When Amazon first launched the ad-supported version of its third-generation Kindle earlier this year, I felt the experiment was worthy but ultimately futile. The $25 savings just didn’t seem enough to justify a mass acceptance of the model. So far, I’m apparently incorrect.
That said, because Amazon still doesn’t report individual unit sales, we can’t be sure exactly how well the cheaper Kindle is selling. According to its frequently-updated “Bestsellers in Electronics” list, though, Amazon claims the $119 variant is outpacing all other Kindle builds.
Posits Business Insider’s Dan Frommer (via CNN), Amazon’s experimental success in this realm might be a harbinger of greater adoption of the ads-on-OS subsidy strategy:
In the bigger picture, this is a pricing model that could potentially appear across the electronics industry, wherever there’s room in a product or service for digital advertising.
Frommer goes on to give examples of this possible expansion, shooting out ideas like internet-connected televisions with ads on start-up and refrigerators with screens pushing products in exchange for less-costly MSRPs. Keeping it real, of course, he says the likeliest (and earliest) non-Kindle landing spot will be the mobile handset sector. Naturally, Google’s riding shotgun:
[B]y now, Google likely has an idea of how many ads Android smartphone owners will see and tap on over the lifespan of a phone, via Google searches, ads in games like “Angry Birds,” and so on. Perhaps Google will eventually subsidize Android phones — using some of that potential ad revenue — to better compete with Apple’s iPhone or other smartphones.
Ads in browsers and games are nothing new, but — through my growing exposure to cross-platform mobile applications — I’ve started to notice a troubling trend regarding big-name Android development. As a general rule, these titles offer near-identical gameplay and visuals to their iOS counterparts; but, oftener and oftener, developers are reticent to release premium paid titles on the jolly green robot’s ubiquitous platform.
Due to the Android community’s high incidence of software piracy and low rates of paid download conversions, most of the arena’s large game-makers are starting to offer ad-supported productions only. For example, Words With Friends — one of the iPhone’s most popular, best-selling apps of all time — cannot be enjoyed ad-free on phones sporting Google’s OS. Had I not been able to buy out the ads on the iPhone version, I would’ve stopped playing the game long ago. In this way, Android is already building up its ad-driven infrastructure (albeit perhaps unintentionally), and it’s easy to see how, once users are familiar enough with ads in every app, Google might go Frommer’s predicted extra mile and make ads an integral part of the base OS user interface.
That said, it’s not quite as easy to see how much of their supported handsets’ prices the folks in Mountain View can (or would) effectively subsidize. The most expensive Android phones usually launch at an iPhone-competing $199, but even this number almost always comes down some 50 to 100 percent within a month or two of market availability (depending upon retailer). And, since Google doesn’t appear to have much trouble getting mass buy-in for its Android empire, there is little reason to believe that more advertising necessarily denotes greater discounts. Ads are already a huge part of everything Google does, and there’s no impetus for the search giant to coax greater adoption with such bonuses when people are already proving they’ll gladly pay for a phone or tablet and the ads that come with them.
Apple, on the other hand, wouldn’t ever consider implementing ads in iOS proper. While Cupertino still believes in iAds and supports the idea of free apps financed by such services, every one of Apple’s working hardware and software design tenets suggests unobtrusive simplicity and elegance over everything else. This philosophy completely precludes OS-based product-placement, and Apple would be loath to shed their so painstakingly-earned “pro-consumer” reputation with the wholesale auctioning off of precious screen real estate. Apple’s not an advertising agency, and, with the questionable performance of iAds so far, the company likely isn’t all that interested in becoming one, either.
But, Frommer insists, for many electronics companies, the move could make sense:
[A]s mobile and digital advertising evolves, and as wireless connectivity becomes more ubiquitous, we can expect to see more ad-subsidized gadgets, and not fewer.
As long as the deals are good, and the financial equation works out, this business model could become widespread.
And he’s right. It could.
Personally, I’ll take the $200 ad-free iPhone over a gratis, mobile, pocket-bound billboard any day of the week.
What’s your price?