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Introducing Amazon Coins

On February 5, 2013, Amazon announced the upcoming May launch of Amazon Coins, a virtual currency for its US customers to purchase apps, games and in-app items on Kindle Fire. Coins can be redeemed by content vendors for actual dollars. Specifically, each Amazon Coin will be redeemable for 1 cent.

What will the Coins mean for Amazon’s community?

According to the company, the Coins represent “an easy way to spend money on Kindle Fire apps and games. They’ll be able to purchase as they do now, but with the ability to choose to pay with a credit card or using Coins.” For app developers, the Coins are “another opportunity to drive traffic, downloads, and increased monetization.”

Paul Ryder, Amazon’s vice president of apps and games, commented, “Developers continue to report higher conversion rates on Amazon compared to other platforms. Now we have another new way to help developers reach even more of our millions of customers.”

Industry observers argue that the Coins could be one of the most disruptive services to be introduced to the Android community. According to Forbes contributor, Ewan Spence, “As it stands Coins is targeted at buying applications, but if you look beyond that, there is a huge potential for disruption in the Android ecosystem which could reward Amazon, Android developers, and the consumer.”

An economic perspective

Further on in its announcement, Amazon also said that as part of the launch, it will be “giving out tens of millions of dollars worth of Coins” to users. This is a bit strange, as there are few companies that borrow money just to return it to customers and suppliers.

According to Slate writer, Matthew Yglesias, this is a brilliant move that demonstrates Amazon understands the underlying economics of the technology platform wars better than its rivals. Yglesias comments that:

“Amazon’s strategy is more like China’s [currency manipulation] or an aggressive program of quantitative easing. By printing money and putting it in the hands of Kindle Fire owners, Amazon will increase the demand for Kindle Fire content. More importantly, because Kindle Fire developers will expect higher future demand, they’ll have an incentive to invest in creating things for people to buy. It’s a developer subsidy, but with several advantages over [the competition].”

Why use Coins?

At first glance, this seems to be a questionable move on Amazon’s part. After all, the company has millions of credit card numbers already on file, so why go to the trouble of creating a new, virtual type of payment system?

Amazon spokeswoman Sally Fouts says, “Amazon Coins gives customers an easy way to spend money on apps on Kindle fire, and that’s a great thing for developers who want to make more money.”

Restrictions on the coins include the fact that they can’t be used to pay for things on Amazon proper. The currency can only be used for apps and games on sale on the Kindle Fire. For the time being, only US customers can use and receive Amazon Coins on the Kindle Fire.

Summary

In early February, Amazon announced the May release of Amazon Coins, a virtual currency which will be available to Kindle Fire customers in the US.

CIPP Exam Preparation

In preparation for the Certified Information Privacy Professional/Information Technology (CIPP/IT), a privacy professional should be comfortable with topics related to this post, including:

  • Privacy expectations – the consumer perspective (II.A.a.)
  • Privacy expectations – organizational practices (II.A.b.)
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