OPINION: MILLS ON ... FREE OFFERS

Perhaps it was the lessons my mum drummed into me: one, be wary of over-familiar strangers who overdo the use of your first name; and, two, always be suspicious of free offers that sound too good to be true because, well, they usually are.

Perhaps it was the lessons my mum drummed into me: one, be wary of

over-familiar strangers who overdo the use of your first name; and, two,

always be suspicious of free offers that sound too good to be true

because, well, they usually are.



Thus it was last week with a piece of direct mail that arrived at

home.



’Dear Dominic,’ it said, before using my first name no less than eight

times (and in UPPER CASE each time just to be really irritating). This

one offered me a free mobile phone package worth pounds 400 comprising a

phone, free connection charges, various extras and 3,000 minutes of free

calls per year - a lot of free lunch to give away.



In the lingo of our age, I simply couldn’t see how this company’s

business model was going to work without some serious gouging going on.

And seeing as the company claimed to be from Gibraltar but couldn’t

spell either that or the name of its network properly (it’s Vodafone

with an ’f’ guys, not a ’ph’), I’ve decided to pass.



But if I’ve made a mistake, well, that’s my choice and there’s no damage

done. The same, however, can’t be said for LineOne, the United News &

Media/BT joint venture internet service provider, which last week

cancelled its unlimited access scheme for subscribers on the grounds

that it was too popular - by which it meant too expensive. By way of

lame defence, its chief executive said: ’We simply didn’t expect the

levels of usage we got.’ Rather plaintively, he then added: ’It’s

increasingly difficult to see how such business models will work.’ Which

leads you to wonder why he didn’t think of that when, four months ago,

he launched the scheme.



Nor is LineOne the only ISP to come a cropper in this territory: NTL,

AltaVista and Liberty Surf, all of which launched similar offers at the

same time as LineOne, have all reneged or scaled back their schemes.



Individually, these failures don’t matter, but it’s the wider

implications that do. The internet’s growth is, to a large extent, based

on what I would call a ’free’ culture but what the hapless dreamers at

LineOne would obviously call a new type of business model. To you and

me, this means things that you might expect to pay for in the real world

- access charges, online news and information services, online magazines

and so on - are given away for free. It’s such an upside-down world that

there are even websites that pay you to look at ads, not to mention

several websites that give away PCs to people who sign up to them. Yes,

truly the internet is rewriting the laws of economics.



Now I fully understand the rationale: it’s so competitive you give stuff

away free in order to build critical mass fast and hook people in on the

basis that their lifetime value to you as a customer is worth more than

your giveaway.



But it seems to me there are really only two types of free offer: ones

that aren’t as good as they look, in which case they fool nobody except

the suckers, and ones that are, in which case take-up is so great the

sucker is the one making the offer.



I like to call this the Hoover business model, after the infamous free

New York flights fiasco. The Hoover model always ends in tears. It also

does lasting, if not irreparable, damage to the brand. Others may prefer

to update it and call it the ’free internet’.



dominic.mills@haynet.com.



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