Amazon's $50 ad-subsidized Blu phone appears to be a hit

Amazon sells a range of unlocked phones that feature its advertisements on the lock screen.

Amazon couldn’t gain any real traction in the smartphone market with its much-hyped Fire handset, but it appears to have a hit on its hands with the ad-subsidized Blu Products R1 HD phone.

The device is the top-selling smartphone for the massive online retailer, Bloomberg reported this week. Amazon began offering the handset last month for $50 to subscribers of its Prime service willing to accept ads and pre-installed Amazon apps on the gadget.

The ad-subsidized Blu phone is half the price Amazon charges for the same phone without ads. Amazon unveiled the strategy in June, when it also announced a steep discount on the Moto G for Prime users who agree to receive ads.

"Customers love the freedom of unlocked phones—it's the fastest growing category within cell phones on Amazon.com—so we set out to find a way to make them even more affordable for our Prime members," Laura Orvidas, Amazon's vice president of consumer electronics, said at the time 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 of the Fire phone last fall.

But the Fire failure may have been something of a blessing in disguise for Amazon. Margins in the phone-manufacturing segment are brutally thin for any company not named Apple, so rather than selling its own devices Amazon has pivoted to using other companies’ hardware to market its own offerings.

Blu, meanwhile, sells its phones through Walmart and Best Buy in addition to Amazon, Bloomberg reported. The Florida-based company is on pace to generate between $600 million and $700 million this year. A Blu representative told FierceWireless earlier this year that the company sells roughly 10 million smartphones a year globally, and around 35 percent of those are sold in the U.S. market through MVNOs, retailers and online outlets.

For more:
- read this Bloomberg report

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