Amazon's announcement yesterday that it would offer a specially priced Kindle subsidized by advertising, the "Kindle with Special Offers," may have been unexpected but it was in some ways inevitable. The idea of an ad-supported device has been out there for a while, and with a number of false starts.
Those with long range to their wireless memory will recall that in the age of the "MVNOs" of the mid 2000s, just about everyone had a "better idea" for mobile models. Somewhere here I still have my review unit of the Amp'd device. Well ahead of its time, this entertainment and youth-oriented 3G mobile service put video and music at the center of the mobile experience, and it was unabashed in its devotion to mobile advertising.
While the pricey service was not "ad-subsidized" in a direct way, that was part of the model its founders expected to help pay for the fat pipe necessary to keep the video content flowing to users. One company I covered a few times back in the day, Xero Mobile, had targeted the college market specifically to distribute mobile devices where their bills would be reduced by credits they gained from viewing ads. Watch an ad, get some of your monthly bill reduced. I recall that the entire scheme was thwarted a bit by a complex math that put a ceiling on how much of a bill the users could have forgiven each month.
Needless to say, these plans fizzled and died on the vine. Consumers and advertisers had no real trust in these models. Mobile advertising generally felt untried and intrusive. The companies had no track records in a field where people needed signs of stability in order to buy in. And so on.
But oddly, after all of that history of false starts, Amazon's plan seems much more viable for both consumers and advertisers. Amazon is offering a $114 model of the Kindle that will include sponsor messages and special offers on screensavers. The actual in-book experience is not interrupted, the company assures everyone. The advertising essentially forms a wrapper via screensavers and a repository of deals. Wisely, Amazon positions this as "offer-supported," not "ad-supported." In that sense they are riding the current Groupon/Livingsocial wave of marketing that leads with the deal. Among the first offers will be that famous Amazon $10 for a $20 gift card, as well as $6 for six audible books. Generally Amazon is using its own properties to set the example of what a value-driven offer looks like. So far as I can see in the initial list only one product, a $50 Roku player, is the only non-Amazon offer. To be sure, Amazon makes out on the Roku as well, since that device carries Amazon on-demand multimedia content.
Nevertheless, Amazon is offering advertising space on the Kindle, but with an important twist. VISA, Olay, Buick and Chase will have placements on the screensaver that pops up in moments of inactivity. As Kindle owners well know, the screensaver on a low-powered e-ink device essentially stays on when the gadget is idle. So these sponsors will get tremendous longevity and exposure from their spots. The brilliant twist in all of this is user choice and feedback -- or at least the illusion of choice. The user gets to vote on favorite ads to display. The cagily named "AdMash" tool will present the user with one of two sponsored screensaver options. "Screensavers with the most preferred votes qualify to become sponsored screensavers," Amazon says. Exactly what that means is not entirely clear to me. To what degree the consumer will really be determining what she sees on her device isn't spelled out. There is another user preference tool that will let Kindle owners declare what they want to see more or less of in their screensaver ads, whether it is literary references, photos, illustrations, people, etc. For advertisers, of course, this creates an invaluable feedback loop about creative.
Rhetorically, Amazon's pitch for the subsidized Kindle is ingenious. From leading with deals rather than ads and emphasizing user-gen keywords like "mash," the whole package is remarkably well-tuned linguistically. It is a bit of a ruse, of course, in that the actual level of user control is unclear. How and how much this feedback really affects experience is TBD, I guess. And an "offer" is an "ad."
Beyond language, however, Amazon is coming at the idea of an ad-subsidized device from the right direction. It has already established trust in the market, and the core value proposition of the Kindle e-reader is familiar and unassailable. The company understands consumers needing to feel in control of a personal device, so the sponsorship model is deliberately limited and contained. I am not entirely convinced these moves are enough for many consumers, but I imagine it will be for enough of them. Whether the company can achieve the necessary scale is going to be an interesting question. Amazon has been famously tight-lipped about the actual unit sales of the Kindle. How can they keep a lid on the metrics around the Kindle with Special Offers if they have sponsors to satisfy?
Still, while the pitch seems right, the pricing does not. For just $25 more I can get a Kindle without any advertising. Granted, Amazon is counting on users perceiving the "Special Offers" as the promise of a longer-term savings, but I don't know if the initial model makes that case well enough. If as a user I could count on persistent discounts for my e-books, for instance, then the long-term value of the device would be clearer. My sense is that if you are offering a sponsor-subsidized gadget, then the core activity of the gadget (the media) needs to be discounted in some way, not the basic price of the unit. Over time, I think the base price will have to come down and Amazon will have to make it clearer that the sponsorships are reducing the long-term cost of media consumption. Then you have a model at real scale.