10,000 Free PCs to Most Worthy Prospects

“There's no such thing as a free lunch,” the saying goes, but there are free personal computers. Free PC Inc. announced that it will, in a test, give PCs to people who agree to receive targeted advertising.

The company, a start-up firm created by Pasadena, CA-based idealab, said it anticipates that revenue from advertisers, whose messages will be displayed on the users' desktops, will cover the company's costs.

The company said it will ship 10,000 free PCs — Compaq Presario desktop models loaded with free Internet access and e-mail capabilities — in the second quarter as a test of the program. The computers are valued at less than $1,000 each, according to published reports.

Free PC collected data through a brief questionnaire at its Web site (www.free-pc.com) to determine who will receive the PCs. Interested consumers submitted information about their income, age, family status, interests and which magazines they subscribe to. Winners are being selected based on criteria that determines whether they are appealing to advertisers, the company said, although it did not reveal what those criteria are. The company said it had already received enough questionnaires by Feb. 8, the day the program was announced, to select participants for the test.

The site explains that Free PC will not sell or distribute the information obtained from the application, and that the advertisers will not be given data about the individuals who receive the computers.

But one analyst speculated that the campaign will not work.

“I think it's an effort to try to figure out how to leverage the excitement in the Internet,” said Tom Rhinelander, an analyst at Forrester Research, Cambridge, MA. But, he added, “Giving away free PCs is not the winning solution.”

The effort has several factors working against it, he said, including the current high level of penetration of PCs in American households, the increasing affordability of PCs and the expected emergence this year of lower-cost Web devices that will allow Web surfing, electronic commerce and e-mail exchange but not word processing or some of the other functions that PCs currently perform.

Such products, he said, might be offered at low prices to people who subscribe to a paid Internet service, much as cellular telephones are given free or at a discount to consumers who agree to pay monthly charges to service providers.

Although Free PC claimed that its offer is analogous to the cellular phone model, it really is not — cellular phones ultimately are paid for by users in the form of ongoing service fees, while the computers will be paid for by advertisers who need to be re-sold on the program periodically.

Rhinelander questioned the ability of the company to attract advertisers on an ongoing basis.

“To be effective, it has to be able to report back to the advertisers what those people are doing,” he said. “They say this is not intended to be a Big Brother thing, but to be effective it has to be.”

Nat Goldhaber, CEO of Internet ad agency Cybergold Inc., which has agreed to supply ads for the site, said he expects that marketers will be willing to pay to reach such a targeted audience, just as they would in a direct mail campaign. They will use advertising that measures response rates through promotional offers that reward consumers for taking certain actions, such as requesting more information about a company.

Goldhaber, whose company's clients include Disney, AT&T and autobytel.com, said he had not yet secured any specific advertisers for the program. Information about advertising rates also was not available.

The ads themselves will be stored on the computers' hard drives so they will be visible along the borders of the users' desktops, even when the user is not connected to the Internet. The ads will be replenished periodically while users are connected.

Free PC will be headed by CEO Don LaVigne. idealab is headed by Bill Gross, whose other ventures include GoTo.com, CitySearch and eToys. The company said it has received $10 million in funding for the Free PC project from USA Networks Inc., an investor in several online ventures.

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