Is Amazon Having No Luck Selling the Special Offer Ads?

04_Kindle-hero-image_v3[1]When Amazon launched the Special Offers program in may 2011 their goal was to reduce the price of the Kindle hardware by selling ads to 3rd parties, and collecting fees when the ads were viewed or click.Something tells me that this ad network isn't having nearly as much luck as Amazon might have wanted.

As you probably know, I have a Kindle Fire HD. I used to tune out the ads that Amazon shows on the lock screen, but that has been harder to do over the past few months as I began to notice that more and more of the ads showed ebooks, deals, and other content related to Amazon.

I think what I am seeing is filler - in other words ads that promote an Amazon product or service which are shown because Amazon wasn't able to sell enough ads to 3rd parties.

Take today, for example. In the past couple hours I have seen one ad for Geico mixed in among many ads for:

  • the Kindle Daily Deal
  • a $3.99 ebook published by Amazon
  • Woot!
  • Kindle FreeTime unlimited
  • the Amazon Appstore free app of the day
  • 10 Kindle ebooks for $1 each
  • a $1.99 Kindle Single
  • a $4.99 ebook published by Amazon

Now, I'm sure that some might suggest Amazon has sold enough Kindle Fires that Amazon can't sell  enough ads. That could be true, but now that the filler accounts for over 90% of the ads I don't think the problem is excess capacity.

Yes, over 90% of the ads shown on my KFHD's lock screen were a net zero in terms of ad revenue. They're not being sold to anyone, not unless Amazon bills itself. But even if they are Amazon is still losing money when they promote a Kindle Single, the free daily app, or the Kindle daily deal.

I think what we are seeing here is that no one wants to buy ads any more, and that is going to be a problem for Amazon.

I have been saying (ever since the KFHD shipped) that this tablet exists just to show users ads. Amazon even went so far as to lock down the KFHD so you can't install your own home screen or replace the lock screen. this would let you escape the ads, and Amazon does not approve.

But now we are seeing that hardly anyone wants to buy the ad space on the KFHD. Amazon's latest marketing brainstorm is, based on what I can see from the outside, a bust.

What do you think?

About Nate Hoffelder (11591 Articles)
Nate Hoffelder is the founder and editor of The Digital Reader:"I've been into reading ebooks since forever, but I only got my first ereader in July 2007. Everything quickly spiraled out of control from there. Before I started this blog in January 2010 I covered ebooks, ebook readers, and digital publishing for about 2 years as a part of MobileRead Forums. It's a great community, and being a member is a joy. But I thought I could make something out of how I covered the news for MobileRead, so I started this blog."

13 Comments on Is Amazon Having No Luck Selling the Special Offer Ads?

  1. Amazon is a bit ambiguous as to whether they are pricing Kindle ads by impression or by click (see http://www.amazon.com/b/ref=az_adv_ln_dads_ki?&node=6246112011) but in either case it is safe to say that they are optimizing for yield.

    Therefore, I don’t agree with your conclusion that external advertisers aren’t interested in buying ads on Kindle Fire because I think it’s quite likely the case that Amazon sees better yield from cross-promoting their own products. If anything, I would say that the display ads from third-parties are the “filler” when Amazon can’t find an ad for one of their own products that is more compelling.

  2. You by any chance see these?
    http://news.cnet.com/8301-1023_3-57586017-93/look-out-google-amazons-eyeing-your-turf/
    http://news.cnet.com/8301-1023_3-57587555-93/amazons-secret-weapon-$600-million-in-annual-ad-revenue/

    Whether on Kindles or elsewhere, CNET thinks Amazon has a nice little ad-selling business and their calling card is targetted ads. Which means that if you are a heavy viewer/buyer of Amazon products or services you are goig to get a *lot* of Amazon in-house ads.

    It’ll be interesting to see if everybody is getting a heavy rotation of Amazon ads.
    (Me, I seem to be getting about a 60/40 split with ads for specific movies and even car ads in the mix.)

