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updated 7/16/2012 12:50:13 PM ET 2012-07-16T16:50:13

Would you watch ads on your phone? What if that got you the phone for free, or at least for very cheap? And what if it kept you from getting locked into a two-year contract?

As with the new iPhone, so many rumors about an Amazon phone are swirling around that it's starting to look inevitable. While at first it sounds incongruous, an Amazon phone makes sense by using ads and incentives to buy merchandise in order to keep the phone price low.

People are already ponying up to buy $200 or $300 phones in order to get contract-free cell plans service from companies such as Virgin Mobile and Boost Mobile, even though most of those phones are small or underpowered. Meanwhile, there is genuine excitement now that both Cricket and Virgin Mobile are offering the current (i.e. soon-to-be outdated) iPhone 4S, even with prices as high as $650. It soon pays for itself with lower monthly service charges. And most everyone is glad to avoid a two-year contract.

If Amazon comes out with an Android smartphone, it could offer a primo device, say something similar to the $600 Samsung Galaxy S III, for a lot less — without a contract. Completely free might be too much for Amazon, said Aapo Markkanen, an analyst at ABI Research. But he told TechNewsDaily that the price could be marked down as low as 40 percent of what a competing phone costs.

That might include ads, for example on the lock screen you see before you enter your password. People are already gladly that doing with basic Kindle readers, which is $79 with ads and promotions versus $109 without. After all, how many people customize their smartphone screen to replace the bland pattern that they barely look at when unlocking the phone?

And, while they may gripe about ads in games or on an entertainment service such as Spotify, most people opt for those free versions rather than pay to get rid of the ads. [ Spotify Will Always Be Free, Founder Hopes ]

"Think about the Super Bowl, the World Cup, the Olympics, the Oscars, the Presidential Debates, the news coverage of important events," said tech investor Fred Wilson on his blog AVC yesterday (July 15). "These things are ad supported and free for anyone to watch who has a TV and an antenna." Wilson has invested in such Web staples as Twitter, Zynga and Tumblr, so he has a pretty good idea of what people want and what they will do to get it.

A Kindle phone would also direct people to Amazon to buy or rent both media, such as ebooks and movies, as well as any products Amazon sells — from SLR cameras to diapers.

But that might actually be a bonus. The iTunes app is considered an essential feature on iPhones, since it let's people easily get the music or video they want on the gadget. And people gladly use Amazon's price-comparison app to find deals and buy right from the phone. If an Amazon phone makes that easier, people might also consider that a bonus, not a downside.

And since you own the discounted phone outright, there is no need sign a two-year contract to get the price subsidized. And avoiding the contract shackles is a kind of free that everyone may want.

© 2012 TechNewsDaily

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