Why Amazon’s Tablet Will Challenge Apple In A Way That Google Cannot

The rumours are unstoppable: Amazon (NSDQ: AMZN) is going to unveil a tablet in the next few weeks, and if thehands-on description of an internal prototype by MG Siegler over at Techcrunch are even vaguely correct, then it’s going to be a 7in device with a colour touchscreen running a forked version of Android, at a price around $250.

Note that “forked” bit, because it could be crucial.

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The expectation around Amazon and its entry to the tablet market has been building, partly because it is the first—and possibly the only—company that people think could pose a serious threat to Apple (NSDQ: AAPL) in the tablet space.

Why, when there are dozens of different tablets out there—from Samsung to Acer to Asus to RIM (NSDQ: RIMM) to Motorola (NYSE: MMI) to HP’s TouchPad (very limited stocks only!) to, I don’t know, throw a stone and you’ll hit someone making a tablet—why should it be that it’s only when Amazon comes to the tablet table that people think it will make a difference?

Two simple reasons: Amazon is a conduit to lots of content; and, just as importantly, it already has a way for you to buy content from it. Like Apple, it is one of the 10 biggest merchant holders of credit card numbers in the world (along with companies such as eBay (NSDQ: EBAY), PayPal, Sony (NYSE: SNE) through the PlayStation Network and Microsoft (NSDQ: MSFT) through its Xbox Live system).

Notice the company missing from that list? Google (NSDQ: GOOG). It has almost no relationship in financial terms with the average person. Not surprising, given that it only really got its act together with AdWords to become profitable in 2001, and that all its business is done with customers who are advertisers, rather than “customers” in the form of its users. Yes, it has advertisers’ financial details. But those are a tiny fraction compared to its huge number of users.

By contrast Apple and Amazon are familiar as transaction handlers: Apple has 200 million iTunes accounts, of which a very significant number have credit cards attached. Amazon isn’t quite as big, but for people in North America and Europe, it’s a company they trust with their details.

Yes, yes, but what has this got to do with tablets? Simply that tablets lack what smartphones have: ready-made content. If you’ve got a smartphone then its obvious use is for making phone calls or sending texts – essentially, you create the content. The data-enabled stuff is a bonus.

With tablets, though, that’s reversed. A tablet is a tabula rasa—a blank slate until you get something onto it. Yes, with the standard Android tablet you can do some browsing, and triage your email, and check what the weather is going to be tomorrow on a weather app, but truly, when it comes to content, Android Honeycomb is simply dire; it’s no contest with what you can get in app terms on the iPad. I’ve been trying a Samsung Galaxy Tab 10 over the weekend and while it’s a nice piece of kit, the call for apps that will show off Honeycomb to its fullest draws a silence as wide and deep as the ocean. The most detailed suggestion I got the other day suggested 10 apps, including an office suite (already on the Tab), a Twitter client (there are literally a million already), a keyboard app (there’s already a soft keyboard), Google Music (doesn’t work outside the US), and a browser (Android has one already). So that leaves five more: Google+ (available on the iPad), Pulse (a newsreading app like Flipboard), a sketching app (there’s a zillion on the iPad), a remote control for watching HD content (if you’ve got it on your home network)—and, last but not least, Kindle. From, as you know, Amazon.

For the iPad? Ask and people won’t stop—Keynote (for writing presentations), Garageband (for writing music), Flipboard, iPlayer (the Android Honeycomb iPlayer “app” isn’t—it’s just a redirect to the BBC website). And on and on.

Why are apps so poor on Android? I think it’s the classic problem: users find it hard to pay for apps, because there’s no simple payment mechanism (is it credit card? Google Checkout? Carrier payment?), which makes them uneasy. So good developers can’t get paid, so they don’t develop good stuff, so the Android Market is overrun with rubbish made at the lowest possible cost, because there’s no point killing yourself to not get paid.

(Yes, I know people who have bought stuff for Android will be saying at this point “No, really, you can!” The fact though is that most people see the price and abandon the process because it’s not clear who will be in charge; the stories aboutGoogle setting up payments systems with carriers only confuses things, rather than helping.)

Bringing Amazon in changes all that.

From paidcontent.org