Amazon Could Be the Next Big iTunes Competitor

This week’s news of Apple’s enforcement of in-app purchasing should surprise no one. After standing by for eight months as Amazon gleefully grew its e-book business on the iPad’s fertile soil — all while sidestepping the Apple 30 percent tax by redirecting users via browser to Amazon’s own storefront to complete e-book purchases — Apple decided it was time to shut that tomfoolery down.

And for all the cries of lock-in and antitrust, let’s be real: It’s perfectly within Apple’s right to do what it’s done. It’s Apple’s device, after all, its app store, its rules.

But that’s not to say Cupertino made a good move. In fact, Apple could grow to regret its latest actions for a number of reasons, five of which I outline in my weekly update over at GigaOM Pro (subscription required).

Perhaps the biggest reason, in my mind, is that it could force Amazon to create an iTunes and app store alternative of its own.

What exactly does this mean? As I stated a few weeks ago, the next-generation iTunes will no doubt be in the cloud, and will be equal parts content/rights locker,  storefront and recommendation engine.

Some would argue this already exists today, pointing to music services like Grooveshark and Spotify. Others point to backup and sync solutions like Dropbox, Sugarsync or Real’s forthcoming Unifi. While all good solutions, none are the unified commerce, sync and multi-content management solution that a cloud-centric iTunes would represent.

Amazon certainly doesn’t offer this today, but the company has a core set of strengths it could leverage in actually creating one:

Recommendation. Amazon practically invented Internet recommendation, and as Google can attest, its technology works and can scale. An integrated, personalized content and commerce hub would no doubt leverage Amazon’s strength here, though Amazon would have to make that inevitable shift from algorithmic recommendation to social recommendation, as Apple is with Ping.

Commerce. Amazon is the leading online retailer worldwide, period. While this no doubt gives it a position of strength, it still needs to catch up to Apple in terms of applications and content sales. However, just as Apple played off of its leadership position in music sales and portable devices, Amazon can start to build outward from both its e-book leadership and strong online commerce market share while also grow its various other content businesses.

Scalable Infrastructure. Amazon is also a leader in scalable, cloud-based infrastructure, and no doubt would have some significant cost advantages in offering a widely deployed, unified consumer-facing media hub.

Of course, Amazon isn’t perfect, not by a long shot. Its own device, the Kindle, is closed. Its MP3 storefront plays a distant second fiddle to iTunes in music sales. Its video service is actually pretty crappy today and its all-you-can-eat subscription answer to Netflix is more smoke than fire. And it would clearly have to make some acquisitions to make such a business model work (some of the companies I mentioned above would be a good start).

But of all Apple competitors, with the exception of possibly Google (who Amazon would be wise to work with more closely), Amazon may have the best shot at competing with Apple as more content moves into the cloud and Apple looks to extract more money out of those companies in the world of iOS. With Apple’s moves this week, I’m guessing Amazon might actually try.

Image courtesy of Flickr user Elsie esq

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