Will Amazon Underground Change Revenue Model for App Developers?

Amazon Underground is a relatively new shopping app designed for Kindle Fire tablets and Android phones. It combines the frighteningly easy Amazon mobile shopping app with over 1,000 free versions of apps and games that would normally cost users money to download.

Amazon is attempting to change the way developers sell their apps. The Amazon Underground model is reminiscent of their Kindle Unlimited plan in which they pay authors by the number of pages readers read of their books. Developers are paid in the same manner, $.002 per minute of engaged user time.

The idea is that this system benefits both the customers and developers. Customers are no longer turned off by upfront prices — or bombarded by in-app purchases — and developers have the potential to reach a broad audience who would normally bypass their games because of the price. Also, developers don’t have the fear of losing a customer when the game stops to ask for an in-app upgrade.

However, until Amazon Underground was introduced, in-app purchases, annoying as they may be, were the best ways for apps to turn a profit. When Amazon launched Underground in August 2015, it replaced their original Free App of the Day and offered a small selection of Android apps that they could now access for free regardless of the day.

In-app purchases award developers for creative and engaging work and can motivate them to provide users with more updates to keep them interested and playing longer.

As of March 2016, royalties paid to developers are up 3,600 percent and the customer base has grown 870 percent in the eight months Underground has been available. Another aspect that factored into this growth spurt came during the 2015 holiday season and the sales of Amazon Fire tablets, which came with Underground pre-installed.

This growth is impressive, but when compared to top competitors like Google Play and the App Store, Amazon Underground is still, for the time being, extremely small.

The biggest complaint from Amazon Underground’s second biggest user, Google’s Android, is that they must complete a multi-step download process to get the app installed. For competitive reasons, Google does not permit apps that also sell apps in their Play Store. Apple iOS users cannot gain access at all to Underground.

Amazon admits that Underground isn’t for every app, at least not right now. Short games, for example, that offer a worthy gaming experience for a limited amount of playing time wouldn’t make much of a profit under this model. For now, app developers continue to monitor the effectiveness of the Amazon Underground model to determine where the efforts are best spent.

To show that they have developers in mind, Amazon even provides a free Revenue Forecasting Calculator to help developers determine their potential earnings by answering a few short questions.

Julian Arden, co-founder of Seller Republic, an Amazon repricing tool, has closely monitored Underground’s performance. Arden says, “because Underground is the Amazon shopping app, it’s presumed that the more people engage with underground for free apps the more likely they are to find other things Amazon sells and will end up buying goods other than free apps.”

It is not immediately clear what Amazon is gaining monetarily, but the success of Underground and app developers’ profits depend entirely on the quality of the apps they offer. This type of model pushes for a greater user experience.

As soon as Amazon can provide concrete numbers proving that a game or app on Underground can do as well as it would on any other platform, it will have the potential to permanently break the mold of how developers sell apps and how users experience them.

Do you believe Amazon Underground can change the revenue model for app developers?

[Image via Alexander Supertramp/Shutterstock.com]