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February 15, 1999


By CBR Staff Writer

Under the title There is No Such Thing as a Free PC the US public broadcasting service’s technology columnist Robert X Cringely has taken a closer look at the deal behind Free PC Inc’s offer of a free personal computer in return for exposure to on- screen advertizing. The launch of Free PC Inc last week (CI No 3,594) was closely followed by a similar offer for free Apple Computer Inc iMacs from the web site, and their are doubtless numerous other permutations already out there or due for announcement. Is this the new era of free desktop hardware that has been widely predicted, as retail prices have plunged to below $500 and services and software become a more attractive focus for profits? Not according to Cringely. These are not free PCs at all he says. For a start, the PCs on offer – to 10,000 suitable applicants prepared to fill in a detailed questionnaire about their buying preferences and personal life – are low-end Compaq Computer Corp desktops worth only $699 in the shops, or $15 a month on lease. The deal is for free use of a PC for two years, after which it must be shipped back at user’s expense, or bought for a knock-down price of something like $200. After two years, most users are likely to buy. Compaq, which leases the hardware to the providers of the ads, will make some money from the leases themselves, but stands to make considerably more from the resale at the end of the two years. Free PC gets all the publicity, and possibly (speculates Cringely) a $6 per-PC kickback from the chosen internet service provider. But advertising revenue? Unless Free PC gives away a lot more PCs than the 10,000 it’s committed to, the numbers make no sense for advertisers, who could access millions using a more traditional broadcasting model. What they do get, as they track, in Cringely words, the use of every application, every URL, every porno JPEG is some incredibly detailed market research, to see how their chosen subjects react to the ads. Those ads those Free-PC customers will watch will be the ads the rest of us find on web sites a month or so later. Free-PC users who qualify for their machine will be acting as closely scrutinized guinea pigs. Cringely says that real free PCs will only emerge when they follow the cell phone model, when the difference between wholesale and retail internet service equals the wholesale cost of a PC plus 30%. Given current service margins in today’s internet service market of around $11 per month, Cringely calculates the price point at which PCs really become free is $300. Cringely column can be found at

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