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The popularity of electronic gadgets among kids has led Amazon.com Inc. (AMZN - Analyst Report) to add certain features to its ebook reader. In addition to the FreeTime feature, Amazon also added the FreeTime Unlimited feature exclusively for kids to its Kindle Fire and Kindle Fire HD.

A study by Nielsen revealed that 77.0% of children use tablets to download games, 57.0% for educational purposes, 55.0% use it as an entertainment device while traveling and 43.0% of children use tablets to watch shows or movies.  Thus, this segment of the market offers sufficient opportunity for tablet makers that Amazon obviously wants to tap.

FreeTime Unlimited is particularly aimed for three-to-eight-year-old kids. This ‘easy-to-use’ feature offers kids a broad range of content such as movies, books, apps and games. They can also view shows from Walt Disney Co. (DIS - Analyst Report), Sesame Street, Nickelodeon and DC Comics.

Amazon is charging $4.99 a month for a single subscription and $9.99 monthly for multiple-child membership. As for its Prime members, Amazon is charging $2.99 and $6.99, respectively, for the multimedia service.

The tablet market is a very competitive one and Amazon cannot afford to miss out on any opportunity to grow its still-small customer base. Amazon’s prime competitor Apple Inc. (AAPL - Analyst Report) is also not behind as it launched 20,000 educational apps in the App Store with 1.5 million iPads being used in schools.

According to IDC, 27.8 million tablets were shipped worldwide in the third quarter of fiscal 2012. Apple shipped 14.0 million iPads and led the market with a 50.4% share.  Samsung was next in line with 18.4% market share.  Amazon ranked third as it shipped 2.5 million units for a 9.0% share.

Amazon’s Kindle Fire has a long way to go. However, strategic measures, including the addition and upgrading features, and the targeting of key markets can generate higher revenues.

In this respect, it should be borne in mind that Amazon is more concerned with the sale of digital goods (books, video and so on) through its Kindle platform. Unlike the other tablet makers, Amazon makes a good deal of money from non-Kindle platforms as well. Its Kindle platform is a way for it to protect these sales and the strategy has proved successful thus far.

Amazon’s third quarter revenue was $13.81 billion, up 7.6% sequentially and 26.9% from the year-ago quarter. This was better than management expectations and more or less in line with the Zacks Consensus Estimate. Excluding the unfavorable currency impact, revenues increased 30.0% year over year.

Amazon, Apple and Disney all have a Zacks #3 Rank, which implies a ‘Hold’ rating in the near term.

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