Amazon, Google: What the New Kindles Could Mean to Their Relationship

As Amazon continues to build its new Kindle mobile tablet devices using Google’s Android operating system and selling them in the same market as Google’s Nexus 7 devices, the two companies could find themselves competing directly more and more in the marketplace.

So will Amazon and Google end up battling in the future, just like Apple and Google have been tussling in the marketplace in the last few years since the release of the first iPhones in 2007? Could the relatively amicable relationship between Amazon and Google sour to the point that they become more like Apple and Google?

It depends, according to three IT analysts who discussed the possible scenarios with eWEEK.

Over time, the budding competition between Amazon and Google in the mobile device market is a bigger threat to Amazon, said Dan Maycock, an analyst with Slalom Consulting. “Google is still making money on ads and search at the end of the day. But Amazon needs the Kindle to continue to be as successful as they have been. The Kindle is a key brick in their house” to sell e-books and continue to drive Amazon’s revenue and profits.

“Google’s Play Store [which sells apps and other products to mobile users] could easily disappear tomorrow and they’re still a multi-billion dollar company,” said Maycock. That’s not the same case for Amazon, which relies on diverse merchandise sales, including its growing e-book business, for its livelihood.

One thing that would likely change the landscape between them is if Google at some point begins offering e-books in its Play Store, he said. “Google selling books ought to be the next interesting thing for them, and when that happens, things might really get dicey with Amazon.

Content delivery is certainly going to be the case [where relationship problems can arise], where they are competing with Google Play and Amazon Prime. That will put them at odds.”

For Google, unlike Amazon, it’s not about devices, Maycock said.

“If HTC or Samsung had launched a tablet [running Google’s Android platform] that did as well as the [Apple] iPad, Google wouldn’t have had to enter this market,” he said. “I think it actually makes them excited to see Amazon launch a product using Android because it takes the pressure off Google to basically have to make a device that’s successful from a hardware and a software perspective.”

And since Amazon officials have a lot riding on their Kindles, they’ll be marketing them big time, said Maycock, which will also be good for Google. “This isn’t hurting Google. It’s helping them because of Android. Absolutely.”

What could complicate things, though, is the possibility that Amazon is threatened by Google in the marketplace at some point and decides to stop using Android on the devices, said Maycock. That’s the same kind of divide that occurred between Apple and Google when Apple announced it would drop Google’s YouTube and Google Maps apps in iOS.

“It was a huge slap in the face to Google when Apple’s new iOS didn’t have YouTube as a standard application and the fact that Apple created its own mapping product,” he said.

Another analyst, Carl Howe of Yankee Group, said the situation shows the challenges of a vibrant “co-opitition” environment, where companies sometimes cooperate and sometimes compete in a marketplace. “Sometimes one leads to the other, and that’s what we’re seeing with Google and Amazon. They start out cooperating because they see it as mutual beneficial, but as they get farther into the market and strategies change, they discover that they become competitors.”

However, the problem is inevitable, Howe said, due to the consequences of Google offering its completely open platform model for Android. “You don’t really have to sign a license to use Android, nor to my knowledge has Amazon done so,’ he said. “And note that not once during [Amazon’s new Kindle unveiling on Sept. 6] did [Amazon CEO Jeff] Bezos use the term ‘Android.'”

So how could things end up?

One problem that could continue for Google is that Android will continue to fragment into unbranded platforms that it can’t control, said Howe. “I’m skeptical that once Humpty Dumpty has fallen apart, as the Android platform is fragmenting, that it’s very hard to put Humpty Dumpty back together again. I would argue in many ways that Amazon has not exactly been Google’s friend because they didn’t license the Android brand.”

Instead, Amazon is using open-source Android without formally licensing it from Google. “This is an Amazon platform” as far as Amazon is concerned, said Howe. “Google brought this on itself. These are the terms that they released their software with. Amazon is allowed to do this.

The hard things about having an open platform is keep everybody marching in the same direction.”

Dan Kusnetzky, principal analyst with The Kusnetzky Group, said that the relationship between Amazon and Google isn’t the only one that both companies need to be worried about.

“They’re both competing with Apple,” said Kusnetzky in an email. “Both are likely to see non-Apple wins as helping their own cause rather than diminishing their own success.”

For Amazon, the Kindles are only a means to an end, said Kusnetzky. “Amazon is selling a portal into their world of services, not merely a device. They are willing to sell the portal with a very slim, or perhaps no, margin because it will more than make up for that shortfall through app, book, video, storage and other revenues.

For Google, the 16GB version of the Nexus 7 sold out in July after proving to be quite popular with consumers.