Apple’s iPad. The company sells the device at a loss, aiming to make up the difference by selling music, movies and apps for the tablet. Amazon may make $136 on each Kindle Fire, thanks to movie and book downloads, according to Ross Sandler, an analyst at RBC Capital Markets in New York.

The new feature will use Amazon’s one-click purchasing, letting consumers buy an item without having to exit the application they’re using, Aaron Rubenson, director of the Amazon Appstore, said in an interview.

“A number of developers have indicated that this technology is important to their business models,” Rubenson said. “For apps that really need this to be viable, this is an important step. It will allow us to bring new apps to the store.”

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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