Amazon: Game Downloads, Webinars, Positioned to Attack Google

Back in August, I suggested that Amazon was strategically pushing far past its retailing business model. If you include any sort of electronic retailing, some new business areas that the company is undertaking provide additional support of the view. Two of the latest are downloadable games and selling webinars. But it also seems logical to ask if be long before the natural outcome of Amazon's cloud activities and massive information on consumers is a set of crosshairs on Google.

It was big news that Amazon was entering the used game market, which could eat into one of the most profitable aspects of GameStop's operations. But there another aspect of gaming where Amazon's activities have been less noticed: downloading PC video games. The announcement of game downloading came in early February on one of the company's blogs. The beta version is already available, with 600 available for a 30 minute online trial and then purchase and download. All prices are currently below $10.

Titles like Jewel Quest III and Sparkle are not the first tier games that crowd the shelves of retail stores. But many of these second tier titles have been popular over the years, and Amazon is likely just testing the waters -- and already creating some significant competitive advantage. For example, Jewel Quest III is available for download at Amazon, but not at GameStop, although the latter does sell it. Amazon's price for downloading Sparkle is about a third of what GameStop charges for electronic delivery.

So where is Amazon going with this? Clearly the company plans on expanding the service, as it is already advertising for a senior developer for games distribution. One thing that has hindered distribution of first tier games is bandwidth, given their often massive size. But telecom and cable service providers have been working to aggressively boost what is available to consumers, so that problem is diminished. (At 50Mbps, a 500MB download takes under 90 seconds.) Given the economic leverage and advantage that Amazon can bring to bear, it's not hard to imagine seeing front-running games available on the site. That also brings up a natural question: how long before there is a game console version of the Kindle, with titles available wirelessly?

The other front for Amazon is webinars. So far, these seem to be created for selling through Amazon. But, as happens with so many capabilities at the company, once developed, why not expand it to provide webinars for third parties? Particularly when your new marketing specialist has responsibilities including vendor management, promotion, and working with sales.

The real interesting development will be if Amazon starts connecting businesses with information they wouldn't otherwise have. Given that Amazon is making a big push into cloud computing. All those e-books could turn into virtual libraries, and, of course, providing an insight into consumer behavior would be easy, and probably worth a whole lot of money.

Then it's just one more step for the company to roll out its robust advertising platform as a service to virtually everywhere on the web. It may be that Google is gunning for eBay and PayPal, but you could easily and reasonably argue that Amazon's sites are set on the online ad king. Think about the advantages Amazon would have over Yahoo or Microsoft:

• It already has a powerful advertising business on its own sites (though I haven't seen numbers from the company that explicitly break it out).
• The behavioral information the company collects on consumers goes well beyond virtually any other advertising network because it includes what people actually buy. That makes it more relevant than competitors.
• When it comes to online, the company has an efficient and profitable business that does not rely solely on advertising, meaning that it has flexibility in how it prices and is no one-trick pony.
• Products like the Kindle, while important to the company, also distract competitors get so much media attention that they distract competitors from a more sober assessment of the company's overall goals and potential.
• Amazon makes far lower profit margins than many other tech companies. Although that would ordinarily seem to be a disadvantage, it also means the ability to operate in a leaner fashion and lower earnings expectations of investors. That translates into more discipline and less pressure.