Details on the program were shared this week by an executive at an ad agency with Ad Age. Amazon was said to have pitched the new advertising program to the agency, offering more ad inventory and the opportunity to be included in an Amazon public relations campaign if they spend $1 million on Kindle Fire ads.
Amazon already sells ad-supported versions of its e-ink-based Kindle readers, which are advertised as "Kindle with Special Offers." On those devices, advertising-driven screen savers will display when the hardware is not in use.
It's unknown whether Amazon plans to offer a new ad-supported Kindle Fire at an even lower price than the hardware's current $199 cost, or if it plans to place ads on the welcome screens of existing Kindle Fire owners. However, Ad Age did state the $600,000 minimum ad buy-in would be a high price "for an ad unit on a device that currently has no distribution," suggesting the ads will be displayed on current models.
Agency executives who spoke about Amazon's pitch to them off the record declined to participate the in-the-works advertising program. They expressed concern over the fact that Amazon isn't guaranteeing the number of devices the advertisements will reach, because Amazon "hasn't decided whether the ads will start popping up on devices that have already been purchased or just on new devices."
Amazon is already believed to be taking a loss for selling the Kindle Fire for just $199. At that price, the touchscreen tablet sells for half the price of Apple's $399 iPad 2.
Earlier this month, new data from IDC showed that shipments of the Kindle Fire saw a "steep drop" in the first quarter of 2012, allowing Apple's iPad to grow to 68 percent of tablets shipped worldwide. The Kindle Fire fell from a 16.8 percent share of shipments during the fourth quarter of calendar 2011 to just 4 percent of shipments in the first quarter of 2012, suggesting demand weakened significantly after the holiday shopping season.
Reports have suggested that Amazon plans to launch a larger Kindle Fire with a 10.1-inch display later this year that would more directly compete with Apple's 9.7-inch iPad. The new, larger Kindle Fire is believed to be in development under the code name "Coyote."