Will the Ad-Supported Kindle Sell?

While Kindle was hailed as an innovation at its debut, Apple’s introduction has sucked the air out of the room when it comes to tablets. The devices, of course, occupy slightly different niches. Still, it’s not unusual to hear people doubt the Kindle’s staying power in the face of rivals on all side, not the least Apple.
That’s why news that Amazon would roll out an ad-subsidized version of the Kindle ignited debate over whether this was a gamechanger. The early reaction: probably not. Amazon is pricing the ad version at $114, just $25 less than the ad-free Kindle. Amazon is avoiding the dreaded “a word” and calling it the “Kindle with Special Offers.” The idea is to borrow from the success of the daily deals space — Amazon is a major backer of LivingSocial — and use the Kindle to distribute offers like $10 for $20 of Amazon merchandise. The “Kindle with Special Offers” will also come with full-page ads in the form of screensavers and banners on the homepage. Ads won’t appear in books, which would set off all sorts of problems for the company from content owners and likely consumers.
General Motors, Procter & Gamble and Visa are running ads. Amazon is adding a social twist by letting users vote on the screensavers they like best, which also happens to help Amazon target them better.
The reaction on Twitter was decidedly mixed to the notion of getting a Kindle with ads and only getting a $25 discount to $114 for the lowest priced Kindle. Still, Amazon as a data-focused company surely tested out this new version extensively. It also gained valuable insight into the power of deals with LivingSocial’s gangbusters Amazon gift card offer in January that sold 1 million.
Amazon is going a bit back to the future with this offer. There was a time when ad-supported mobile services, like Xero Wireless, were tabbed the Next Big Thing. Will Amazon succeed with this approach, or is it offering very little in return for yet more ads?
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