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With scaled clouds and connected devices, Google (GOOG) and Amazon.com (AMZN) have entered a new phase in their growing market battle, securing loyal accounts.

Amazon has been taking what you might call a Costco (COST) approach. Costco, you'll note, gets an annual fee from customers and then rebates a small portion of purchases. Loyal customers get far more in their annual rebates than they pay out in the fee, but they're spending that money with Costco so it's a very good business.

That's what Amazon Prime, Amazon's $79/year shipping offer, and its discounted Kindle Fire tablets are about. You get a spending commitment from the customer, up-front, and assure yourself traffic and sales down the road. You can make up the Prime cost in a few Christmas shipments to out-of-town relatives, but then you pick up books and other products on an as-needed basis and suddenly find yourself committed. Or you buy a Fire and find yourself depending on Amazon for "purchase" of all kinds of digital content - not much at Prime is really free.

Extending the reach of this business model to a monthly plan ostensibly competes with Netflix (NFLX) and Hulu, but I think Google is the real target here. Get their money first, and you'll have their loyalty is the Amazon way.

Google built its cloud earlier, and I personally think it has lower cloud costs, per digital transaction, than Amazon, because it has been investing in that cloud constantly. Its strategy is to give first, and drive loyalty that way. If Amazon is Costco, then Google is Wal-Mart (WMT) - you don't have to commit to it, but membership has its privileges.

The big story of 2012 at Google is that they're not just giving things away anymore. It's asking for the commitment of an account. It wants you to sign up for Google Mail and Google Plus, giving them data about your traffic, and in exchange it uses that data to enhance your search experience in a myriad of ways. It's a slower embrace, less a financial transaction than a seduction.

Like Wal-Mart, Google is going after the mass market. And it sees this as a global opportunity, one not limited to those who can afford the up-front expense of an Amazon Prime account. Thus the Google Freezone, launching now in the Philippines, and presumably (after a successful test) elsewhere.

Here's the deal. Go into a sponsored WiFi hotspot (the Philippine effort is with a carrier called Globe) and, while you're in that hotspot, get free access to Google services. Leave Google (or the hotspot) and you'll be warned of charges.

Google says the effort is aimed at "the next billion" Internet users. But there is something else going on here, a model of Google-carrier cooperation that can be extended anywhere. The model should let Google extend the reach of its own fiber network globally, with costs minimized because a flow of customers is assured. That assured customer flow has always been missing from its model in the past, so it's a very positive sign.

Source: Google And Amazon Fight For The Cloud Account