Amazon and Wal-Mart Scale Apple's Walled Garden With HTML5

Talk about an interesting day on the Apple (AAPL) iPhone and iPad ecosystem front. First, Amazon (AMZN) introduced what it called the Kindle cloud reader, which is really an HTML5-based way to route around Apple's effort to skim e-commerce revenue from app vendors. Then Wal-Mart (WMT) rolled out a new HTML5 Vudu video streaming app.

For all its strength, Apple is also in a dangerous, maybe even desperate, situation. Google (GOOG) Android smartphones have taken the global market lead from the iPhone and the iPad is under attack. But the biggest fundamental threat has been HTML5 apps, because they would break important bonds Apple has placed on its customers. The company has finally pushed others in the media business far enough for the danger to turn palpable, not just theoretical.

A chill wind kicking up
Apple partisans often dismiss the idea that the company could face trouble. In one sense, of course, they're right. It's not as though tens of millions of customers will suddenly walk away and take up Android devices.

But trouble is relative. If Apple was simply comfortable with taking a good piece of market share and raking in money, there would be no issue. But Apple's always been far more ambitious. It wants to own the mobile market its way. That's why Apple is trying every legal trick possible to keep Samsung Galaxy Tabs and Motorola (MMI) Xooms out of Europe via arguments that it essentially owns the tablet shape and form.

People originally dismissed what Android could do in the smartphone space. Now it has the biggest market share. Unless Apple can use patents to block Android hardware from entering the U.S., as it is trying to do before the International Trade Commission, it's already lost the opportunity to dominate smartphones. Tablets might easily be next.

Where do you think you're going?
A second and more important issue is holding on to what it has. Locking in a high-margin market is a great strength, and Apple has done that with more than design. Want an app? You have to get it through Apple. Want to buy some music or an e-book? In theory you can buy it from someone else, but Apple wants to get as much of those sales as possible, or put competitors at a disadvantage by taking a 30 percent cut of their sales.

Apple fans argue that it's only fair because it's Apple's store. That is rationalization. On the software side, Apple insists that it has to be its store or nothing. Don't argue protection from malware or ensuring quality, because there are other ways the company could do that. This is all about controlling the business.

Originally, Apple wanted to insist that media sales would have to take place through its app store. The company backed down for two reasons: some large and important players in the publishing industry got upset and there was the distinct possibility of them going to the Department of Justice and complaining about monopolistic practices.

Leaving the barn doors open
That's what makes HTML5 applications so dangerous to Apple. They take the control of software out of the company's hands -- and out of Google's, for that matter. With HTML5, software becomes independent. You don't have to own a particular operating system to run an app so long as your browser supports HTML5. Even Adobe (ADBE) is back in the iOS game with its Edge HTML5 authoring tool.

HTML5 not only changes the dynamics for Apple, but for everyone. A smart retailer would build an independent apps marketplace where it could eventually become a central place to find mobile software that will run on virtually any phone. Just as Amazon has been doing. The Financial Times already has a well-regarded HTML5 version. Now Amazon and Wal-mart have followed with their own (and admittedly quite different) HTML5 apps.

With books and video breaking loose of Apple's control, at least in theory, the company has that much less to work with. If people want to shift platforms, their content can come with them. That makes the high-growth future of Apple a lot cloudier.

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