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Ad-Supported Technology Leaves Cash, and Commercials, in Your Pocket

written by: •edited by: J. F. Amprimoz•updated: 3/15/2012

How many advertisements are you willing to tolerate in exchange for free or discounted products and services?

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    CNN.com recently ran an article about sales of the new 'Kindle with Special Offers' and suggests that it could help pave the way for new methods of selling electronic devices with online capabilities. The catch is that you have to look at ads in order to use the device, but you at least get it at a discounted price.

    The only time anyone really cares about watching advertisements is during the Super Bowl. I've heard friends say they only watch the big game for the ads, and I must admit that you will see some of the best and funniest commercials at that time. Otherwise, we go out of our way to avoid ads no matter what the medium. With DVR you can thankfully fast-forward through commercials. When browsing online you can employ pop-up blockers and other ad filtering software to block as many ads as possible. We even skip past the commercials and previews on the DVD and Blu-ray movies we rent or buy.

    Case in point, BusinessInsider.com says you are 475 times more likely to survive a plane crash than you are to click on a banner ad.

    Why is it, then, that ad-based content still drives everything from websites to game apps? If nobody is clicking on the ads and some people even go so far as to employ software and other techniques to deliberately avoid the ads, then why are they still around?

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    How Marketing Works

    Billboard You don't have to immediately respond to an ad in order for it to reach you. Think about that for a moment. Just because you didn't respond to that banner ad does not mean you didn't notice it at least subliminally. Animations and sounds, or even funny/racy photos, are used to catch our attention, even if for a split second. This is all it takes to reach a potential customer. You've been exposed to the ad and that's why programs like Google's AdSense charge customers per impression instead of just per click. (They charge much more per click.)

    Consider how Interstate billboards work. Sometimes you see a sign with a big 'Turn Here!' notice and an arrow, and other times you start seeing ads for restaurants and attractions many miles before you reach their exit. The idea is to plant that small seed in your memory and then maybe somewhere down the road (figuratively and literally) you will respond.

    (Image credit: WikiMedia Commons, Public Domain)

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    Ad-Supported Hardware

    Ad-supported software has been around for ages. I remember using one of the first free Internet email services called Juno.com that used toll free numbers for dial-up email access. This was back before the World Wide Web was even known to most people and BBS (Bulletin Board Systems) were about all anyone used their modem for, besides faxing. Nowadays, most sites offer up free content for users by inundating them with advertisements and even employ scripting to tailor ads based on search results, location information, and so on.

    A new trend that may be coming around is the idea of ad-supported hardware. A good example of this would be Amazon's latest model Kindle, which sells for $25 less than the regular Kindle price because it displays advertisements. Otherwise, it has all the same features and hardware specs, so it's technically the same device but with slightly different software. The advertisements only display on the main screen and won't interrupt your reading at all, so they are hardly obtrusive.

    Amazon's introduction of this ad-supported Kindle actually went over well with customers. With the discount, which really isn't enough in my opinion, more new Kindle buyers opted for the $114 model. It's currently the #1 bestselling item in the Electronics category on Amazon.com. The $139 model without ads is number two.

    Just to compare, I did a poll of some friends on Facebook and the general consensus among my friends was that they would rather pay not to have to watch any ads. I happen to agree with them. It's the same reason why I subscribe to Netflix instead of cable or satellite TV.

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    Kindle Potential

    Kindle Personally, I think Amazon.com should give the ad-supported Kindle away for free because they'd make up for the cost in book sales from having more kindles in circulation, let alone the ad sales.The $25 discount just isn't enough because the idea of having to look at advertisements is such a turn-off to many people. It's why the full price base Kindle is still selling well - readers do not want to look at ads.

    Perhaps Amazon could implement some kind of subscriber service like with Audible.com where if you pre-pay for a year, they give you a Kindle. Maybe they could start some kind of 'Kindle Club' where after you buy so many ebooks, you get a free Kindle reader. Someone might be reluctant to spend $139 or more on a Kindle and then still have to buy the books to read on it, so sell them the books first and the Kindle second. In some ways, they are already doing this with free Kindle apps for PC's and smartphones.

    The idea is to get people used to reading books on the e-reader. Besides, once the hardware is in the user's hands, how much does it cost Amazon.com to send them a digital book? It's just bandwidth, and they already use plenty of that when sending out the advertisements that hit my mailbox daily. In many ways, this would be better that pushing ad-supported hardware because the very notion of having to see ads on something you paid for, even at a discount, is going to turn off a lot of potential users. Ads on something you get for free are a lot easier to handle.

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    Make it Free

    Maybe the future of ad-supported hardware shouldn't have paying customers in mind. The discounted price isn't enough to win over purchasers that wouldn't otherwise be shopping for an e-reader. If companies began giving away devices for free, such as cell phones or maybe even low-end computers, they could tap into entirely new groups of customers.

    Right now, some cell phone companies are already employing government-subsidized services that provide free cell phones and talk time to low income applicants. What if the same could be done by major retailers like Verion, AT&T, or Cellular South? Imagine if they could push local advertisements to customers based on zip code? The same could possibly work for netbook computers supported by cell companies: You use a client to connect via an air card, so why not put ads on that client screen and offer discounts if customers are willing to put up with it? The money made from advertising sales could offset the service costs.

    The biggest concern would be that users would hack or jailbreak the hardware to remove the advertisements, and that would definitely happen. On the other hand, it could be a way of reaching customers who otherwise couldn't afford the service and the occasional hacker would be an expected loss. There is great potential there for bringing in new customers, provided that the program was implemented correctly and closely monitored.

    The bottom line here is that companies need to realize that if they are going to sell ad-supported hardware, they may be better off giving it away instead of trying to sell the hardware at a discount.