At $199 a pop, many people questioned Amazon’s market tactics when the Kindle Fire was released late last year. I mean, the online retailer was taking a $2.70 loss on each Fire made, and when you consider the company was estimated to sell more than 5 million of its tablets during 2011’s holiday season, well, that’s a pretty hefty chunk of change.
According to Ross Sandler of RBC Capital, each Kindle Fire is raking in around $100 each of added revenue. That’s a lot of dough for Amazon. If the Seattle-based company did indeed sell 5 million units and made a profit of $100 on each, that’s an extra $500 million. That’s more likely a conservative estimate, too.
RBC‘s report said that roughly 4 out of 5 Fire owners has purchased one or more ebooks in their first 60 days of owning the tablet. Two-thirds of owners said they’d purchased an app or game, with 41 percent buying three or more. That’s crazy, and sure to grow and grow and grow in 2012. If Amazon manages to sell ten million Kindle Fire units and hit $100 profit for each unit, the company will earn a cool $1 billion.
It looks like Amazon knew what it was doing all along.