With an ever-growing list of online sites for people to spend their time, attention, and money, companies are going to great lengths to snag customers.
This week, Free-PC announced it would give away Compaq personal computers to customers who agree to view ads on their computer screens, even when they are not online. And a company called One Stop Communication is offering "free" iMac computers to those who agree to spend $3,600 over three years at its online mall.
Such efforts go beyond the business models of Internet marketers such as Cybergold and Netcentives, which offer such incentives as frequent flyer miles, merchandise coupons, and even cash to Net surfers who agree to view advertisements.
But analysts are skeptical about the long-term businesses behind these marketing efforts, which often appear to be simply ploys designed to generate buzz about a particular product or Web site.
"This kind of thing belongs to the P.T. Barnum school of doing business online," said Marc Johnson, e-commerce analyst for Jupiter Communications. "These are tactics, not long-term strategies."
The theory behind such business models goes that if you give consumers the means to connect to the Internet and point them to commerce sites, more people will begin buying online and viewing ads. It follows from the oft-cited example of selling razors cheaply in order to sell more blades, but isn't always as effective, according to Johnson.
"There's a benefit to giving away the razor to sell the blades," he said. "But there's no benefit in forcing people to shave."
If the terms of getting free stuff are too onerous, he said, not enough people will jump. It may be better to just write a check for your iMac than to commit to a long-term agreement to buy a lot of merchandise you may not want.
The iMac "giveway," in particular, seems like a bad deal for consumers, he said. "In a word, it's crazy."
Still, Johnson said, there are effective ways to boost an e-business--and keep customers coming back--through incentives. He cited Amazon.com, which sells books at very low margins in order to grow its customer base and establish itself. "It's an investment in the future, and it's brand-building," he said. "But eventually, Amazon's going to have to start thinking about making a profit," and will have to raise prices.
Many give-away schemes are based on dubious theories of the effectiveness of online marketing, said Evan Schwartz, author of Webonomics and a frequent speaker on e-commerce and online media.
"Some of these companies are acting as if advertising and shopping were just invented, and that different rules apply just because it's the Internet," he said. In the case of the Free-PC offer, for instance, "they'd be hard-pressed to show how effective these ads really are."
Providing incentives, particularly cash, doesn't make sense, Schwartz said, because those most likely to sit at their computers and view advertisements for money are the people least likely to be sought after by advertisers. "We're talking about people who would sell 15 minutes of their time for 50 cents. Are they in the demographic that you want to reach? By definition, these ads are reaching the wrong people," he said.
Computer users' attention, Schwartz said, "is the scarcest commodity in cyberspace. But once you purely monetize attention, you get into trouble." A better tactic, he added, is to "provide services and information that's actually worthy of attention, rather than paying people or giving them things."