- Associated Press - Tuesday, April 12, 2011

SAN FRANCISCO (AP) - Amazon.com Inc. is dropping the price on its Kindle e-reader, but the change comes with a trade-off: On-screen ads.

The online retailer was set to announce Tuesday that the new Kindle with Special Offers will cost $114 _ $25 less than the currently lowest-priced Kindle _ and include advertisements on the bottom of the device’s home page and on its screen savers. Seattle-based Amazon will start shipping the newest Kindle on May 3, and it will also be sold in Target and Best Buy stores on that date.

Amazon has consistently lowered the price of the Kindle since it released the first version of the device at $399 in 2007, though this is the first time it is doing so while including ads on the e-reader.

Kindle director Jay Marine said in an interview Tuesday that the release of a cheaper, ad-studded Kindle is Amazon’s way of getting the device into the hands of more people. But it also shows Amazon is getting more aggressive in its efforts to lure consumers tempted by competing e-readers and bombarded by ads for Apple Inc.’s latest iPad and a growing number of competing tablet computers.

Some potential buyers may be turned off by the idea of having ads on an e-reader, but Marine thinks that serving up a number of money-saving offers will be appealing.

“We think customers are going to love it,” he said.

The advertisers sponsoring screen savers at launch will be General Motors Co.’s Buick car brand, Procter & Gamble Co.’s Olay cosmetics brand and payments processor Visa Inc. JPMorgan Chase & Co. will advertise the Amazon.com Reward Visa Card.

And other than the addition of ads, the latest Kindle is identical to the current one that uses Wi-Fi to wirelessly download books (a more expensive model uses 3G for wireless content delivery). It has a grayscale “electronic ink” screen that measures 6 inches at the diagonal, a battery that lasts for three weeks with Wi-Fi on, and enough space to store 3,500 books.

In a demo of the device, a screen saver showed a deal where customers would pay $10 for a $20 gift card to Amazon. If a user is interested in that deal, they can click to have details of the offer e-mailed to them. A much smaller ad shown across the bottom of the Kindle’s home screen _ the screen that shows you the content stored on the e-reader _ was less obtrusive, but still clearly an advertisement. The ads will change frequently, Marine said, and there will not be any ads in Kindle books.

“It was very important that we didn’t interfere with the reading experience,” he said.

Users will be able to log on to their Kindle account on Amazon.com and adjust preferences about the types of screen savers they’d like to see.

Amazon has never revealed how many Kindles it has sold.