Amazon is aiming to broaden the e-reader market with a cheaper, ad-supported Kindle. But can that help fend off the challenge from tablets and other e-readers?
Amazon.com is offering a cheaper, ad-supported Kindle. Will
that make a difference in the e-reader wars?
Amazon CEO Jeff Bezos, in a
placed prominently on the online retailer's landing page, suggested
that a Kindle with "special offers and sponsored screensavers" will help "make
sure that anyone who wants a Kindle can afford one." Buick, Chase, Olay and
Visa are early sponsors of the ad-happy
device, which retails for $114, a slight but noticeable reduction from the
basic Kindle model at $139 and the Kindle 3G at $189.
"Our goal is to display screensavers that customers want to
see," Bezos added in his note. "Anyone who's interested can download AdMash and
help pick future screensavers. Two prospective screensavers show up
side-by-side, and you pick the one you find most attractive." Those with the most
picks, apparently, become sponsored screensavers.
Although the Kindle continues to dominate the e-reader
market, the device faces competition on a number of fronts. E-book applications
for the iPad and Google Android threaten to make tablets and smartphones a more
attractive option for consumers than a dedicated e-reader, and Barnes &
Noble's Nook offers a color alternative to the Kindle's grayscale. In a bid to
blunt at least some of its rivals' power, Amazon has also pushed a Kindle app
for PCs and mobile devices that allows e-books to be read on virtually anything
with a screen.
An ad-supported Kindle, by virtue of a lower price point,
could make the device appealing to a broader demographic of potential
customers. The question is whether that price is low enough, and if customers
will tolerate ads on their e-reader the same way they do on virtually every other
Amazon is fighting to hold a piece of an ever-growing pie.
Analytics firm In-Stat predicted in September 2010 that e-reader shipments will
grow to an annual 35 million units by 2014. "Tablet PC shipments are taking
off, fueled in particular by the Apple iPad introduction. Yet there will still
be a revenue opportunity for e-reader suppliers and OEMs since tablet PCs and
e-readers target different consumers," Stephanie Ethier, an analyst with
In-Stat, wrote in a research note. "Standalone e-readers will address the needs
of avid readers, to whom the reading experience is central. Tablets are better
suited for consumers who prefer a stronger multimedia experience and only light
Amazon could also plunge into the tablet market directly,
building an Android-based device to tackle the iPad head-on. That's the theory
of a handful of analysts, at least.
"Amazon could create a compelling Android- or Linux-based
tablet offering easy access to Amazon's storefront (including its forthcoming
Android app store) and unique Amazon features like one-click purchasing, Amazon
Prime service, and its recommendation engine," Forrester analyst Sarah Rotman
Epps wrote in a
March 10 blog posting
. "More consumers considering buying a tablet say that
they would consider Amazon (24 percent) than Motorola (18 percent)."
In that scenario, the Kindle's existing customer base would
come in handy.
"A Kindle-Android device could prove popular, building on
the large installed base of Kindle users," added analyst Jack Gold. "And Amazon
clearly has the largest -store' out there (bigger than the iTunes/app store
world) so that could be a swaying factor if they got aggressive with offering
special deals on their own device."
Whether Amazon ever considers building an Android
device, it seems focused for the moment on pushing any angle it can with its