Amazon has turned
selling items at a loss into an art form, particularly when it comes to books.
But selling in-book advertisements on its Kindle devices just might put the
company in an even stronger position with its competitors, according to a blog
posted by Joe Wikert.
The retail giant has
shown it is more than happy to lose money on the price of bestsellers. However,
Kindle advertising could provide Amazon with the additional revenue to take
e-book prices even lower.
“Make no mistake
about the fact that Amazon would love to see e-book pricing approaching zero,”
Wikert wrote, adding that the Kindle Owner’s Lending Library program is already
approaching free e-books.
Amazon is already
selling advertising on some of the Kindle models, offering those models at very
attractive prices to consumers. There are even rumors that Amazon plans to sell
ad space on its Kindle Fire’s welcome screen. Wikert adds there’s nothing
stopping Amazon from using in-book advertising, while offering ad-free editions
at higher prices.
Amazon will keep
100% of the ad revenue it sells on both device and in-book advertising, padding
its bottom line and giving the company even more leverage when it comes to
negotiating wholesale list price with publishers. Wikert says he believes other
e-book retailers will not be able to sustain the losses to effectively compete.
“Why wouldn’t
Amazon follow this strategy, especially since it helps eliminate competitors,
leads to market dominance, and fixes the loss-leader problem they currently
have with many e-book sales?” he asks.
