3 reasons why Amazon’s Android Appstore makes the stock a buy (AMZN)

Already stocked with 3,800 apps, Amazon’s (NASDAQ:AMZN) launch of the Android Appstore is planting the seeds for a lot of new revenue at the online retailer. Here are three reasons why the move will likely give Amazon’s stock a jolt.

Already stocked with 3,800 apps, Amazon’s (NASDAQ:AMZN) launch of the Android Appstore is planting the seeds for a lot of new revenue at the online retailer. Here are three reasons why the move will likely be successful and – in the process – give Amazon’s stock a jolt:

1) Developers do the work, Amazon reaps the profits. Amazon will get at least a 30 percent cut of the cost of every paid app they sell. That’s part of what’s driving record profits at Apple Inc. (NASDAQ:AAPL). Developers make the apps, and Apple provides the ecommerce platform where users go to buy those apps. Apple, of course, has to administer and approve hundreds of thousands of apps, but once they’re online, sales – for the most part – take care of themselves.

2) Brilliant recommendations. One of my favorite ways to discover new musicians is by going to Amazon and typing in an artist I like. Amazon’s recommendation engine then shows me similar albums that other customers bought, and the site makes it easy to listen to songs by those artists before I click the buy button. Those built-in recommendations will be a key part of Amazon’s Android Appstore, too. By showing you real-world reviews, and apps that other customers downloaded, potential buyers could end up buying more apps than they otherwise would have. Amazon’s recommendation system has more than 15 years of trial-and-error testing behind it. That could give it a big leg up over Google Inc.’s (NASDAQ:GOOG) own Android Marketplace.

3) Positioning for the future. Despite Amazon’s silence on the issue, rumors are swirling that the company could be working on a Kindle that runs on the Android operating system. That would make the device good for more than just reading books: it would transform it into a tablet computer. The Amazon Appstore would integrate seamlessly with the device, no doubt, and Amazon could then use the Kindle as a distribution point for its online movie sales and movie rental services.

Every time I start to worry that Amazon’s losing relevancy with shoppers, the company does something that makes me feel daft. We should have all seen the Appstore coming. Now that it’s here, though, I’m convinced it’s just the beginning of bigger and better things.

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Rovio stock suddenly becomes hot commodity

Will Rovio sell out or look to go it alone and IPO? Possible suitors aren’t difficult to imagine from Google, Inc. (NASDAQ:GOOG) to The Walt Disney Company (NYSE:DIS). If I were them, I’d be booking a flight to Rovio’s headquarters as soon as possible.

With the news that Angry Birds-maker Rovio Mobile has secured $42 million in Series A funding, Rovio stock has suddenly become another hot stock that investors can’t buy. The funding round was led in part by venture capital firm Accel Partners, which got in early on Facebook, Groupon and AdMob.

Accel’s not quite got the cache of Digital Sky, but the venture capital firm is well on its way. Accel was founded by Niklas Zennstrom – the same Zennstrom who co-founded the file-sharing site Kazaa and the soon-to-IPO Skype.

Zennstrom has a knack for sniffing out up-and-coming tech trends, and he’s apparently pouring a lot of heart into Rovio Mobile. He’ll sit on the company’s board of directors as Rovio looks to transform Angry Birds from a mobile game to a multi-platform global phenomenon.

Already some 40 million users play Angry Birds every month and Rovio boasts that the game is the No. 1 paid app on the iPhone in 67 countries from the U.S. to Kazakhstan and Macau. Talk about a success story. It’s hard to wrap your mind around just how explosive the growth in Angry Birds has been.

Rovio was on the cusp of bankruptcy before starting work on Angry Birds in 2009. The company had made 51 mobile games for other companies, and the time had come – they decided – to start marking their own games. Rovio’s founders thought they’d have to make 10 or 12 games, Wired reports, before coming up with a blockbuster. It only took one.

Now, on the strength of Angry Birds downloads, stuffed toy sales and licensing deals, Rovio’s revenue is estimated at $50-70 million. With just 50 employees, the company’s already profitable, and the fun is just getting started. Angry Birds is available on all of the major mobile platforms (outside of the Blackberry), and it will be available on major game consoles including the PS3, XBox 360, and Wii next year.

A broadcast cartoon is in the works. Rumors of a movie deal are floating in the ether, and a Facebook App should launch in May. Rovio, it seems, is doing what Zynga hasn’t been able to do. It’s turning itself into more than a mobile game developer. The latest funding round is proof of that, and I’m a believer. Now, I just wish I could buy some shares off a disgruntled employee.

Since that probably won’t happen, the question becomes whether or not Rovio will sell out or look to go it alone and IPO. Possible suitors aren’t difficult to imagine. How about Google, Inc. (NASDAQ:GOOG) or The Walt Disney Company (NYSE:DIS)? If I were them, I’d be booking a flight to Rovio’s headquarters as soon as possible. Accel’s cash infusion may have shut the door on acquisition talks in the short-term, though. Why look for a buyer when the birds are just taking flight?

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App market size forecast for 2011

The global app market size forecast for 2011 paints a pretty picture. Expect a compound annual growth rate of 29.6 percent.

After capturing $6.8 billion in sales in 2010, the global app market is projected to grow at a compound annual rate of 29.6 percent over the next five years, according to a new research report by MarketsandMarkets.

Indeed, MarketsandMarkets expects the global app market to be worth $25 billion by 2015. Based on their numbers, expect the app market size to grow to more than $8.8 billion in 2011. According to the report, North America currently dominates the global app market in terms of revenue, but Asia has an edge in the total number of app downloads. North American mobile users spent more than $2.8 billion on apps last year. That’s not chump change, and it’s a number that’s going to keep getting larger every year.

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