The price of a Kindle digital reader continues to drop after announced plans to release The Kindle With Special Offers, a Kindle 3 reading device that will be subsidized by on-screen advertising in the form of sponsored screensavers. The new Kindle With Special Offers reader will sell for $114 and will begin shipping May 3.

The new $114 Kindle with Special Offers will go on sale alongside the $139 Kindle 3 and $189 Kindle with 3G wireless access. The KSP is the same third generation Kindle 3 device released in 2010 that has gone on to sell millions of units.

However, instead of the device’s screensavers showing images of classic writers as they have in the past, the new Kindle with Special Offers screensavers will feature a variety of ads, initially by such firms as Buick, Olay, Visa and Reward Visa Card, all designed to be showcased on the Kindle 3 black & white e-ink screen. Amazon will also use the KSP to feature a variety of ads and promotional price offers for its gift cards ($10 for a $20 gift card), Audible Books ($6 for 6), Roku Streaming Player (50% off) as well as discount offers for the Amazon Denim shop and Amazon MP3 store.

Buick director of advertising and promotions Craig Bierley, said, the Kindle’s “High contrast e-ink display eliminates glare is perfect for emotionally engaging and impactful brand imagery.” He explained that, “the opportunity to offer custom-designed Kindle screensavers was a natural fit for Buick because Kindle is such a unique device surrounded by a community of intelligent, passionate people.”

In addition, Amazon is also launching AdMash, a free Kindle app and Amazon website where Kindle users can go to vote on the “most attractive and engaging display advertisements that will become Kindle sponsored screensavers.” Consumers are presented with potential ads and asked to select which they prefer. The app will be available sometime in the next few weeks. In addition KSP users can go to the Manage Your Kindle page on and indicate the kind of graphic elements they would like to see in KSP screensaver advertising, from landscape and scenery to photography or illustrations.

“We’re working hard to make sure that anyone who wants a Kindle can afford one,” said Jeff Bezos, founder and CEO.