How Low Will Amazon.com Go With the Kindle Fire?
The Kindle Fire is hot. Amazon.com (NAS: AMZN) says the tablet continues to be its top product, which is in no small part thanks to its $199 price point.
Well, guess what? That price point might even get lower, even as rumors continue to swirl that Apple (NAS: AAPL) is coming after Kindle Fire turf with an iPad Mini sporting a 7-inch display priced between $200 and $250 later this year.
According to a recent Ad Age report, Amazon has been approaching advertising execs to sell ad space on the Kindle Fire. The e-tailer is supposedly looking for ad commitments of at least $600,000 for packages, which would run for a couple of months. In February, Ad Age also reported that Apple had slashed its own minimum cover charge for its iAd mobile advertising network to just $100,000, after it originally launched with a $1 million minimum.
What's not entirely obvious is whether Amazon is looking to include these ads in the current Kindle Fire or the next-generation Kindle Fire that's widely expected later this year to further dominate the Google (NAS: GOOG) Android tablet market. It's pretty tough to sell ad execs on an unreleased device with an unknown audience, which is one reason the two execs mentioned apparently turned down the offer.
Amazon also isn't guaranteeing a specific number of devices that the ads will reach, and there's generally a lot of uncertainty with what it's offering advertisers. One of the unnamed execs said: "It's kind of an expensive buy to not get a guaranteed audience and measurement. It doesn't comply with a lot of our necessary planning rigor."
Here's where my own speculation begins. Amazon already offers an ad-subsidized version of its popular Kindle e-ink readers. The discount that prospective buyers can see ranges from $30 to $50 if they're willing to subject themselves to ads on the device. I have a feeling Amazon will probably try to do the same with the Kindle Fire, subsidizing its already low price (which sells around cost) to broaden its installed base and boost content sales.
If Amazon's selling millions of Kindle Fires at $199, how many do you think it could sell at $150?
At the time this article was published Fool contributorEvan Niuowns shares of Apple and Amazon.com, but he holds no other position in any company mentioned. Check out hisholdings and a short bio. The Motley Fool owns shares of Google, Apple, and Amazon.com.Motley Fool newsletter serviceshave recommended buying shares of Apple, Amazon.com, and Google, as well as creating a bull call spread position in Apple. The Motley Fool has adisclosure policy. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.