In its second-largest acquisition, Amazon buys the company for $970 million.
Amazon.com may be moving into uncharted territory in tablet computing.
Nothing like a captive audience for advertising. That’s what Amazon.com Inc. may have in mind if it starts selling full-screen advertisements on its mega-popular Kindle Fire tablet computer.
The e-retailer, No. 1 in the Internet Retailer Top 500 Guide, is pitching advertising agencies advertisements that would appear on the tablet’s welcome screen and in Amazon’s Special Offers section—a two-month buy would cost at least $600,000, and $1 million would get additional ad placements and inclusion in Amazon.com public relations efforts, according to a report in Advertising Age, an industry trade publication. Special Offers is a listing of deals and sponsored messages users of select models of the Kindle e-reader can access from the home screen.
Amazon sells two versions of select Kindle e-readers: one does not include ads, the other displays ads and comes at a lower cost. There have been reports that Amazon will release a second Kindle Fire this summer. This could be an ad-supported version of the existing Kindle Fire, which debuted in November and, according to Amazon, is the e-retailer’s top-selling product. Amazon did not respond to a request for comment and has not released figures for the number of Kindles sold to date.
Whether consumers would be up for a tablet, as opposed to an e-reader, that displays advertisements is up in the air. There has yet to be a tablet on the market that displays ads.
“The Kindle Fire buyers who think of it as a pure tablet like an iPad may be more resistant to advertising foisted on them,” says Chris Silva, mobile analyst at Altimeter Group, a technology research and consulting firm. “That said, savvy buyers realize Amazon is not selling a tablet but a media consumption device, really no different than a Kindle e-reader, except that the Fire allows you to buy higher cost items, including easy access to Amazon.com for physical merchandise. These people might be OK with advertising if ads help them find products they like.”
One way or another, Amazon would have to make the cost of a Kindle Fire that displays ads less than the $199 cost of the existing Kindle Fire in order to make the ads more palatable, Silva adds.
The ad program could be an answer to Apple Inc.’s iAd, which sells display ads that run within a spectrum of smartphone and tablet apps. When Apple debuted iAd in 2010, it was asking $1 million for a minimum buy. Today that price has dropped sharply to $100,000. But these ads run within apps, they do not cover the entire screen of an Apple device when the device is turned on or off or goes to sleep, which is what Amazon is proposing. The Amazon full-screen ads could be quite jarring to consumers who have purchased the Kindle Fire to date, as the device was never promoted as including ads. But it is not clear whether Amazon would run its new ad program on all Kindle Fires or only new Kindle Fires.
“The addressable market for an iAd is anyone with a device running Apple’s iOS operating system, which is hundreds of millions of people,” Silva says. “The Kindle Fire network is much smaller. It may be a competitor to mobile ad networks like iAd or AdMob because it is taking some of those online advertising dollars. But I don’t think Kindle Fire ads will be viewed in the same way by users or the marketing execs that make the ad buys. For Kindle Fire ads, marketers would know exactly who their customers are and want to target them with X. An iAd gives you the broadest possible exposure.”