It looks like Amazon is opening its own App Store on Android using many of the more restrictive policies employed by Apple…

Earlier today, after several tips, we guessed that Amazon may be close to launching its own app store for Android — yes, another Android app store. Sources we reached out to weren’t sure about what exactly Amazon was launching, but many had been asked to sign NDAs about something. Now we seem to know a bit more. And yes, it appears that Amazon is on the verge of launching its own app store for Android.

I think there’s a broader strategy here but to understand that we have to look at Amazon’s other digital media stores on Android.

Google does not want to be a retailer.  The margins are too small, the headaches are too large (returns?) and it’s not a terribly interesting technological challenge.  They sell ads which are high profit and low maintenance and they clearly want to keep their focus on that.

At the same time Amazon IS a retailer and they’re looking at a future where goods are increasingly being sold as pure digital representations.  More importantly they’re looking at a present where Apple gets most of those sales.  So their focus has to be on competing with Apple without completely reinventing themselves. 

That’s where Android comes in.

Amazon is uniquely positioned because they’re the only retailer with existing digital businesses in every Apple market AND the infrastructure to handle Android’s future growth.  That makes them Android’s best bet against Apple.

Which brings us back to the App store.

Google needs to keep the Android Marketplace alive if only to pay lip service to their openness. But by their own admission they don’t make money off it and the user experience is a disaster.  This puts Google between a rock and a hard place because Android needs a better app store but they can’t open a second one.

At the same time Amazon needs Android to stay viable or it can’t feed the company’s other digital businesses.  So it’s in Amazon’s best interest to offer a better App store experience (and in the best interest of carriers to take advantage of that). 

In the end this gives us a scenario where it’s in the best interest of Google, Amazon and the carriers to support an Amazon app store.  If they’re smart they’ll let the Android Marketplace fade into a dark corner of the handset dedicated to enthusiasts while Amazon’s App store rises to challenge Apple in the application space.