One of the more interesting developments in the Android ecosystem in recent months has been Amazon’s announcement of its forthcoming Android App Store. The web retailer is poised to take on Google on its own turf.

Despite Android’s success in catching and then overtaking Apple in the battle for smartphone market share, the Android Market remains unloved by users, developers and commentators alike. The new web market is a welcome leap forward in this area but it still suffers from a glut of junk apps and, ironically, poor search results.

Google is known to be “not happy“ with the purchase rates for paid apps on the Android Market (here at Rectangular Software, we’re not exactly ecstatic either) and has a number of initiatives in the pipeline to address these concerns.

Amazon spies an opportunity. Google may be kings of search and advertising but retailing remains outside of its corporate comfort zone. Amazon’s Android offering will benefit from targeted recommendations across the site. Buying a book on poker? Maybe you’d also like this Android poker app? Bought an Android phone and lots of MP3s? Perhaps this music player app would be of interest?

Amazon will almost certainly serve developers better when it comes to putting their apps in front of potential buyers – something that is a constant source of frustration on Google’s Android Market with its stagnant top apps lists and capricious search engine. If Android apps are included in the Amazon Associates affiliate scheme (and I’ve been unable to confirm this yet) then developers may also benefit from third parties voluntarily promoting apps on their behalf.

Where Amazon’s proposal has proved controversial is in its approach to pricing. Developers set a recommended price but Amazon is free to apply a discount or even to give the app away for free. Amazon undoubtedly has a much better insight into the most effective price for a given application, and by maximising developer revenues they maximise their own cut, but many developers are understandably reluctant to surrender control of pricing. There will be winners and losers in Android’s pricing lottery and nobody wants their app to be a loss leader for somebody else.

The terms and conditions prohibit developers from setting a higher list price than on the Android Market (or any other app store) so Amazon has effectively guaranteed that it will always have the cheapest price for a given app. The developer will be paid 70% of the purchase price of the app, or 20% of the list price, whichever is greater.

The important thing about this last point is that the developer gets paid even if the app is given away for free. At first glance, having your paid app given away for free and only getting 20% of the list price for each user, rather than 70%, seems like a bad deal but in reality it could be lucrative for the developer. On the Android Market, free apps typically get somewhere in the region of 50 times as many downloads as paid apps. If that ratio translates to Amazon’s store then instead of selling 200 copies at $2 and getting $280 out of it, the same developer could see 10,000 copies given away free and yet earn $4,000.

Apps uploaded to the Amazon Appstore will be screened for suitability and may be rejected. The challenge here for Amazon is to strike a balance between Google’s anything-goes approach and Apple’s sometimes onerous process. This human oversight comes at a cost. Developers will have to pay a $99 annual subscription (compared to Google’s one-off $25 fee) though this is waived for the first year if you sign up now.  Initially Android apps will only be available on Amazon.com (other Amazon sites will likely follow if it is a success).

Google has unveiled several incremental improvements to the Android Market in recent weeks and months. These welcome changes include availability in more countries, support for additional screenshots, longer descriptions, changelogs, related app suggestions, local currency conversion for prices, and carrier billing. All good stuff, but there is still more that needs to be done to make the Android Market truly fit for purpose. Support for even more countries is one thing. The long-awaited web interface is another. These proposed enhancements have many vocal proponents but there are other areas that need to be addressed that haven’t received as much attention.

Android developers currently find it difficult to give away free copies of paid apps, something which is necessary for providing review copies or simply for running promotional give-aways. The obvious approach of e-mailing the .apk file to the lucky recipient is sub-optimal. It’s more work for the user and apps that don’t use the licensing service are susceptible to piracy, while those that do won’t work because the licensing service will not authorise copies that were not acquired via the Android Market. Furthermore, the recipient will not be able to download updates from the Market.

The solution to this dilemma is to allow the developer to generate unique promotional codes that can each be redeemed for a free or discounted licensed copy of the application. Apple’s App Store provides this functionality for iOS developers. For each release of an app the developer can create up to 50 promotional codes. This is a somewhat arbitrary limit but it is certainly better than zero.

Adding this feature to the Android Market has obvious advantages for developers and for users who will have the opportunity to download free or discounted apps. If it leads to developers selling more apps there will also be financial rewards for Google as they will be taking their 30% slice from a bigger pie.