Folks, I'm thinking a lot of people--here and elsewhere--are focusing on the wrong thing. KSO is not using kindles to sell ads (I think the ads are a sideline) they are using KSO to distribute the DEALS. It's like the weekly coupon fliers showing up in the mail; there is *profit* to be made distributing shopping deals.
edit: Here, check this:
http://socialtimes.com/groupon-gap-social-buying_b20835
Why all the buzz over Woot (now owned by Amazon) and Groupon (Google wanted it $6 billion bad!) That's why I see the Special Offers as coupons.
And why the Special Offers will continue indefinitely; the Special Offers *are* the product.
Try this:
You sign up for a new "Amazon Special Offers" service that delivers daily (or better) offers for all sorts of shopper discounts that nobody else will see. For US$114 you get a lifetime membership to this new buyer's club and, as a Free! Bonus! you get a Kindle3 WiFi to receive those deals (and select other partner ads) on, yours to keep forever and read ebooks from the Kindle ebookstore and other free ebook sites (listed on the website along with the sample deals, bw).
Think that would fly on late night TV?
On HSN?
What if they make it 4 payments of $28.99?
The ads are secondary here.
Even the reader itself is secondary; its free!
Think about it; *this* is the Free Kindle everybody was speculating about.
They're just disguising it to avoid antitrust attention and avoid alienating those willing to pay full price. Focus on the ads all you want but the real story is the Deals.
Also, about those ads: they're a shot across the bow to Google.
Think about it: Google wants to sell ebooks?
Fine, Amazon can sell online and offline ads.
And think of the possible follow-up: an Amazon-branded Android Webpad with access to the Amazon Special Offers and a built-in browser that serves up Amazon-sold ads instead of Google-sold ads.
This isn't about expanding the Kindle ecosystem as much as it is about using Kindle to build up *two* new businesses.