Amazon's Steady Progress Towards Building A Mobile Eco-System

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Amazon's approach to products is an amazing case study in product management. It's methodical and systematic approach has conquered many new areas since the online-bookstore first launched in the 1990s. Amazon's progress at building new products from scratch is nothing short of remarkable. Amazon's Cloud Infrastructure, the Kindle and its online marketplace have been big bets that have transformed into Billion-dollar businesses in their own right.

And now Amazon is setting its eyes on the mobile eco-system, but its approach to this new market is not based in hype, as is so much of the mobile ecosystem these days, but in a steady stream of services that it adds and tweaks until it gets it right.

Last week, Amazon announced a new Ads API in beta. This API brings a much-needed Ads eco system to its Android-based Kindle mobile platform. The Ads API allows Apps running on the Kindle to monetize their Apps through the kindle platform. To be sure, other mobile ad providers are already present on the Kindle and are helping App developers monetize as well.

If you look at the other Ad networks like InMobi and Millennial Media, the Ads business is a very low margin (but high-volume) business. Ad networks have to squeeze out every large bit of efficiency from their networks to make money playing the broker in the ad network. But what is a tough, competitive market for everyone else is right where Amazon feels at home.

Amazon's expertise in low-margin, high-volume businesses is well known - From it's online e-Commerce platform to Amazon Web Service, Amazon has built up great expertise in squeezing out small efficiencies in the operational areas, which add up when you scale to Billions of transactions. Another reason this is interesting is because of the enormous amounts of data that Amazon has about its users.

Probably second only to Google, Amazon has been building up data about the millions of customers that use its various services everyday. Amazon probably has the buying history, likes-and-dislikes and interest graph readily available which it can bring to bear on the mobile ads. Combine that with its one-click online shopping checkout service, and you'll begin to realize the enormous potential an Amazon ad network has.

For example, Amazon can allow a merchant (like Nike) to list a new line of shoes online, allow them to run a sales promotion, advertise and generate leads through its affiliate network and mobile ads, and allow a seamless checkout experience for users. From start-to-finish, Amazon will track the sale, and by integrating all these fragmented pieces, Amazon can measure and deliver value to a merchant like Nike. This has enormous potential for both the merchant and the App developers, who should start seeing better and more relevant ads, and integrated e-Commerce actions on an Ad unit. This should take ad monetization to a new level.

Amazon can definitely make this work. They have a rich history of doggedly pursuing a strategy until it works and starts making tons of money. This is a great development for the app eco-system, and also a great incentive for developers to get their apps into Amazon's Kindle App store.