Amazon Drops the Price on Kindle, But Ads or No Ads, Don't Get Your Hopes Up for Free

Amazon has dropped the price of its latest generation of the Kindle by $25, hoping to attract a larger user base of people who will now be able to afford the e-reader.

But will the Kindle ever be free?

“It’s not possible. The economics don’t work,” Jay Marine, a Kindle director said in an interview. “At $114, we think it is the best deal for a consumer electronic. We sell a lot of consumer electronics, so we should know it’s a good deal.”

What if it were tied to other offers, like Amazon Prime, which costs $79 a year and offers free two-day shipping and access to free streaming movies?

“I don’t know how to do it. I would not get your hopes up,” he added.

Three years ago, the first Kindle went on sale for $399, and each subsequent price drop led to a spike in sales.

Last year, when Amazon dropped the price to $139 for the Wi-Fi model and $189 for 3G, it became the company’s best-selling product in history. What’s more, robust sales helped catapult Kindle books to become the most popular format on the giant bookseller’s site, surpassing hardback and even paperback books.

The new Kindle introduced today will cost $114 when it comes out on May 3. That’s roughly the same price as 10 paperbacks. It will be sold by Amazon, Best Buy and Target.

Marine’s comments aside, it appears Amazon is doing everything it can to bring the price of the device down. This time, it has squeezed another $25 out of the system with assistance from advertisers.

The Kindle at $114 will display full screen ads on the home screen, and a much smaller banner ad will appear at the bottom of the screen when using the menu. Ads will not appear inside books (and nothing changes for the more expensive Kindle models). Initial advertisers that have signed up include General Motors, Procter & Gamble and Visa.

At the new price point, the Kindle will inevitably attract a few more hold-outs. But without hitting the $99 sweetspot, it’s questionable whether it will be enough for the masses, especially since it will now ship with advertisements. “We know price matters. We expect people to love it,” Marine said.

To be sure, Amazon is trying to make the experience sound as painless as possible.

For starters, the Kindle with Special Offers will have the exact same hardware that’s on sale at $139. It includes the same battery life, storage capacity and screen resolution.

And, the advertisements themselves are being sold less like a display banner and much more like a daily deal that a user has opted into, much like what Groupon and LivingSocial are offering today via email. The name “special offers” says it all. In fact,  Amazon will offer $20 gift cards for $10, a near-identical deal to the one LivingSocial offered earlier this year, which led to more than one million sold.

Marine said there’s no direct connection between LivingSocial and Amazon today despite the company’s $175 million investment in the company.

Other specials include: $6 for six Audible books (normally $68), $1 for an album from Amazon MP3 Store and $10 for $30 of products in Amazon’s Demin Shop. Users will also be able to help dictate what ads end up appearing on their homescreen by placing votes on a system Amazon calls the AdMash.

Not once has Amazon revealed how many devices it has sold, preferring to speak in vague terms, such as millions of sales, or Kindle sales eclipsing “Harry Potter and the Deathly Hallows,” the seventh book in the children’s series.

Maybe that will change now that Amazon will have to respond to advertisers, who want to know the size of the audience it is reaching.

Nah, probably not.

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