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Amazon To Give Away Millions In 'Amazon Coins'

E-commerce giant will launch its own virtual currency for Kindle Fire users in May.

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Taking its book discounting strategy to its Appstore, Amazon plans to introduce a virtual currency for its Kindle Fire devices.

Amazon on Tuesday said that Amazon Coins will be available for use in developers' apps in May. The virtual currency will be usable for purchasing apps and for making in-app purchases, including app-specific virtual currencies but excluding subscriptions. App developers will be able to redeem the coins, which will only be available to U.S. customers, for one cent each.

Developers selling in-game items for Amazon Coins will receive the same 70% revenue share as they would for apps or items paid for in U.S. dollars. In other words, they will receive the same amount of money whether an app was purchased for $2.99 or 299 Amazon Coins.

Claiming that developers report higher conversion rates on Amazon than on other platforms, Paul Ryder, VP of apps and games for Amazon, in a statement said, "Now we have another new way to help developers reach even more of our millions of customers. Amazon Coins gives customers an easy way to spend money on developers' apps on Kindle Fire in the Amazon Appstore -- and we're giving customers tens of millions of dollars in Amazon Coins to get started."

[ Should Amazon be concerned about the taxes on its coins? Read The Taxman Cometh For Big Data-Driven Companies. ]

Amazon has not said how it will distribute this bounty. But the giveaway amounts to an Amazon discount program that will only cost the company 70% of the tens of millions of Amazon Coins it distributes -- that's cash value developers will be able to redeem. It will also serve as a loyalty program because customers can only spend their Amazon Coins on Amazon Appstore goods.

Amazon said that developers should have their apps submitted and approved by April 25 to benefit from this windfall. No additional work is required to make digital goods purchasable with Amazon Coins, the company said.

Not all virtual currencies succeed. Last summer, Facebook backed away from its Credits currency, which it previously provided for users to buy gifts through the Facebook Platform and for exchange across third-party apps. The problem was that many third-apps had their own virtual currency systems, which made for unnecessary currency conversions and fees. Facebook ultimately opted for a simpler model that relies on local currency support and in-app payments.

Amazon has been working to enhance its app ecosystem and developer services since it was launched its Appstore in early 2011. Last July, it introduced Game Circle, a social gaming and sync service. The following month, it launched Amazon Game Studios, a social gaming subsidiary. The company has also introduced A/B Testing, a service that helps developers understand and improve game monetization.

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