The KSO is very different from an ad-supported book, for a couple of reasons.
The first reason is that you will look at ads on the KSO over the lifetime of the device (1-2 years, presumably). This gives Amazon a long time to make up the $25 discount you received. With a book, [assuming a 20% discount on a $10 book] by contrast, the publisher has approximately 8 hours to make back the $2 discount...because after that, you're done with the book.
The second important difference is that Amazon is able to present ads on the KSO without interfering with the reading experience at all. Using a bookstore analogy, it's like having ads on the shelves of the bookstore, but not on or in the books themselves. Books could, of course, place the ad on the cover, or after the cover page but before the book begins. But if they need to make $2 in ad revenue per book, and only have 8 hours to do it it, I think that they are going to be more aggressive. And I don't think that readers will accept that.