You can buy six brand-new tablets from Amazon for less than the cost of a new iPad.
At first, that claim may sound unbelievable, as just five years ago few people had tablets, and the ones who did had likely spent hundreds on them.
But on Thursday, the Amazon unveiled a $50 version of its Fire tablet. It has a 7-inch color display, a quad-core processor, and front- and rear-facing cameras.
It's even selling them in six packs for $250.
So why can Amazon sell its devices for next to nothing?
Because unlike Apple or Samsung, Amazon doesn't need to make any money on the hardware.
The company has for years said that it makes money when you use the tablet to buy apps, games, movies, books, TV shows, or physical goods on Amazon. It's a way of locking you into the Amazon ecosystem. You get the cheap device, but use it as a portal to buy stuff from Amazon. That's where the real money comes from. Whereas Apple locks users into an ecosystem that encourages you to buy new devices every year or two, Amazon locks users into an ecosystem that encourages you to buy everything you need from toilet paper to the latest episode of "The Walking Dead" for years after the initial purchase of a cheap tablet.
An Amazon executive reiterated this strategy at the press briefing for the new tablets this week, telling Business Insider's Jillian D'Onfro, "Our thesis is that if they're using the tablet, we gain our profitability from that."
Jeff Bezos, the founder and CEO of Amazon, has in the past referred to Amazon's unique strategy in selling devices at such low costs, writing in a letter to shareholders in 2013 that during a visit to the beach, he saw nearly every generation of Kindle being used.
"Our business approach is to sell premium hardware at roughly breakeven prices," he wrote. "We want to make money when people use our devices – not when people buy our devices... we don’t need our customers to be on the upgrade treadmill. We can be very happy to see people still using four-year-old Kindles!"
