Amazon Offering Ad-Supported Kindle 3G, Sponsored by ATandT

Amazon is offering an ad-supported Kindle 3G for $139, with corporate sponsorship by AT&T.

Amazon is offering an ad-supported Kindle 3G for $139, a move that might kick off a new round of e-reader price reductions. The device comes with corporate sponsorship in the form of AT&T.

"A big thank you to AT&T for helping to make the new $139 price possible," Amazon CEO Jeff Bezos wrote in a July 13 statement.

Amazon also offers a WiFi-only, ad-supported Kindle for $114. The devices include sponsored screensavers; early sponsors included Buick, Chase, Olay and Visa. Although Amazon likes to keep mum on actual Kindle sales numbers-a long-running company habit-the Kindle with Special Offers' prominent position on the retailer's bestseller list suggests that people are willing to sit through ads in exchange for a lower price.

Although the Kindle continues to dominate the e-reader market, it faces significant competition on a number of fronts. E-book applications for the iPad and Google Android have threatened to make tablets and smartphones, by virtue of their multitasking capabilities, a more attractive option for consumers. Barnes & Noble, meanwhile, continues to push forward with updates to its Nook e-reader franchise. And Amazon's own Kindle application for PCs and mobile devices could cannibalize the hunger for a dedicated Kindle device, at least in theory.

Even as Amazon expands its Kindle franchise, rumors abound that the company will begin building an Android tablet. Such a device would tackle Apple's iPad head-on.

"Amazon could create a compelling Android- or Linux-based tablet offering easy access to Amazon's storefront ... and unique Amazon features like one-click purchasing, Amazon Prime service and its recommendation engine," Forrester analyst Sarah Rotman Epps wrote in a March blog posting, soon after the first rumors of such a tablet began to emerge. "More consumers considering buying a tablet say that they would consider Amazon (24 percent) than Motorola (18 percent)."

In May, Piper Jaffray analyst Gene Munster said he believed Amazon could sell 2.4 million Android tablets in 2012, following a late 2011 launch in time for the holidays. A few weeks later, during a June 7 Amazon shareholders meeting, Bezos told the audience he was excited about tablets' potential for his company's business.

"Most of our customers shop with us from desktop or laptop computers, but people have a different posture with tablets," he said, according to a report published by GeekWire. With tablets, they "lean back on their sofa. People leaning back on their sofa, buying things from Amazon, is another tailwind for our business, so I'm very excited about that."

However, Amazon remains tight-lipped about its actual tablet plans.

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