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Amazon’s new ad-supported Kindle, called Kindle with Special Offers, will retail for $114, or $25 less than Amazon’s Wi-Fi only Kindle. The company says:

Special offers and sponsored screensavers display on the Kindle screensaver and on the bottom of the home screen—they don’t interrupt reading.

However, some wonder why the price cut isn’t more generous. Dan Costa writes:

Why $114 and not, say, the market-killing $99? Amazon hinted at reasons in our meeting, but basically it said that Kindle sales have been very price sensitive. Reducing the price to $139 lead to a huge spike in sales. A $25 price cut should be enough to do the same. Plus, I think it needs to save a big announcement for the holiday season. It isn’t likely we will see another Kindle this year—at least not an E Ink-based reader, so a big price cut in the fall would be just the thing to make the Kindle the hot gift this holiday season. Again.

Dan Frommer notes that, though $25 may not seem like much of a discount, it could still take time for Amazon to recover that money:

Will Amazon eventually be able to sell enough ads and deliver enough impressions to make the subsidy more than $25? (About 2,500 impressions per device at $10 per 1,000 impressions. If you see an average 10 ads per day, that’s still 250 days of use at that ad rate before Amazon breaks even on the $25 savings.)

Amazon’s move is particularly interesting since it’s the sort of thing people have been expecting from Google’s Chrome netbook or similar devices. Mobile analyst Chetan Sharma noted:

While Google is focused on Facebook, Amazon is coming in from left flank. Beautiful.

The Kindle was already an example of sponsored connectivity–a trend I’ve previously covered. If it come to include even more sponsorship, that model could become the way of the future, argues Jason Gallagher:

Amazon should be credited for finding a way to slide another source of revenue into the world of the Kindle. The revenue generated from the ads, let alone if anyone actually clicks on them, should more than cover the $25 discount per unit. Plus, Amazon is appealing to the deal hunter in everyone. This practice goes along with the reason why companies like Groupon are so successful; they offer deals that are actually useful (at least once in a while).

The real amazing part is that no other company put this together sooner. If Amazon and the Kindle with Special Offers are successful, there is little doubt other companies with mobile devices could follow suit.

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Tagged: Computing, Google, advertising, Amazon, Kindle, business models

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