It looks like Amazon’s “Special offers” strategy is contagious! Kobo, the #3 ebook retailer is being acquired by the Rakuten, the “Japanese Amazon”, and they are already looking to copy some of Amazon’s success. The most obvious example of this is that they will be offering an ad-supported Kobo Touch for $99. This new “product” will allow Kobo to have a reader at the $99 price point “sweetspot” without breaking the bank since sponsors will foot some of the bill. Fortunately, Kobo is taking the same discreet approach as Amazon by placing the ads on the screen saver and home screen but not in the books themselves.
I find it interesting that ad support has become the path to cheaper ebook readers and I think there are two main reasons for this. First, ads are an easy way to offer incentives to readers and pretty much everyone likes a deal. Some have gone so far as to suggest that with the right set of deal offers a Kindle with Special Offers can actually pay for itself over time. Second, the discount that is made available through ads makes it possible to leapfrog over the biggest obstacle to the magical $99 price point-the cost of components. Amazon, Kobo, and B&N all seek to drive down prices, but the stark reality is that eInk screens, memory, and processors all cost enough that, even with ads, margins are, at best, razor thin. Bringing in a sponsor through the addition of ads jumps over the accounting mess of potentially huge losses and lets companies get down to the business of selling books.
And there is yet another parallel between what Kobo and Amazon are doing. As is the case with the Kindle, you can always buy a Kobo Touch for the regular price of $129 if you don’t want ads. Moreover, if you want a Kobo reader in anything other than basic black, you’ll need to pay full price; as of now only black Kobo readers will be available with sponsored offers. Still, given the psychological importance of the $99 price point for buyers, and the popularity of Amazon’s special offers devices, I am sure this will be a big hit for Kobo!
Check out Kobo’s product page for both Touches, and if you end up with a special offers Kobo let us know what you think!