This article was  published in August 1999

Technology discovers marketing as fast as marketing is discovering technology.

After years of being apologetic about it, advertising makes no bones about 'subsidizing' the media. But it's not the media you thought you knew.

TRIVIA
In 1980 Microsoft paid $50,000 for the early version of DOS.

The real estate on your desktop is more valuable than you think.

His name is Bill Gross, not Bill Gates, and he'd like to give you a PC for free. Would you be interested? You may think there won't be enough to go around, but Gross is optie weeks, he thinks he may be able to go up to 50 million. Is this guy crazy? You'd certainly think so. After all this is no el cheapo, no-name PC. These are Compaq Presario's. Full bodied 333 MHz beasts with 4 gigs Hard Drive, 32 megs RAM, and yes, they come with CD ROMs and a 56K modem. What's the deal? Just business as unusual in Cyberspace.

Knowing how one of the biggest obstacles to get on the Net is not getting on a PC but getting a PC, this may be the ultimate giveaway for anyone in Ecommerce --if they could find a way to expense it. And they have. After all, PC prices are crashing (two years after pooh poohing the sub $500 PC, some prices are as low as $400) and Ecommerce is blazing, so the combination is perfect.

So if you're trying to guess just what kind of businesses can give away PCs for free, you'll get high marks for guessing they are ISPs (Internet Service Providers). They're testing out the brave new world of advertising. One year ago, in this column, I speculated that it would not be long before marketers began to subsidize customers for media time -no different from the way the ads make newspapers affordable. Why shouldn't an advertiser allow us to borrow a certain line of free videos from our favourite video club, if we agreed to watch a few ads before the movie, I surmised. We accept that 'intrusion' in movie theatres, after all. Predictably, the Web merchants -rather than the main street marketers-- grabbed this model first in the theatre of operations we call 'new media', and everyone from music marketers and banks to auto companies and airlines are jumping in. Bill Gross' company is called FreePC and despite its name, is in the 'eyeball' business, not the hardware business. This new media business model is the same as the old media --renting eyeballs, to put it crudely. But instead of providing content, it rewards you with a product that relentlessly delivers 'commercial content', a.k.a. Ads. You get a free Internet connection, and you get to keep the 300Mhz PC, monitor, modem and all, if you can bear to watch the ads that will occupy the bottom and one side of the screen. The catch (of course there's a catch) is that even if you are not logged on to the Internet, the ads still appear, because they have been burned onto your hard drive.

Does this sound like a good proposition? Not everyone is as enthusiastic as the company founder, who seems to take the concept of ads-as-subsidy to its logical conclusion His other venture, a 'portal site' and search engine, no different from Yahoo! (find it at www.goto.com), brings up search results not randomly, but prioritized by how much each listed site pays! This approach is anathema to Internet purists, but no one in Ecommerce apologizes for having a profit motive. The FreePC business must be a runaway success judging from similar models springing up.


PCs FALL OUT OF THE SKY
Take Direct Web , a New Jersey company (www.directweb.com) that launched in March this year. For only $19.95 a month, you get a fast 333 MHz Intel PC, upgrades, support, software (Microsoft Works suite), and unlimited Internet access. They even promise to replace the PC every 3 years for a nominal charge, so you don't end up with an obsolete paperweight. While most similar business models (say in the cellular phone business) require long term contracts to lock in the customer, FreePC requires none. The $150 deposit required at the sign up stage, is refunded if you cancel after 12 months. In effect, it is a month-to-month 'subscription' that can be cancelled by returning the computer, no questions asked. Again, this sounds like a smoking deal. But wait a minute. You're not only paying for the connection (OK, so it's slightly cheaper than what AOL charges), but you are required to watch the ads. As the company puts it, "our sponsors underwrite the cost of providing our subscribers with the hardware and software" that runs the computer. How do the advertisers benefit? DirectWeb offers "unique advertising and e-commerce partnership opportunities" that once again, like FreePC translate into ads on your desktop. So yes, like their ads say Free PCs do fall out of the sky. Just be careful you're not crushed by the weight of the advertising.

So what's the alternative? Like unleaded fuel and fat-free salad dressing, the advertising-free alternative is definitely more expensive. Nevertheless, this business model, followed by three companies, Gobi, Intersquid, and PCFree is an indication that there's no shortage of outside-the-box thinking in E-commerce. The CEO of GOBI, 26-year old Ganesh Ramakrishnan's statement that "the PC is a wasteful investment", is spot-on for what this category is after. Built on multiple revenue streams from monthly fees, signing-up fees, fees from advertising, a share of e-commerce transactions and a termination fee, GOBI is confident that it can survive in this chip-eat-chip market. For a $74.99 deposit, the company will ship you a fast 333 MHz computer. No hidden charges, no annoying on-screen advertising. You 'pay' for it with an expensive $29.99 a month internet connection. Here too, after your contract runs out (typically 3 years), you get to keep the PC. Renewing your membership gets you another PC. But because this is not an ad-subsidized business transaction, the cost of access can be thought of as monthly installments that pay for the computer. But considering the computer has a 3-year warranty, you are covered as long as you are paying for it.

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