Amazon.com, the largest online retailer, has invested in a music-focused social network that sells tracks at prices dictated by their popularity.

AmieStreet was launched in October by three American university students. The site breaks with the flat pricing plan used by Apple’s iTunes store, the dominant force in digital music, by using a variable pricing model where more popular songs increase in price.

A new song on AmieStreet.com is initially free to download and is given a starting price after users begin to download the song. The price rises to a maximum of 98 cents, just a shade below the 99 cents charged by iTunes for the vast majority of its catalogue.

The platform is open to anybody to upload tracks to sell.

Users of the site who recommend their favourite tracks to others are rewarded by receiving credit for the purchase of additional music.

Details of Amazon.com’s investment in the site, as part of a first round of funding, were not revealed.

However, the technology behind AmieStreet could now figure in the online giant’s own music ambitions.

Amazon announced plans in the spring to open its own online music store by the end of the year and has formed a partnership with EMI Group, the British-based record label whose artists include Madonna and The Beatles.

It is possible that AmieStreet.com's variable model could win wider industry support. Music labels are openly critical of Apple’s policy, claiming that the flat cost of tracks on the site has capped revenues.

Last week, there was also evidence that consumer discontent with the way that much-older tracks cost the same as the latest hits on sites such as iTunes is a driving factor behind soaring rates of internet piracy.

A survey by Entertainment Media Research, the analysts, suggested that, as CDs fall in price, online retailers should adopt variable pricing to safeguard the “internet discount” that has previously been regarded as a key reason for buying online.

In 2006, the price advantage of downloads was the third most significant factor in motivating download purchases, cited by 45 per cent of respondents. That figure fell to 31 per cent this year.

In the same survey 43 per cent of people said that they illegally downloaded tracks, up from 36 per cent in 2006.

The research also underscored the growing importance of social network sites among music consumers. More than half of people polled said that they used social network sites to discover new music and artists.

Separately, Amazon.com, still best known for sales of books and electronics, gave another signal of its designs on wider markets when it said that it will test out grocery delivery in the US.

The site has begun taking orders for fresh produce in Mercer Island, a Seattle suburb. It also dispatched a fleet of 12 delivery trucks from its grocery distribution centre in nearby Bellevue to deliver groceries in one-hour time slots.

Last month, Amazon said that profits more than tripled in its second quarter — usually a quiet period for retailers — in a sign that years of heavy investment in technology could finally be delivering results.

The largest online retailer also raised full-year revenue and profits forecasts as it posted profits of $78 million (£38 million) for the three months to June. Sales were up 35 per cent, at $2.9 billion. Both figures beat analysts expectations.

The group was also boosted by 2.2 million pre-orders for the final instalment of the Harry Potter series of novels, Harry Potter and the Deathly Hallows, in what was Amazon’s largest ever product launch.

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