If you’re not one of its million users, then you’re probably asking “What is Stanza?” Stanza is an electronic book application for the iPod/iPhone available for free through the Apple App Store. It’s not the only free eBook application, but it’s the one that is dominating the market, probably because it wins out on ease of use and capability. And as of 30th December it has a million users.

Yesterday, I spoke with Neelan Choksi, COO of Lexcycle, the company that brought Stanza to market. Lexcycle is a  recent start-up, but the team behind it have been building software together for a decade and have extensive business experience. They dominated the iPhone eBook market quickly through a combination of good design and guerrilla marketing. The company runs an active user forum and makes extensive use of social networks in order to provoke feedback on its application -which it responds to very quickly.

Choksi noted that users are varied in their demands and unpredictable in how they use the product. In respect of colors, for example, most users choose black type on a white background, but others choose green on black (like the old IBM terminals) and some choose bizarre combinations like black on red. The Stanza experience is not the Kindle experience and doesn’t pretend to be, because the iPhone is not a Kindle. Stanza has won plaudits from the visually impaired because it let’s you set the font size (and the font too) to apparently ludicrous values. It may look goofy, but to the visually impaired, it makes the application usable.

Lexcycle makes its money from ebook royalties and Choksi has been furiously trying to sew up deals with every ebook provider on the planet. Stanza currently has a catalog of 100,000 books (of which thousands are free to download) and this is quickly building to the point where it will have parity with Amazon.

A Moment of Truth For Amazon

From a technology ans market perspective, there’s a very simple question that needs to be asked about the ebook. Here it is:

Does an ebook need a software application that runs on a device (like the iPhone) or does it need a purpose-built device (like the Kindle)?

Imho, the ebook is software and I have little doubt that I’m right about this. There will be some people who are prepared to buy a Kindle (or the Sony equivalent) in order to have a device that’s purpose-built for reading books. But if you can get equivalent functionality from an iPhone or iPod, then you’re not going to be happy to pay over $300 for the Kindle just for the privilege of buying ebooks. If ebooks were difficult to read on the iPhone/iPod then Stanza would already be dead in the water, but that’s not the case.

And, as you would expect, Stanza will not be confined to the iPhone. There’s already a Beta version for Google Android and one will likely be developed for RIM. There are also versions for the Mac and Windows (you may not want to read books on those platforms, but you’ll want to keep your library somewhere. For Lexcycle it makes sense to port it wherever there’s a platform that might be used for reading ebooks.

So for a time there were purpose-built wordprocessing devices, but it quickly became obvious that word processing was a software app, and the word-processing devices went the way of the dodo. The proliferation of an ebook app like Stanza has created a conundrum for Amazon that it is going to have to deal with sooner rather than later. If Amazon doesn’t respond to the challenge that Stanza represents – and the only way I can think of it doing so is to create a similar app of its own – then it will soon be looking at a very dangerous competitor. But if it does build its own ebook app, then it will have to kill the Kindle.

In situations like this companies usually move too late. LexCycle may be a recent start-up, but how long is it going to be before it’s impossible for Amazon to catch up with it?

Not long.