Late last year, a start-up company, Metronomy, announced a scheme in which it would lend an IBM computer to anyone who wants one. But there's a catch. You have to be prepared to watch advertising on the computer's screen.
The PC is yours to use - on loan - for three years. There are no hidden charges such as delivery fees, and no need to sign up for any other paid-for services, such as a specific internet connection or a set of encyclopedias. At the end of the period, you can either return the machine or start a new loan period with a new one.
This is by no means the first time a company has offered "free" PCs. But most previous deals have been linked to a specific internet connection or phone contract. Tiny, the UK computer maker now owned by Time, tried a "free" PC deal in 1999. The company offered a Pentium III computer, but no monitor, to anyone who signed up with Tiny's telecom service and spent at least £25 a month on calls. But the deal was quickly withdrawn, with Tiny citing a lack of interest.
In the United States, one of the largest schemes, FreePC, failed because the company signed up more people for free computers than its manufacturing operations could cope with. The company ended up merging with PC maker eMachines. In France, CiBox, a company that offered free PCs to anyone prepared to sign up for their internet connection, had to withdraw its offer in 1999 after shipping 25,000 computers. The company lost some FF20m (£2.1m).
Unlike these deals, Metronomy's free computer is not tied to an internet connection deal. But the company does require that anyone who signs up has an internet connection, as the computer collects advertising data and sends it back to Metronomy's servers once a month.
Metronomy's model is closest to FreePC's idea. John Thornhill, the company's co-founder and chief executive. acknowledges the similarities, but claims that he offers a better proposition to both advertisers and people who sign up for the computers.
"FreePC took up a third of the screen with advertising in a continual stream," he says. "That was too intrusive, and the quality of ads was just that of banner adverts, which were much less attractive to advertisers."
If you sign up with Metronomy, you agree to watch up to three minutes of advertising for every hour you use the computer - and the advertising will take over the full screen.
Metronomy says it will typically show one-minute ad breaks every 20 minutes. Anyone using the computer can delay the commercials for up to five minutes, but unlike an online "pop-up" ad, there is no simple way to block it altogether. The computer itself is modestly specified. A similar computer from Dell or HP's current mail-order flier costs under £400, with VAT and delivery.
Anyone signing up for a Metronomy computer will not be able to carry out hardware upgrades that mean opening up the box, so adding memory, video cards or hard drives is not an option. "We are not going for users who want to add lots of memory or video cards," Thornhill says. "This is for the more typical household."
Metronomy is targeting three groups of users: existing computer owners who want to upgrade, families looking for a second household computer, and people who want to go on line but are put off by the cost.
The company claims that almost 100,000 people have registered for the PC offer either online or by phone. Metronomy has an eventual target of two million users but for the first phase - described as a "soft launch" - Thornhill claims there will soon be a waiting list.
But will people fully understand the terms of the deal? The Consumers' Association cautions that anyone who is interested needs to read the full contract with care. "The issue is what that agreement contains," says a spokeswoman. "It isn't safe to judge them [Metronomy] just on the terms and conditions that appear on the site."
The condition that could catch out people is the requirement to use the computer for 30 hours a month. Metronomy points out that average households use their computers for 44 hours, but 30 hours is still a relatively high figure, especially for a new user.
You also have to agree to keep the computer for three years. After a 14-day cooling-off period, sending it back means paying a penalty of £10 for each remaining month of the contract - a maximum of £350 if you were to give up after the first month. Unless you are on broadband, you have to load a DVD-Rom with new ads on to the machine once a month.
The company will have to sell advertising space quickly to meet the cost of the computers and its running costs. Sending out the DVDs alone could cost £600,000 for the first 100,000 takers alone, assuming it costs 50p to make and distribute a DVD (if broadband users download ads, this will cut the initial costs). If Metronomy does gain its two million users, costs could rise to £12m a year for the DVDs alone.
Recouping these costs will depend on how effective Metronomy's targeting software is, and how many people respond to the advertising.
"The danger is that the people who are interested are not that attractive to advertisers," said Paul Jackson, an analyst at the market research firm Forrester. "People who are desperate enough [for a free PC] are not the high-spending, technology literate, high-disposable income consumers. They would be too alarmed by the ads."
And no doubt the computer-savvy will work out a way to bypass the system, perhaps by running multiple versions of Windows XP, or even using the computer as a media server in the background. And there are other questions: whose responsibility will it be if the machine is infected by a virus? Would a user be justified in erasing the disk?
Perhaps not many people would go so far, but if a significant proportion of those with Metronomy PCs choose to put the kettle on rather than watch the ads, the company could struggle.
For further details, go to www.metronomy.comReuse content