Free-PC.com sets off 'sales' frenzy

Officials at the Idealab startup Free-PC.com say they're baffled by the overwhelming response to their advertising-supported free hardware offer and want to expand the program.
Written by Maria Seminerio, Contributor

Officials at the Idealab startup Free-PC.com say they're baffled by the overwhelming response to their advertising-supported free hardware offer and want to expand the program.

"It's just been unbelievable," said a Free-PC.com spokeswoman, saying no one at the company expected the stampede of half a million people who applied between Monday and Tuesday for a free PC. Free-PC.com said Monday it would offer 10,000 free computers to those willing to sit through constant on-screen advertisements.

While the company hasn't yet announced an official plan to give away even more PCs, officials said Wednesday the number will almost surely rise, and are brainstorming ways to finance the expansion, the spokeswoman said. Company executives, including Idealab founder Bill Gross, were unavailable for interviews because they were "stuck in meetings" on how to handle the crush, she said.

The stampede to apply for the PCs, which the company will give away to users fitting a so-far-undisclosed demographic model, was so great that the Free-PC.com site was inaccessible at times Monday and Tuesday.

Would-be applicants also deluged Idealab with phone calls and "several hundred" even lined up outside the company's headquarters, the spokeswoman said, even though the only way to apply for the program is to sign up on the company's Web site.

The popularity of the idea makes it possible that other companies could follow suit, just as some Internet service providers now believe advertising can subsidise free service, analysts said.

"If this works out for them, what's to stop Dell and Yahoo, or AOL and HP from doing the same thing?" said Dick Shaffer, principal analyst at Technologic Partners in New York.

Citing the latest ISP to turn to the ad-supported model, Westlake, Calif.-based NetZero, which has signed up 300,000 users since its Oct. 19 launch, Shaffer said there's theoretically no reason the same model couldn't work with increasingly-cheap PCs.

"This could radically change the economic model for a lot of companies," he said.

But like its ISP counterparts, Free-PC.com will have some important hurdles to clear to be a success, Shaffer said.

"The most important thing will be what do media buyers think, what do advertisers think," he said. "Will they like the demographics? You don't want it to be only people who can't afford a PC, because that would be patronizing, and obviously they wouldn't make the best advertising audience," Shaffer said.

The positive reaction to the Free-PC.com offering is a sign that the advertising-supported model has a better chance of working on the Internet than was thought, said Rich LeFurgy, chairman of the Internet Advertising Bureau.

"Online advertising is redefining and creating new business models almost on a daily basis," LeFurgy said. "Right now a number of companies are under-pricing their products, or even giving them away for free, all to build market share by financing their ventures through advertising."

Asked whether the company is likely to recoup its hardware investment, as it claims it can, another analyst said it's possible, and cited cellular phone carriers, which either gives away phones or gives them at a substantial discount.

"It's not a new model, after all, even if it is new to this area," said Scott Smith, an analyst with Current Analysis in Sterling, Va.

If the company can offer a winning demographic group to advertisers, the Free-PC.com offer could be "an opening salvo" in a war among similar promotions, Smith said.

The Free-PC.com spokeswoman said the first 10,000 PCs will go to users who fit the profiles requested by the initial advertising partners, which the company has not yet revealed. But company officials hope that in future rounds of promotions, they can target consumer users with a wider range of income and spending characteristics, she said.

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