For those that do not know, Amazon has been managing to sell lower priced Kindles by giving readers the "special offers" edition. Also known as ads. So a Kindle that is normally $109 can be purchased for the low price of $79 if you're ok with having advertisements as your screen saver.
How generous of Amazon. How generous of those advertisers to help make up the difference! As if. I highly suspect that Amazon probably doubles what they make on each Kindle when they add those special offers. Between production costs and the advertisers, they are making a killing.
What cracks me up is how a lot of people seem to be in awe over how business savvy Amazon is. Like putting ads in things to lower cost is a new idea or something. Come on, guys! They basically just reinvented the magazine. I actually had a post a while back about the magazine vs. the short story.
The primary source of income for magazines is not the well thought out articles and it's not the subscriptions (though that does help). It's always been from the ads. Amazon just took a widely accepted practice and packaged it in the form of the Kindle.
Will ebooks basically just become giant magazines? I doubt it. At least, not completely. The sheer number of ads these days has created a generation inflicted with ad blindness. We pause TV shows to fast forward through ads, we can read web pages without even being aware there are ads, and most people are generally really annoyed by pop ups.
With this in mind, I think we can all rest easy in our beds. There may come a day where authors will have the option to sell their ebooks at a cheaper price with ads included. But I'm willing to bet all the ad money I would have earned that in cases like that, most readers will spend the extra money to not be annoyed.