• by Mark Walsh  @markfwal, October 8, 2010

Reports that Amazon plans to jump into the app store race with its own app storefront for Android-based phones at first glance looks like bad news for Google. Here Google is just starting to gain momentum with 80,000 titles in its Android Market -- and along comes the Web's retailing Goliath to eat its lunch on the very platform Google created.

Even though Amazon is starting from scratch, it brings powerful assets to the app table, including existing billing relationships with 80 million consumers, a wealth of experience selling everything online from MP3 downloads to groceries, and a strong reputation for customer service. Whenever Amazon opens up its app store, it should hit the ground running.

Google, by contrast, hasn't shown much aptitude for online retailing to date. The Android Market has often been faulted for being disorganized and ill-structured for app discovery. Google's other attempt at online retail with Nexus One smartphone earlier this proved to be a flop.

Jeff Bezos must be rubbing his hands together looking at the opportunity that awaits in app-land. Gartner has forecast that mobile app download revenue will grow from $4.2 billion last year to $29.5 billion worldwide by the end of 2013.

While a rival Amazon Android store would presumably cut into Android Market sales, a recent Nielsen study showed that Android owners have a clear preference for free apps, downloading 3.5 apps for each they buy. They're also more open to advertising in apps than their counterparts using the iPhone, BlackBerry or Palm devices. That plays to Google's strength in ad-based monetization -- a model in which Amazon has shown little interest or capability to date.

It's not clear whether Amazon might offer any free, ad-based apps, but if so, it could open the door to Google serving ads in them via its mobile ad network. But in the larger view, Amazon launching an Android app store could add to the platform's overall appeal and help propel its market share gains against Apple's iOS and other smartphone operating systems. And that would suit Google's long-term interests.

If Google is still nervous about Amazon encroaching on its turf in the short term, it could always go out and try to snap up an independent app store like GetJar, which boasts more than 70,000 apps and 1 billion downloads.

Google laid out $750 million to buy mobile ad network AdMob last year, so it's not hard to imagine the company going the strategic acquisition route to bolster its position in mobile apps. Especially since an Amazon-Google partnership doesn't appear to be in the works.