Sundry wannabe gazillionaires in Silicon Valley lust after those kind of boffo statistics but this was no fantasy. This was Bill Gross, thinking outside the box – way outside the box.
On Monday Gross’s startup, Free-PC.com, announced it would distribute free computers to people who agreed to answer questions about themselves, and made a commitment to expose themselves to Internet advertising.
The sub-$1,000 PCs made by Compaq are going to come bundled with free Internet service. The catch is that consumers must use the systems a minimum of 10 hours a month and let the computers download ads that get displayed on screen.
The scheme was the brainchild of Gross, an industry Johnny Appleseed whose Pasadena, Calif., company, Idealab!, has helped give birth to more than 20 companies over the years.
AST Research co-founder Safi Qureshy, who calls it “a great marketing idea” is right. For years, computer demographers have been wringing their hands about how to increase PC penetration into the home? This is it: Digital democratization in one fell swoop, an end to computer second-class citizenship for millions of people.
Dissonant voices
Still the embrace by the multitudes stood in sharp contradiction to the conventional coin of wisdom among the computer industry’s chattering classes. For years, the self-appointed Internet privacy advocates have taken a uniformly hard line against anything that smacked of offering a helping hand to Big Brother.
And when Gross’s idea surfaced, some critics predictably clucked their disapproval. They would not supply personal data to any entity that might help advertisers find them. Others suggested that the target audience was all wrong, that advertisers would stumble targeting messages at people who can’t afford PCs.
But this is no pie-in-the-sky proposal – Barry Diller’s USA Networks plans to pony up $10 million of the firm’s $30 million in initial funding – and people I spoke with at the just concluded Demo 99 conference expect other companies to test the waters with similar offerings.
And the economics aren’t as crazy as they appear at first blush. Gross estimates that Web customers are valued at about $1,000. What’s more, the systems, which retail at about $600, cost the company a lot less when purchased in bulk.
And there is precedent. In the cellular-telephone business model, customers pay for the service, not for the phone. The French applied similar thinking in rolling out Minitel; individuals, who got the systems for free, only paid for the services they used.
For computer makers, there is one potential downside: If Gross’s idea catches on, it will accelerate the commoditization of low-end computers. Still, that shouldn’t affect the[SIZE=7] core business of the IBMs and Compaqs of the world, who don’t make any money selling el-cheapo PCs anyway. O[/SIZE]n the other side of the ledger, just think of all those new millions of Internet surfers. This would be the real computer revolution.