Amazon offers deep phone discounts to Prime members who accept ads

Amazon (NASDAQ: AMZN) is slashing the price of two new, unlocked Android phones to subscribers of its Prime service who are willing to accept advertising and pre-installed Amazon apps on the devices.

Prime members can pre-order the Moto G and Blu R1 HD for as much as 50 percent off, the online retailer announced this morning. Both phones are scheduled to ship in the U.S. on July 12.

In exchange for the handset discount, Amazon will present personalized ads and product recommendations on the phone's lockscreen. Users who are interested in the offer can tap the screen to learn more; otherwise they can unlock the screen to dismiss it.

Amazon will also install its own apps on the phones, enabling the company to expand its mobile reach. The move mirrors Amazon's strategy with tablets, although the phones will come with Google apps such as Play, Gmail and Maps.

"Customers love the freedom of unlocked phones—it's the fastest growing category within cell phones on—so we set out to find a way to make them even more affordable for our Prime members," said Laura Orvidas, Amazon's vice president of consumer electronics, in a prepared statement. "We currently offer low prices supported by lockscreen offers and ads on our Fire tablets and Kindle e-readers, and they've been a hit—in fact, the vast majority of customers choose the lower-priced option. Now we're lowering prices in a similar way on new, unlocked smartphones, working with two of our best-selling brands, BLU and Motorola."

Amazon's Fire phone, which launched in July 2014, was an unmitigated flop, causing the company to take a $170 million writedown just a few months later. The online retail giant finally discontinued sales and exhausted its inventory last fall.

But profit margins in mobile hardware are notoriously thin for any company not named Apple (NASDAQ: AAPL), and Amazon's success in selling ad-subsidized tablets clearly indicates that consumers are willing to accept some ads in exchange for discounted devices. Offering discounted smartphones could enable Amazon to continue to grow its Prime audience as it boosts sales and gleans huge amounts of data about how its customers shop and interact with the company online.

Amazon is being relatively cautious here – the initiative applies only to two relatively low-profile handsets, after all – but the move could pave the way for the company to grow its presence in mobile substantially. If the effort gains traction, expect Amazon to roll it out to more handsets in the coming months.

For more:
- read this Amazon press release

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