Amazon, Others Cave to Apple, Remove In-App Purchasing

Bowing to new licensing rules that allow Apple even greater control over its insular device ecosystem, Amazon.com and other electronic booksellers this week released new versions of their apps for iPhones and iPads that remove the ability to make purchases inside the apps. For users, it's a serious inconvenience. But for Apple, it's just another power play.

Apple instituted this change so that it could snag a 30 percent cut of all sales by content providers and retailers. That's because previous in-app purchasing links could direct users outside of the apps and to websites that were not controlled by Apple. But by preventing external sales and requiring in-app purchases to go through Apple, the company is preventing these retailers from selling directly to their own customers. Those external sales would not include a 30 percent cut for Apple.

This 30 percent vig is a problem for ebook sellers because the profit margins on electronic content are already razor-thin. Most would simply lose money on in-app purchases if they gave Apple the required 30 percent cut.

So Amazon changed its Kindle app, which is backed by the world's leading ebook store, requiring users to manually visit a mobile web version of its Kindle bookstore in order to make purchases. Apple doesn't even allow these apps to mention this as a possibility, so readers will need to figure that out on their own.

"You can still shop as you always have," an Amazon statement to customers notes, trying to put a positive spin on things. "Open Safari and go to www.amazon.com/kindlestore. If you want, you can bookmark that URL. Your Kindle books will be delivered automatically to your iPad, iPhone, or iPod touch, just as before."

Amazon isn't alone in making the change. Barnes & Noble, which markets the competing Nook ebook platform, made a similar change to its apps for the iPhone and iPad. Google temporarily pulled its ebook reader app, Google Reader, from Apple's virtual store before releasing an updated version that lacks in-app purchasing a day later.

Only one e-bookstore hasn't been affected by Apple's anti-competitive moves: the iBookstore, which is run by, you guessed it, Apple.

On the good news front, Amazon also coincidentally announced this week that Kindle-based subscribers to magazines and newspapers will now be able to automatically deliver many of these periodicals to iPhones and iPads instead of the company's Kindle devices. (Some periodicals, like The New York Times, don't yet support this usage.) These devices provide a superior reading experience for text and can be used outside but lack the color and newspaper-like layouts that can be provided by the iPad, especially. Best of all, this Kindle app update allows Amazon to provide users of Apple's devices with periodical subscriptions that neatly bypass iOS native apps, potentially preventing Apple from cashing in on those app sales as well.

Amazon will announce its second-quarter financial results this evening, and while the retailer has never provided Kindle sales figures, analysts believe that the ebook reader platform now contributes roughly $900 million in revenues each quarter.