Epods to sell lean, mean Internet machine on TV

Epods is not the first company to market an Internet appliance to techno-novices, but it may be the first to use an infomercial to do it.

4 min read
Epods wants to make surfing the Web as easy as using a bread machine or cutting cans with a Ginsu knife.

Set to launch in May, the start-up company is targeting the increasingly crowded Internet appliance space with its Epods Web tablet and online service. But rather than compete in consumer electronics stores or through Web-based computer dealers, Epods will team up with telemarketing experts and launch its product with an infomercial. That will be followed by marketing in department and discount retail stores, instead of typical computer outlets.

Salton, the merchandising company behind such infomercial legends as the George Foreman Grilling Machine, the Breadman and the Juiceman, recently took a $2 million stake in Epods and will be launching the product with its own infomercial this summer. The Epods device will be offered for $199, plus a yet-to-be-determined monthly service fee.

Epods is stalking late adopters, people who have missed the Internet phenomenon and are too intimidated to venture into CompUSA or the Good Guys. These buyers, generally women and seniors, must be approached in locations they are comfortable in, Epods believes, which means traditional department stores such as Bloomingdale's and Macy's, and through television infomercials, a cornerstone of the direct sales model.

The company believes its strategy, which includes studying the habits of its customers with anthropologists to better understand their buying and usage patterns, will differentiate its service from similar efforts coming from traditional PC companies. In addition to its marketing and merchandising strategy, Epods has created an Internet service and device designed to be as simple as possible, with very little resemblance to a PC in look or feel.

"It's still an early market, which partially explains why we're seeing so many entrances into the area," said Bryan Ma, an analyst with International Data Corporation, pointing to the success of companies such as Netpliance, which recently raised $144 million in its IPO.

IDC predicts this market will be huge, which explains why newcomers as well as industry heavyweights are angling for their piece of the pie. Internet appliances, including TV set-top boxes, handheld computers and gaming consoles, are expected to grow from 11 million units shipped in 1999 to 89 million units in 2004. The market will grow from revenue of $2.4 billion last year to $17.8 billion in 2004.

"We won't have a dominant Wintel monopoly. At least, not yet," Ma said. "From that perspective, it allows a lot of players."

But in staking out new territory, the start-up firm is also facing challenges that don't exist in the PC world, analysts say. One of the biggest obstacles for Epods is their customer, Ma said.

"In pitching to the back end of the technology adoption curve, it entails more or less of a double sales job," Ma said. "They have to sell consumers on the device and also convince them why they would want the Internet in the first place. That's going to be a challenge."

The product may not appeal to more savvy users because it does not yet offer wireless Internet acces, and requires another Internet service account. "Why would you want to pay that money for a service on top of the PC?" Ma said.

For its part, Epods is completely focused on setting itself apart from the PC world, launching an ambitious advertising campaign using the same advertising agency that launched Saturn cars. When the service begins in May, the look and feel of the interface will be different from that of a typical PC desktop.

Shae Hong "People want the Internet, but they want to do it on their own terms," said Shae Hong, co-founder and CEO of Epods, referring to the market research the company gathered after hiring the anthropologists. "They want to feel connected. Even the tech savvy want it simple."

Rather than pull-down windows and menu bars, the Epods terminal will feature a few choices, based on the most popular online and offline activities, including shopping, email and a variety of content channels. All of the online services and features are to be bolstered by 24-hour customer service, which will provide general support, as well as specific questions regarding products for sale online.

These small touches will separate Epods from its PC industry competitors, Hong believes. "The (MSN) Web Companion--it's still Microsoft, it's still not that easy to use," he said.

Epods will announce tomorrow that its content partners will include Pets.com, Art.com, Proflowers.com, Sparks.com, a greeting card store, Screaming Media for news and information, StockPoint and Mapquest. Ma believes these partners, as well as distribution partners like Nordstrom's and Macy's, provide opportunities for cobranding and continuing revenue streams down the line.

In addition to providing help from customer service representatives, Epods is using technology from Vitessa.com that will allow users to shop a variety of sites using an online wallet. Epods' revenues are based on taking a cut of all transactions which take place on the service, along with advertising fees.

The hardware specifications reflect the target audience--this is not a Pentium III powerhouse for advanced gamers. Rather, the tablet runs on a RISC processor with 32MB of memory to run applications and surf the Web. The device is tethered to a docking station with a dial-up connection. Wireless access is planned for the next version of the machine, due out next fall.