Amazon recently announced an ad-supported Kindle for $114 – that’s $25 off the regular price of $139. On the software side of things – especially on the Mac and iOS platforms its common to see both ad-supported (free) and ad-free (paid) versions.
I have used ad-supported versions of Echofon (a Twitter client on the Mac) and a couple of other applications. On the Windows platform, virus protection brands have had both a free ad-supported version and a paid Pro version. Personally speaking, the ads (even though highlighted in yellow on apps like Echofon) are a blind spot for me – I have hardly clicked them. But some can be in-your-face and intrusive which is when it gets annoying and becomes an interruption. Buick, Olay (Procter & Gamble), Visa and Chase are sponsoring the first series of screen savers on the Kindle. As for their ads, as long as they not intrusive most of would be willing to live with them – a $25 rebate being an attractive incentive.
Apple is supposed to have patented an ad-supported OS with even ‘dis-incentives’ for not paying attention to the ads: “In the case of a desktop or notebook, the UI and its components (e.g., menu bars, icons, etc.) may be faded, darkened, brightened, blurred, distorted or otherwise visually modified during the initial state (or while the advertisement is being presented) so as to emphasize that the desktop UI is temporarily inactive.”
So can advertising subsidize products with which consumers interact through a screen? I think a majority of consumers would be willing to get a product or service free or partially subsidized and ‘pay the price’ as it were, of ads. Those who can afford to pay a premium to avoid ads would still be in a minority. With Kindle, I think Amazon can deliver ads relevant to a certain demographic & outlook – maybe purchase behaviour (of books) can also dictate the kind of brands advertised. When introducing iAds, Steve Jobs said that the trouble with mobile or small-screen advertising is that it has thus far provided only interactivity not emotion. For the ads to be engaging and evoke an emotion in the real-estate of a Kindle or a small-screen device like a mobile phone, will be a challenge. The engagement and involvement are likely to go up if the reward is ‘customized’ and the advertising enriches the usage experience of the device (imagine a free handset as long as you interact with ads from a brand on its screen). Will we see more brands go the Kindle way of subsidizing price in lieu of advertising? I think other e-book readers, maybe other tablets competing with the iPad and some mobile phones will consider the option of advertising to subsidize consumer pricing. But the way the advertising is created and delivered on these devices has to be done with a lot more finesse.