"Advertising is the price you pay for having an unremarkable product or service," Jeff Bezos told shareholders at Amazon's annual meeting only two years ago. With the launch of an ad-supported version of the Kindle yesterday, the Amazon CEO appears to have gotten over his disdain for advertising. And by most accounts, the new Kindle with Special Offers, priced at $114 -- $25 less than the current least-expensive Kindle model -- is just the beginning of a bigger push into the display ad market by the online retail giant.
Speculation is picking up that Amazon will launch its own tablet to compete directly with the iPad and Android devices, and introduce additional forms of ad-supported digital media. The company only last month got into the mobile apps business with its Amazon Appstore for Android, offering both paid and free, ad-supported titles.
But its first major display-ad-based effort marks a leap into the unknown by slapping ads on books -- well, e-books, anyway. That's not a place people are used to seeing ads, and Amazon has obviously taken some pains to try to ease readers into accepting the commercialization of once-pristine pages. Besides lowering the price for the ad-supported Kindle, the company is limiting ads to screensavers and the bottom of the home screen, as well as providing special offers like the many daily deal sites.
Beyond that, Amazon is also giving users input on the types of ads they see though a free Kindle app that lets them choose the most "attractive and engaging" (least annoying?) of two versions of an ad to become a sponsored screensaver. Users can also set ad preferences, indicating they'd like to see more or fewer screensavers that include nature, humor or photography.
Amazon will eventually open offers to third-party advertisers, but at launch, the deals are all from its own site. They include $10 for a $20 gift card and $6 for 6 audible books (normally $68).
But all this can't disguise the fact that plunging into the works of Shakespeare, Melville, Joyce or Proust will now be prefaced by a word from launch sponsors like Buick, Oil of Olay and Visa.
Forget about the classics; even if you're reading a crappy but enjoyable mass-fiction novel, having an ad for a screensaver may not the most welcome user experience. And Amazon has always prided itself on delivering a good customer experience.
And is a $25 discount on the new Kindle enough of an incentive to want to see a bunch of ads in one of the last ad-free formats? That doesn't seem like much of a bargain over the long term. The special offers themselves are more likely to drive sales of the device -- set to roll out May 3 -- given the popularity of sites like Groupon and consumer appetite for deals in general.
But if Amazon is already focused more on making money from selling e-books than the Kindles themselves, giving away the basic model in exchange for turning readers into a captive audience for advertising would be a fairer exchange.
No doubt, Amazon has set the bar high for its first foray into display advertising. "This will be a real test for the proponents of online targeted advertising," noted Ben Schachter, an analyst with Macquarie Capital, in a research note today on the new Kindle. "After all, as far as we know, no company has successfully, at scale, offered free televisions, music players, movie players, etc. for free in exchange for a captive advertising audience. The difference now is the ability to target dynamic ads in real-time."
And don't forget, people who get the forthcoming Kindle with Special Offers can always avoid the ads by turning off WiFi.