  3. I’m not clear why you consider those filler ads? My big question would be whether Amazon makes more by selling ads to third parties like Geico or from the revenue generated when users of Kindle and Kindle Fire purchase more content from Amazon. Considering that Amazon makes some profit from every Kindle Daily Deal, Prime subscription, etc.

    So I’m not sure why it seems like nobody wants to buy the ads. I’d love to purchase one. I’m sure a lot of other publishers and studios would, too. It may not be that Amazon can’t sell them so much as they don’t want to.

    • Amazon will sell you ad space. The minimum ad buy is $10,000 (I checked).

      And the reason i call this filler is that Amazon doesn’t earn anything on the free app of the day, nor do they earn much on the dollar ebooks. Amazon would earn more had they sold the space instead of using it themselves.

      • Not all earnings come in the form of direct revenue, though. Free apps and cheap e-books do make people happier with their tablets, and possibly more likely to recommend them to their friends, or buy more of them as presents, or whatever. You can’t always put a dollar value on good will, but that doesn’t mean it’s not valuable.

        • This could be true, but it’s also not how Amazon described the Special Offers when it was launched. At the very least the new ads represent a change in Amazon’s plans.

          • Of course, as Amazon’s plans go, Kindle advertising is probably pretty penny-ante. Heck, the whole mess with agency pricing came about because Amazon wasn’t afraid to throw money right down the toilet if it meant building out the number of people with its hardware. Even if it loses cash here and there by selling ad-subsidized hardware then not making enough money back on the ads, I’d bet Amazon will still call that a win, at least for now.

  4. I always opt out of the special offers when I buy a Kindle. And I always will. I have no need or desire to see more ads. The extra cost is worth not having to look at ads. I would quit being an Amazon before accepting a device with special offers.

    As for Amazon using their own content because they can’t sell ad space, I can say. But I try to imagine it from the adman’s POV: is the Kindle screen the best place to hock ads for Geico? I’m not an adman, but my best guess is no.

  5. I bought a Kindle Touch mainly for testing so I didn’t really care if it showed ads or not. And actually, I found the ads kind of “cute” and “campy.” But I didn’t realize that there would be banner ads on the main library page — which interfered with the number of titles you could see on the page. It also meant you had to do a lot more scrolling.

    Book advertising can actually be fun if it is semi-targeted to your interests and doesn’t emphasize too many big publishers. But with a 10,000 minimum, I guess that limits your offerings to the same plodding bestsellers.

  6. I don’t know. I mean, if Amazon advertises a $10 e-book, on which it makes $3, it only has to sell 3,334 of them to make the same $10,000 it would have charged for ads. And how many people have Kindles these days to be exposed to those ads?

    Say it advertises a $3 e-book, on which it makes 90 cents. It would have to sell like 11,000 of them to make that 10K minimum, but is that really going to be a problem for a book that costs less than some hamburgers at McDonald’s?

    Advertising its own books may be even more lucrative for Amazon than accepting anyone else’s advertising ever was.

    • We are talking *added* ebook sales as a result of the inhouse ad, right?
      On those terms, it makes perfect sense; the odds go way up that inhouse use of the ad space might very well be more profitable than selling the eyeballs to an outside partner.

      Nonetheless, I’m *still* getting a heavy rotation of Toyota Avalon ads.
      In fact, right now, on my HD8.9 special offers screen I have ads for:
      Toyota
      American Express
      Garmin
      Norelco
      Miracle Grow
      Google (!!)
      Sony
      Geico
      7Eleven
      Karcher
      That is out of 22 ads on the screen.
      The rest?
      Two MP3 albums, three ebooks on sale, one ad for Woot, one ad for Freetime Unlimted, one for a fast-charger for the FireHD8.9, and two ads for cases for same.
      The last two?
      Kindle summer entertainment guide and the free app of the day.
      21 out of 22 are trying to actively sell me something and 19 are trying to sell somebody else’s product. Only the fast charger and the Freetime subscription are Amazon products.

      I expect others to have a different list of ads but I don’t see a particuarly odd list of ads.
      (shrug)

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