Amazon on Tuesday unveiled a new virtual currency for purchasing apps  , games and in-app items on the Kindle Fire. Dubbed Amazon Coins, the e-tailing giant is positioning its innovation as an easier way to spend money in the Amazon Appstore.
Many analysts have called Kindle products a virtual vending machine. The virtual currency, then, makes good sense for Amazon. As a way to prime the pump, Amazon is planning to give away tens of millions of dollars worth of free Amazon Coins to spend on Kindle Fire apps when the virtual currency launches in May.
Amazon also hopes to woo app and game developers with Coins by driving more traffic to its app store. Amazon Appstore developers will earn their standard 70 percent revenue share when customers make purchases using Amazon Coins.
The Developer's Pitch
"Developers continue to report higher conversion rates on Amazon compared to other platforms," said Paul Ryder, vice president of apps and games for Amazon. "Now we have another new way to help developers reach even more of our millions of customers."
Amazon Coins is the latest in a series of new features and services for developers. Other announcements include in-app purchasing for Mac, PC and Web-based games,
Game Circle, Game Connect, A/B Testing, Adobe AIR Native Extensions, and Amazon Mobile App SDK Eclipse Plugin (beta).
"Everyone recognizes Amazon's success in the e-commerce world -- now the Amazon Appstore has become a major player in the mobile app marketplace," said Misha Lyalin, ZeptoLab's CEO. "Amazon's new virtual currency is designed to open new opportunities for developers and make things easier for customers. This is a great example of Appstore innovation and we want to support it."
Will Consumers Buy It?
Of course, it won't work unless the customers use it. Brad Shimmin, principal analyst at Current Analysis, told us if any company is positioned to make this approach work, it is Amazon.
"First, Amazon has an extremely robust and mature marketplace platform. Secondly, they have established an un-walled garden approach to content and applications," Shimmin said. "For example, you can use apps from the Amazon Appstore on your Android device the same way you use apps from the Google Play store on your Android device. Amazon is a bit of a Switzerland in terms of application marketplaces go, relative to the likes of Apple with iTunes."
Shimmin points out that Coins is altogether different than Google Wallet, which has a much broader scope of intent. Google Wallet aims to get consumers to use their phone to buy retail products on-site. Amazon, by contrast, is trying to forward a method of simplifying and speeding the consumption of Amazon goods on the Kindle Fire.
"The tablet form factor is a preferred method for shopping online. Tablets literally crushed traditional laptop and desktop sales during the holiday season. Amazon is wise to roll out Coins," Shimmin said. "Unlike the Facebook rendition, which in some ways is a solution looking for a problem, this makes a lot more sense given the way people interact with the Amazon Appstore now."
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