Starting Monday, Virgin will be offering 10,000 free Internet appliances to U.S. customers who are willing to part with personal data. If this launch is successful, Virgin said it may distribute 30,000 more appliances.
"Getting hold of a customer's name can be costly," said Glen Ward, president and chief executive officer of Virgin Entertainment Group. "This is a more cost-effective way of doing it."
Virgin won't disclose how much it is spending on its VirginConnect WebPlayers, but experts estimate that they cost about $300 to $500 apiece. The Web devices allow users to surf the Net and send e-mail, but cannot be used for computing functions such as word processing and spreadsheets.
Ward said the cost of the WebPlayer project is still modest compared with the hundreds of dollars per customer that his competitors spend on TV advertising that may not be as effective. "The joy of direct marketing is you know exactly what the return on that dollar is," Ward said.
Virgin plans to recoup some of the cost by charging $50 a year for Internet access, but the fee will be waived for the first year. The company will also charge advertisers for preferential placement on the opening screen and take a cut of electronic-commerce transactions conducted online.
Many other companies, including FreePC.com, DirectWeb Inc. and Gobi Inc., have offered free personal computers, usually in exchange for long-term Internet-service subscriptions with hefty monthly fees and with a plan to pump advertising at the users.
Virgin's plan is more involved and more targeted. To get the devices, customers must log on to a Web site -- www.virginconnectme.com -- and fill out a questionnaire designed to determine their fit with the so-called Virgin lifestyle. Questions cover shopping preferences, music and entertainment interests, where and how customers generally get online, and how they spend their time once they get on the Web. Answers are rated and scored, then evaluated.
"We're looking for people with Virgin affinity and interest in electronic commerce," said Audrey Parma, president of Internet Appliance Networks, a closely held New York startup that designed the Web appliances for Virgin as part of a joint venture.
The Web device is a sleek silver machine with a flat-panel screen, a wireless keyboard and a 56K modem. The top row of keys consists of icons that connect users to Web sites that have paid for preferential placement. For example, the key with an airplane icon connects to Microsoft's Expedia travel Web site. The music icon connects, not surprisingly, with the Virgin music site. Virgin Entertainment and Virgin Music are divisions of Virgin Group, run by British entrepreneur Richard Branson.
Customers, of course, can visit any Web page they like on the Internet. But when they log on, they will find themselves directed to the VirginConnect Web page. And as they travel to other Web sites, the Virgin logo and icons will continue to frame the Web pages that they visit.
In accepting the machine, customers are also agreeing to receive targeted banner advertising and e-mail messages from Virgin and other marketers. Advertisers often pay more for ads if they know who they will reach. Virgin customers must promise to spend 10 hours per month surfing the Web or else will be asked to return the machine.
"If customers get online with this machine, they know we'll be reaching out and tracking where they go online -- all for the purpose of giving better service," Parma said.
DoubleClick recently ran afoul of privacy advocates when it attempted to do a similar type of tracking through its online advertising network. But privacy advocates are more forgiving about devices that are upfront about their privacy intrusions. "Our view is people have the right to give up their privacy if they wish, but they should know how the data are being used," said Marc Rotenberg, executive director of the Electronic Privacy Information Center.
In its privacy statement, Virgin promises that "we will never pass information about you to any party not affiliated with VirginConnect."