• by Mark Walsh  @markfwal, April 25, 2011

With the launch of its upgraded Nook Color e-reader today, Barnes & Noble has added more pressure on Amazon to introduce its own tablet -- in color.

There's little question, the black-and-white, single-purpose Kindle still dominates the e-reader space. Data from IMS Research last month showed Amazon had nearly 60% of the market, with Barnes & Noble the next closest, at 11%.

But the color version of the Nook and the expansion of its eBookstore to 2 million titles helped Barnes & Noble increase its share by three percentage points last year. With the addition of features including an Android app store, email and support for Flash to the Nook Color at $250, the device is set to grow sales and gain further market share this year. Besides the Kindle and other e-reader rivals, the upgrade also positions the Nook to compete more closely with the higher-priced iPad.

Amazon CEO Jeff Bezos has long maintained book reading is important enough that it demands its own specialized device, hence the Kindle. The popularity of e-book downloads for the iPhone and iPad has shown people are certainly willing to read books on tablets along with watching movies or TV shows, Web browsing and other activities. Barnes & Noble is straddling the e-reader/tablet worlds with the Nook Color, but pushing more toward the latter with the latest improvements.

Amazon recently launched its own Android app store and has released a lower-priced, ad-supported version of the Kindle as it morphs increasingly into a digital media business. "Think about it, the person likely to buy a low-price tablet that is optimized for reading is the ideal Amazon customer, wrote Forrester analyst James McQuivey, in a blog post Monday about the Nook update. Since last year, he has suggested the online retail giant introduce a Kindle tablet to blunt competition from the iPad, even giving it a fictitious name: the Kindle Flame.

With heightened competition now from Nook, and its own growing push into content with apps, film and TV downloads, and its cloud-based "media locker," it makes more sense than ever for Amazon to roll out its own tablet to consume all that stuff on. It could even continue to offer an e-reader-only version of the Kindle for those, like Bezos, who prefer that option. The Amazon CEO seems to have softened his stance against advertising; perhaps he'll do the same regarding a multipurpose tablet.