Amazon intros new $114 ad-supported Kindle with Special Offers

First, there were friends with benefits. Now Amazon has Kindle with Special Offers.

That's right, Amazon will be shipping a new ad-supported version of its popular e-reader on May 3 for $114 or $25 less than the standard Wi-Fi-only Kindle, which retails for $139. This new model--available for preorder now--is also Wi-Fi-only and comes in the same carbon color as its ad-free sibling. Specs-wise, the two devices are identical.

The big question, of course, is why $114 and not some other number, say $99? Apparently, Amazon isn't willing to go quite that low quite yet, but Russ Grandinetti, Amazon's vice president of Kindle Content, says the company's pretty excited to be able to shave the Kindle's price by another $25.

"$25 off a $139 device is actually a pretty meaningful drop and it's going to make it [the Kindle] an option for an even larger audience than already has been the case," says Grandinetti.

We had a chance to play around with the Kindle with Special Offers and while some people may find the ads irritating, you can can quickly get around the first batch of rotating screensaver ads by simply hitting the home button. However, once you do get to your Kindle's home screen, you'll notice a small ad running along the bottom of the screen. So far ads don't appear within books themselves, though many feel that's coming soon.

Amazon, which invested $175 million in the social coupon site Living Social, a Groupon competitor, hopes that the quality of the deals it offers will end up being a welcome intrusion rather than a nuisance.

"If we do a great job with the special offers--and that's our intention--people are going to feel pretty excited about the option and having access to it," Grandinetti says.

Additionally, the company is trying engage users through a free Kindle app (and Web site), AdMash, that allows you to vote on the most "attractive and engaging" display ads that will become sponsored screensavers.

"How often the ads rotate will change over time," says Grandinetti. "The nice thing about the way the e-ink technology works is that when the screensaver comes on it doesn't draw any power but the image just sits there until you turn it [the device] on again."

Amazon has Buick, Olay (Procter & Gamble), Visa, and Amazon.com Reward Visa Card (Chase) lined up as sponsors for the first series of screensavers (for screensaver examples, you can head to www.amazon.com/aboutkindlespecialoffers). In terms of deals, this is what you can expect in the initial weeks:

• $10 for $20 Amazon.com Gift Card
• $6 for six Audible Books (normally $68)
• $1 for an album in the Amazon MP3 Store
• $10 for $30 of products in the Amazon Denim Shop or Amazon Swim Shop
• Free $100 Amazon.com Gift Card when you get an Amazon Rewards Visa Card (normally $30)
• Buy one of 30 Kindle bestsellers with your Visa card and get $10 Amazon.com credit
• 50 percent off Roku Streaming Player (normally $99

It's worth noting that existing Kindle owners won't have access to these deals--at least initially, according to Grandinetti.

Obviously, if the new ad-supported version works well for Amazon and attracts enough sponsorship deals, you can expect the price of the Kindle to continue to drop--or even be free someday.

How long before that will happen? That we can't tell you, but it will be interesting to see how many people are willing to pay the extra $25 so they don't have to see any ads. Would you?