But Wait! Theres More

Whats behind PC giveaways?

Art by Bob AulWhat would you do for a free computer? Would you be willing to let ads pop up on your computer screen? Would you let marketers spy on you while you surfed the Web, including your surreptitious visits to the HOT SEX PARTY SLUTS site? Would you agree to spend thousands of dollars at an online mall? Would you commit to a year and a half of Internet service? Would you sell your children for medical experimentation?

All of those (except the last one) have been advanced recently by companies willing to push the PC marketplace as far as it can go—and in some cases farther. Faced with a couple of years that saw PC prices sliding giddily downward, a number of companies have seen opportunity in the low end of the market. Several companies have begun selling PCs for as little as $299, while others have tried offering them free as incentives to buy other stuff.

One of those companies is My Free PC (www.myfreepc.com), a home-based ISP run out of Laguna Beach by former fighter pilot Ted Barnett. Barnett and his partners started My Free PC in February, offering a free computer with a 1GB hard drive, a 56K modem, a monitor, a sound card, preinstalled software and all other kinds of goodies—absolutely free. The catch: you have to sign up for 19 months of Internet service through Barnett's company at a cost of $539—payable in advance. That works out to about $30 bucks per month—slightly more expensive than a lot of other ISPs, but not unheard of.

"We don't make much of a profit, but the cost per unit is low enough, given the volume we move, to make it work," Barnett said. He said the company has signed up about 100 OCcustomers in the few months it has been in existence and fielded inquiries from thousands more. "Our story just got picked up by PC Magazine, and since that happened, we've been crushed by inquiries. We're still digging out from under them," he said.

Barnett says his company's strategy is still evolving. They're in talks with other companies, considering selling ads and otherwise marketing to their customers, a strategy used by other free PC companies to help defray costs. "Right now, we make enough money on each system to not sell ads or track people's surfing on the Web," he said. "We don't do any of that. We don't bother people. But I'm not saying we won't down the road. That's the way other companies are going, so we might have to go that way, too."

Other companies like Pasadena-based Free-PC.com, which began offering customers a free PC in February in exchange for allowing the company to track their movements online and sell advertising targeted to their interests—advertising that appears on the desktops of their free PC. Half a million potential customers clamored to be the recipients of the 10,000 available machines, even while privacy advocates fretted about the potential for abuse inherent in the scheme.

It seemed there was no shortage of Americans willing to play cyber guinea pig. Two days after Free-PC announced its offer of free PCs, a company called One Stop Communication upped the ante by offering free iMacs to customers who promised to spend $100 per month at its online mall for the next three years. CNET News reported in May that mammoth computer maker Dell was considering a free-PC-for-Internet-service plan to help bolster growth.

Still other companies have offered customers not free computers, but computers that are incredibly cheap. A Utah company called SoftStream offered customers $250 computers in hopes of attracting them to its software-leasing service.

But these plans, while obviously appealing to consumers, sometimes don't work out quite as well as the companies hope. SoftStream reportedly had to back out of its offer, saying a "shortfall" in cash made it unable to keep its commitments. And Wired News reported in February that the CEO of One Stop Communication, which had promised free iMacs, had made a similar offer to customers in Israel through another company and then failed to deliver, leaving many customers out $100. PC experts are looking at other pricing schemes with a jaundiced eye, skeptical that companies will be able to live up to their obligations.

"This model has only been out there for a few months," said Stephen Baker, a senior analyst with the computer research firm PC Data. "There's no way right now to know if it's a viable way of doing business; all the economics haven't been settled yet. It's hard to say what the market is going to be like in a year or a couple of years."

Baker also pointed out that many of the computers being given away are not necessarily the snazziest machines in the world—a fact Barnett doesn't dispute. "It depends on what you want to do," he said. "If you just want to run Quicken, do a little word processing and get on the Internet, you don't need an expensive machine."

But Baker says that's why he doubts the free/cheap PC model will take over the marketplace. "Don't kid yourself: a $299 PC is not the same as a $999 PC," he said. "You can go cheap if you want, but there are alternatives. The whole market isn't going to be people buying cheap."

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