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Amazon slashes prices on budget phones by half -- but there's a catch

Are you interested in a deal? You'll have to agree to see ads on your phone's lockscreen.

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If you could save a few bucks on a new phone by allowing ads on your lockscreen, would you do it?

That's the idea Amazon is pitching with a new offer to its Prime members for two unlocked budget phones. Starting Wednesday, the e-commerce giant will take early orders for the Blu R1 HD for $50 and Lenovo's Moto G4 for $150. That's $50 below the regular retail price for both. (There's a limited promotion on the Moto G4 that takes an additional $25 off.)

Here's the catch: Those lower prices are available only for customers who agree to receive personalized ads on the devices' lockscreens.

Amazon already offers a similar ad-supported model for its Fire tablets and Kindle e-readers, allowing it to trim a few bucks off the price of the devices. For example, someone can buy a Fire HD 8 tablet for $165 or agree to Amazon's lockscreen "special offers" to cut the price to $150. After years of providing this kind of deal, the company says the "vast majority" of customers agree to take the cheaper device with ads.

Cheap and cheaper: The Moto G, left, and Blu R1 HD.

Amazon

Yet this is the first time Amazon will start making such an offer for phones, as well as for devices it doesn't make itself. Since folks tend to use their phones a lot more than a tablet or e-reader, time will tell whether such a concept will take off with customers. If it does, there's a chance some higher-end and more desirable phones will get added to this program.

The offer, while for phones that most people probably won't want, is also another way for Amazon to increase the perks of Prime, its $99-a-year program that includes two-day shipping at no additional charge, a streaming video library and other benefits. Keeping customers coming back to Prime has become a crucial goal for Amazon, since Prime members tend to spend roughly twice as much as non-Prime customers with the e-retailer.

The deal is also an opportunity for Amazon to build up its customer base in unlocked phones, which aren't tied to a carrier when purchased and tend to be cheaper than major handsets. That flexibility and lower price have boosted demand for such phones. Strategy Analytics reports that unlocked phone shipments in the US grew 140 percent last year, though they still make up just 9 percent of the national phone market. Blu last year was the top seller for unlocked phones in the country, the researcher said.

Along with the special ad-supported pricing, Amazon has added its suite of apps to the phones, including the Amazon shopping app, Amazon Video, Amazon Music, Audible and Prime Now. Users can access all these apps through a single sign-in, so they don't have to log on to each app individually.

Amazon declined to specify whatever revenue sharing agreement it may have with Blu and Motorola to put ads on the phones. The phones will be available July 12.