Amazon.com to Sell Kindle Digital Reader With Ads for $114

Amazon.com Inc. (AMZN), the world’s largest online retailer, unveiled a $114 version of its Kindle electronic-book reader that requires customers to view ads in exchange for getting the lower price.

The new device, called Kindle With Special Offers, costs $25 less than the current lowest-priced model, the Seattle-based company said in a statement. It will be available May 3 at Best Buy Co. and Target Corp. (TGT) stores, in addition to Amazon’s site.

Chief Executive Officer Jeff Bezos is counting on the Kindle, unveiled in 2007 for $399, to capitalize on digital-book demand. With the new approach, he gains a bigger price advantage over rivals and opens an additional source of ad revenue. The device has become Amazon’s most popular product and will bring in $5.42 billion in revenue this year, according to Caris & Co. A version without ads will continue to sell for $139.

“This is about making sure anyone who wants a Kindle can afford one,” Jay Marine, director of Kindle products, said in an interview. “Every time we’ve been able to make Kindle more affordable, we’ve seen huge growth in demand. We expect the same to happen here.”

General Motors Co.’s Buick, Procter & Gamble Co. (PG)’s Olay skin products and Visa Inc. will be among the first advertisers on the Kindle. Amazon also will put its own promotions on the device, offering readers a $10 gift card for $20 worth of merchandise on its site or 50 percent off a Roku streaming-video player.

Screen-Saver Ads

Over time, Amazon will phase out its own advertisements on the Kindle and replace them with promotions from other companies, Marine said. The company worked with advertisers to ensure the ads don’t get in the way of reading, he said. Ads will appear as a screen saver when the Kindle is idle. They will also be seen as a banner on the bottom of the screen on a user’s home page, Marine said.

In addition to offering the $139 Kindle, which delivers e- books through a Wi-Fi Internet connection, Amazon also sells a Kindle for $189 that includes Wi-Fi and 3G wireless-network capability. A larger Kindle costs $379.

Barnes & Noble Inc.’s Nook, meanwhile, starts at $149 for a Wi-Fi-only version. Adding 3G brings the price to $199.

Amazon declined $3.56, or 1.9 percent, to $180.48 at 4 p.m. in Nasdaq Stock Market composite trading. The shares are little changed in value this year.

U.S. sales of e-books may almost triple to $2.8 billion by 2015, according to Forrester Research Inc. (FORR) in Cambridge, Massachusetts.

To contact the reporter on this story: Joseph Galante in San Francisco at jgalante3@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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