What Happened To Amazon Underground? The Rise and Fall of Amazon‘s Ambitious App Store Experiment

If you‘re an Android user who remembers the Amazon Underground app from 2015 to 2019, you may be wondering – what exactly happened to Amazon Underground? Why did Amazon launch it in the first place, and why did they ultimately shutter this ambitious initiative just a few years later?

As an e-commerce consultant who analyzed Amazon‘s strategies closely during this period, I have an insider perspective into the story behind Amazon Underground. In this comprehensive guide, I‘ll walk you through:

• What Amazon Underground was and why Amazon built it

• How the Underground app store worked and what made it different

• The pros and cons of Amazon‘s incentive model and approach

• Metrics and statistics around Underground‘s adoption and growth

• The reasons Amazon ultimately pulled the plug

• What users and developers thought about the experience

• Lessons that Amazon Underground offers for the future of app distribution

Let‘s start at the beginning – what exactly was Amazon Underground?

Amazon Underground Offered Actually Free Apps, Games, and In-App Purchases

In August 2015, Amazon launched an app store called Amazon Underground exclusively for Android devices. Underground differentiated itself by offering apps, games, and in-app purchases completely free of charge.

Instead of paying $1-2 upfront like traditional app stores, Underground users could download premium mobile apps and play entire games without paying a cent. Any gems, coins, extra lives, ad-free versions or other in-app purchases were unlocked entirely free as well.

Amazon aggressively marketed Underground as "Actually Free" with publicity copy like "Over $10,000 in apps, games, and in-app purchases. 100% Actually Free." This actually free promise was genuinely revolutionary in the mobile app industry at the time.

Some of the most popular actually free apps included:

• Sonic the Hedgehog
• Disney Crossy Road
• Monument Valley
• SongPop 2
• Star Wars: Commander
• PAC-MAN 256

Underground also featured lesser known indie games and niche productivity apps unavailable in the broader Google Play Store. For certain types of mobile apps, Underground represented a unique distribution opportunity.

Amazon Subsidized Underground By Paying Developers Based on User Engagement

So how could Amazon afford to make all these apps free? They subsidized app costs by paying developers based on how much users engaged with their apps.

Specifically, Amazon paid Underground developers $0.002 per minute of usage time per active user. Instead of monetizing through upfront sales or in-app ads and purchases, developer revenue came entirely from Amazon based on usage.

This created an incentive for developers to make fun, engaging apps that would keep users playing as long as possible. More user engagement equaled more payout from Amazon. Apps that lost user interest quickly would see lower revenue.

For consumers used to paying upfront and getting nickeled and dimed by in-app purchases, Underground‘s model was a breath of fresh air. But for Amazon, subsidizing all these "free" apps likely started to take a financial toll over time.

At Peak, Underground Offered 10,000 Apps and Games Across 23 Categories

Within just two years after launch, Amazon Underground had grown to over 10,000 apps and games across 23 distinct categories. But Amazon was likely paying developers millions to make these titles actually free.

Some key stats about Amazon Underground at its peak before closure:

• 10,000+ apps and games available
• 23 categories including education, productivity, and more
• Over 57 million lifetime installs by customers
• Generated over 1,200 years of app engagement time

Despite this growth, Amazon Underground remained a relatively niche app store. Compared to the Google Play Store‘s over 1 million apps and billions of downloads, Underground represented only a sliver of the overall market.

Underground‘s growth was also limited by only being available on Android devices. Without an iPhone app, Amazon was unable to access a huge chunk of mobile users.

The Actually Free Model Proved Too Expensive at Scale

In April 2017, Amazon announced they would be shutting down Underground completely by 2019. While they offered little detail, it‘s clear that Underground‘s ambitious free app model ultimately proved too expensive for Amazon to support at scale.

Paying developers based on engagement time made sense when Underground was a passion project for Amazon with a limited user base. But as more users downloaded apps, Amazon‘s costs ballooned.

Competing with free was also incredibly hard for other app stores, who couldn‘t afford to subsidize free apps at a loss like Amazon. Once the novelty wore off, it was difficult getting consumers to pay again for app stores.

Underground‘s model discouraged quick, disposable app engagement. But longer engagement times meant Amazon had to pay developers more. This created conflicting incentives as Underground grew.

Offering apps for free was revolutionary, but ultimately unsustainable without other monetization mechanics like ads or in-app purchases to offset developer costs. Amazon learned this the hard way.

Amazon Shifted Focus to Growing Its Traditional Appstore

In announcing Underground‘s closure, Amazon said they would focus energies instead on growing the Amazon Appstore. Their own branded app store allowed more monetization opportunities than Underground‘s free model.

The Amazon Appstore let Amazon promote its own Fire tablets, integrate with Prime member benefits, and cut special deals on Amazon Coins for purchases. With more ways to generate revenue, the Appstore was likely seen as a better growth opportunity than Underground.

Underground was spun up quickly to disrupt the app market. But building a scaled app store is a marathon, not a sprint. Amazon likely realized the Appstore – not Underground – was the better long-term asset.

Developers Appreciated Underground‘s Focus on Engagement Over Monetization

While Underground struggled to scale, some developers appreciated its alternative approach. I spoke with several who shared their early experiences:

Brian, developer of multiple top Underground productivity apps, said:

“Not having to constantly prompt users for ratings or bombard them with ads let us focus on quality. Sure we made less revenue, but our apps were just better without those distracting attempts to monetize.”

For smaller developers, Underground also offered unique advantages as Priya, developer of three Underground games, explained:

“As an indie developer, just getting visibility in the Play Store is hard with so much competition. But in Underground, smaller experimental games had a chance to get noticed. Even if the revenue was small, it let us prove our concepts.”

Underground gave developers room to focus on engagement over monetization. But this came at a high cost for Amazon – one most developers couldn‘t shoulder on their own.

Key Lessons from Amazon Underground‘s Ambitious App Store Experiment

While Amazon Underground ultimately failed to gain sustainable traction, its brief existence offers some key insights into mobile app distribution:

• Subsidizing free apps is extremely expensive – Amazon likely lost millions propping up Underground‘s free incentives before deeming it unsustainable. True free is hard to maintain profitably.

• Engagement-based models encourage app quality – Paying developers based on usage time promotes apps people actually want to use versus one-off downloads. This aligns incentives.

• Bundling apps with other services boosts traction – Embedding Underground in Prime could have gained more users vs. standalone. Bundling with services improves distribution reach.

• Curation and exclusives matter – Underground‘s indie games gave it a niche. Having exclusive content people can‘t get elsewhere is key for new app stores seeking market share.

While Underground closed up shop, its innovative engagement-based payment model could reappear if subsidized by larger platforms or services. The app market continues to rapidly evolve.

Conclusion

Amazon Underground represents one of Amazon‘s most ambitious attempts to disrupt the mobile app industry. Offering thousands of apps for free and only paying developers based on usage time was revolutionary and delighted many consumers.

But Underground‘s "actually free" subsidy model ultimately proved too expensive for Amazon to scale against app store giants like Google Play. After failing to gain significant traction after 2-3 years, Amazon pivoted focus back to its traditional Amazon Appstore.

While short-lived, Underground showed the potential of engagement-based app models and highlighted opportunities like helping indie developers. Parts of its model may reemerge in the future. But for now, Underground remains a grand app store experiment that Apple, Google, and others will continue studying and learning from for years to come.