Amazon Kindle 3G with Ads Aims to Blunt New Grayscale Nook

Amazon launched a cheaper Kindle 3G with advertising support, in an apparent bid to blunt the impact of Barnes & Noble's new touch-screen Nook e-reader.

Well, that didn't take long: On the same day that Barnes & Noble unveiled an updated Nook e-reader, Amazon issued an advertising-supported Kindle 3G at a conspicuously low price.

The "Kindle 3G with Special Offers" retails for $164 and features display advertisements from companies such as Buick and Visa. It follows on the heels of a WiFi-only, ad-supported Kindle that retails for $114, and which Amazon claims is the bestselling electronic device in its repertoire. The regular, no-advertisements Kindle retails for $139, and the Kindle 3G for $189.

Even as Barnes & Noble seemed to focus increasingly on full-color e-reading, with its Nook Color, Amazon continued to issue updates to its grayscale Kindle's capabilities. On April 20, the company announced a Kindle Library Lending feature, due later in 2011, which will allow readers to borrow Kindle e-books from more than 11,000 libraries in the United States.

However, Barnes & Noble hadn't abandoned its own grayscale efforts entirely. On May 24, the company issued a revamped Nook navigable via touch screen. In addition to a 6-inch display, the new Nook weighs less than eight ounces, and Barnes & Noble claims the battery will last more than two months on a single charge. It retails for $139, with shipping slated to begin June 10.

That contrasts heavily with the Nook Color, which retails for $249 and features access to 125 apps, enhanced audio and video for certain titles, and a social-networking app that lets readers swap books and recommendations. It also includes some decidedly tablet-like features, including support for Adobe Flash Player and a single in-box for Web-based email.

"Barnes & Noble is not targeting Apple with this device. Instead, it's targeting Amazon, trying to undermine today's black-and-white Kindle as well as tomorrow's color Kindle tablet," James McQuivey, an analyst with Forrester, wrote in an April 25 blog posting about the Nook Color. "Barnes & Noble may have to come to market with is original e-ink Nook second, but its Nook Color upgrade gives it the upper hand in the war over the serious reader."

But it'd been an open secret that Barnes & Noble intended to roll out another device: The company's May 4 filing with the Securities and Exchange Commission indicated that "a new eReader device" would be launched May 24. That not only unleashed rampant speculation among bloggers about Barnes & Noble's plans, but also doubtlessly gave Amazon a little bit of time to prepare a response timed for that date.

Despite the convenience of e-readers, some analysts see the format as potentially devastating to the publishing industry in the long term.

"The book publishing industry has entered a period of long-term decline because of the rising sales of e-book readers," read an April 28 research note from IHS iSuppli, which predicted a decrease in book revenue at a compound annual rate of 3 percent through 2014-a reversal from the period between 2005 and 2010, when revenue rose.

That note quoted IHS iSuppli analyst Steve Mather as saying: "The [publishing] industry has entered a phase of disruption that will be as significant as the major changes impacting the music and movie business."