| Lesson 6 || e-Business architecture |
| Objective || The free PC model (an adaptation of the storefront model) |
Free PC Model (Adaptation of Storefront Model)
List the features of the free PC business model.
We often wonder, "is it possible to get anything for free in this day and age?" The answer to this question is YES! An emerging business model allows consumers to receive a free personal computer (an amazing feat, considering some gas stations actually charge consumers to add air to their tires). While this business model is in its infancy, it has gained a lot of attention because it does what we never before thought possible. It gives users a free, or extremely discounted,
computer. There are two variations of the free PC business model. We will call them free PC with Internet and free PC because of the Internet.
Free PC with Internet
The earliest model, free PC with Internet, provided users with both a free PC and free Internet access. Customers signed
contracts allowing targeted advertising messages to be delivered directly to the user's desktop. In this model,
merchants pay to reach the consumer, and thus, subsidize the cost of the PC.
What type of interface accompanies a typical Free PC with Internet system.
Changing Interests of Investing Firms
Beginning in the mid-1990s, numerous investors eagerly sought electronic commerce ventures and were especially interested in funding B2C start-ups. The prospect of potentially reaching any consumer around the world without the cost of setting up physical shops seemed to hold unlimited profit potential. In fact, for a short period of time it seemed that the ultimate goal was to find and fund purely virtual companies, or companies completely independent of physical constraints.
One of the first successful virtual companies is Tucows
Scott Swedorski started Tucows in 1993. Mr. Swedorski developed a website and posted software patches as freeware. The website became
so successful among software developers that advertisers rushed to place banner advertisements on the website.
It is interesting to note that not only is Tucows one of the first successful virtual companies, it is also one of a very few companies that successfully used banner advertising as a sustainable business model. Indeed, Tucows is the exception, not the norm.
Mr. Swedorski recognized a unique market need and fulfilled it using Google Adsense.
In contrast, many new e-business start-ups have been driven more by a desire to identify new Internet markets
rather than by an existing need. That is one valuable lesson from the Tucows example. Another lesson is that Tucows
did not need venture capital funding because the company grew as a result of meeting a need in a new way. There is
much less risk all around if an entrepreneur with a good idea can start small and grow the business slowly. Entrepreneurs
who want to start big usually require venture capital. Invariably, this means that entrepreneurs will relinquish
control of company management. It also means that overall the financial stakes are higher.
Free PC because of the Internet
The latest version of the model, free PC because of the Internet, involves ISPs (Internet service providers) and retailers. In exchange for this rebate, consumers must sign a long-term agreement (typically 3 years) with an ISP.
This provides the ISP with a captive and a long-term consumer base.
Free PC Challenges
There are potential problems with the FreePC model. Please use the detail button to learn more.