To get a better read of their customers, JPMorgan Chase and Visa have become the initial sponsors of Amazon.com's new advertiser-supported Kindle e-book device.
E-readers such as the Kindle allow users to set their own pictures to display on the screen after they have stopped reading. The new discounted Kindle, which costs $25 less than the standard $139 Kindle, replaces these screen saver images with advertisements. The device is expected to include a feature called AdMash that allows consumers to choose which version of an ad they prefer to see.
"It's a learning opportunity," said Chris Conrad, JPMorgan Chase's marketing director in charge of the Amazon rewards card. The bank benefits from "having direct consumer feedback on advertising preferences, and … [consumers'] ability to vote up or vote down preferred ads particularly in an electronic medium online."
Through the new Kindle, "we will be just more rapidly able to understand what messages resonate," Conrad said.
He also suggested the advertising system could find its way to Amazon.com's Kindle applications for smartphones and Apple Inc.'s iPad.
"As those platforms evolve we would look to be involved," Conrad said. "We would take a serious look at any opportunity for advertising."
A Visa spokesman said its deal with Amazon.com is separate from JPMorgan Chase's, though Visa is the payment network for the bank's Amazon.com rewards card.
JPMorgan Chase and Visa declined to discuss the costs of advertising on the Kindle.
As with earlier versions of the e-reader, the new device, called Kindle with Special Offers, allows users to buy e-books directly from the Kindle's screen. The books are delivered wirelessly and can be purchased with whichever card is tied to the user's Amazon.com account.
The initial sponsors also include General Motors Co.'s Buick and Procter & Gamble Co.'s Oil of Olay skin care cream.
JPMorgan Chase and Visa are trying to better align themselves with online purchases, analysts said. Each is threatened by alternative providers, such as PayPal Inc., a unit of eBay Inc., that supply a simpler option for online transactions than typing in a 16-digit card number.
"Trust is very important to consumers when making online purchases, so with Amazon being all about online merchandise — and Visa and Chase, too — being associated with online trust, especially in the face of PayPal, is important," said James Van Dyke, the president and founder of Javelin Strategy and Research. "Everyone now is looking for areas that you are going to get sustained rapid growth, and knowing that consumers are worried when they shop online, it makes sense to advertise this way."
According to Javelin research published in November, roughly a third of all consumers at the top 10 retail banks used a service like PayPal to transfer money over the automated clearing house network.
Brian Riley, a research director in the bank cards practice at TowerGroup, cautioned that there is risk to using an unproven advertising platform. "When you are testing these things out, you are really fishing," Riley said. "There's a great buzz about social media, but it's yet to prove itself … I guess the bigger you are the more you have to test, and sooner or later something has to hit."
Banks have not been shy about embracing new advertising opportunities, particularly when payments are an integral part of the new platform. In 2006, Citigroup Inc. offered rewards points to credit card customers who used its card to sign up for Google Inc.'s Checkout payment service. Citi's move kept its brand prominent when consumers chose which bank's card to enroll with Google's online payment service.
Ideally, JPMorgan Chase and Visa would want their own brands to become synonymous with the Kindle device, experts said.
"Certainly if you are the first, there is no clutter," said Britt Beemer, founder of America's Research Group in Charleston, S.C. "If there is ever a time to be involved in a new technology, it's to be there in the beginning. That's where the real opportunities are. It's great to be No. 1."
