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This, THIS is the key point: it's not whether the tech problems are insurmountable (they're not, even though they can't be handwaved past), or whether the readers will accept ads (they will), but whether it's *worth the money* for advertisers to pay a noticeable part of the purchase price.
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I agree that this is the key point. Now I have no background in marketing, and possibly, EW, you do. I wonder how you can be so sure that ad support could not noticeably lower prices. After all, it does so for games, TV shows, and apps, not to mention hardware like the KSO. Are you really trying to say that the ebook is the unique type of medium that ad support WOULDN'T lower prices for? That sounds perilously close to wishful thinking to me. You need to argue for this in more detailed fashion than you have done so far.