Sun, Dec 26, 2004 page11

• Internet freebies come with strings attached

  TANTALIZING Where companies once offered coffee mugs in return for, say, signing up for a credit card, the Internet is making it possible to offer pricier enticements

  • NY TIMES NEWS SERVICE
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  The e-mail messages are tantalizing: "Join now and receive a free IBM laptop." "Your complimentary iPod with free shipping is waiting."

  These offers and similar ones on the Internet promise gifts for buying products or services. Are they for real? At best, yes, but they can also be riddled with problems. Participants may have to spend a lot to qualify or may not get the reward if they fail to follow what can be complicated rules. Ultimately, they may end up with nothing more than a big increase in spam as their e-mail address and other information is passed along or sold.

  

  John Morgan, a business owner in Columbia, South Carolina, works in his office on Dec. 6. Morgan says the giveaway program on the Internet in which he participated has spawned a monster he is still trying to conquer: spam.

  PHOTO: THE NEW YORK TIMES

  Complaint sites are filled with messages from consumers who say they participated in such programs only to come up empty-handed.

  One person, Vic of Northport, New York, participated in a deal and was disappointed in the experience. On a message board on RipOffReport.com, he wrote: "The lesson is that the only thing on this earth that is truly free is your mother's love. Everything else has a string or catch attached."

  Behind the offers are marketing companies whose goal is to generate customers for a wide range of businesses. They offer incentives -- money or products -- to people who sign up for items like credit cards, CD clubs or newspaper subscriptions. In return, the marketing company receives a fee, or bounty, for every customer it signs up.

  Although the marketing companies will not divulge what they are paid per person, those familiar with the business say it averages US$40 to US$60. This type of marketing is not new. But where companies once offered gifts like coffee mugs or beach towels in return for, say, signing up for a credit card, the Internet is making it possible for marketers to make more money by bringing multiple offers and consumers together. In return, they offer pricier enticements.

  Paul Bresson, a spokesman for the FBI, said no reports of fraud involving such operations had been made to the bureau's Internet Fraud Complaint Center (www.ifccfbi.gov). But he recommended that consumers examine such offers carefully.

  "The thing to know about this is that anybody can do it," said Gary Stein, a senior analyst at Jupiter Research, an Internet consultancy. "They can be fraudulent, real or somewhere in between."

  The marketers operate in numerous ways. Gratis Internet, a Web marketer based in Washington, has developed a system in which it buys pricey products like iPods -- www.freeipods. com -- and gives them away. To receive the iPod, participants are asked to sign up for one of about 10 different offers and to persuade five others to do the same. They have developed similar programs giving out US$700 desktop computers (freedesktoppc.com), US$800 flat-screen TVs (freeflatscreens.com) and high-end designer handbags (freehandbags.com). The main difference between the offers is how many others must be signed up for the main participant to receive the "free" merchandise.

  Its customers include Time Warner's AOL; BMG Music Service, a CD club owned by Bertelsmann; and USA Today, which is owned by the Gannett Co.

  Rob Jewell, a co-founder of Gratis, says the company gives away 500 iPods a week. It posted revenue of nearly US$5 million last year and expects that to hit US$15 million for this year, he said.

  "It's a very cost-effective way for advertisers to attract new customers," said Jewell, who is 27, "and it's good for consumers as well because they're getting a piece of that."

  Jewell and his friend and business partner, Peter Martin, 28, started their operation with freecondoms.com, on which participants get points for purchases or signing up for programs, and the points can be redeemed for condoms.

  Then they realized if they incorporated more people into the process they could offer a bigger prize, which led to the iPod giveaway.

  Susan Grant, director of the National Fraud Information Center, a project of the National Consumers League, said "free" offers on the Internet should be examined closely for underlying costs. Typically, a business will need to cover the amount of the prize and such offers will be followed by an onslaught of solicitations.

  "I don't think a lot of people would really stop to think about the implications," she said.
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