Is An Ad-Supported Kindle a Good Proposition?

About a week ago, Amazon announced the an upcoming release of a cheaper Kindle on May 3rd for US$114 that will feature ads on the home screen (as a small banner at the bottom) and as screensavers (full screen advertisements when the device is not in use). Amazon will also push special offers of its own products through the device such as discounted Amazon gift cards or discounted bulk purchasing of Audible audiobooks.

In a nutshell and in theory, these ads and offers should not impact the regular reading experience.

In terms of price, the ad-supported Wi-Fi Kindle is $25 cheaper than the regular Wi-Fi Kindle without ads. Maybe a saving of $25 is a big deal for some people but personally I don’t see this as a fair deal. Amazon stands to gain a lot more from ad revenue over the lifetime of ownership of the device and obviously the longer that term of ownership the more money Amazon could potential collect from its advertisers.

Of course, Amazon would want to recoup as much of the discount as possible or even more to cover the cost of manufacturer a Kindle which it reportedly sells at razor thin margins or at a loss to entice consumers to get into the eBook market. Therefore, it should not be surprising that Amazon has not offered to remove ads from devices once the units have broken even similar to how mobile phones can be unlocked from a carrier once a contract has concluded. Also, for heavy users of the built in global 3G connectivity it might also help to pay the bills for those carriage costs.

Aside from all of this, Amazon really needs to be gunning for the $99 price point. It wasn’t that long ago when a Kindle would set you make several hundred dollars but triple digits are a significant psychological barrier. I’m sure we’ll see that price point before the end of the year.

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