Unless you're extremely gullible, the promise of getting a free iPod from FreeiPods.com looks extremely dubious.
But surprisingly, the site appears to be legitimate. The program almost certainly isn't a dodgy pyramid scheme; it's a new form of online marketing supported by companies like eBay, AOL and Columbia House.
And while lots of happy customers are popping up all over the internet brandishing new iPods, analysts are skeptical of the economics.
Here's how it works: FreeiPods.com promises an iPod or a $250 gift certificate to anyone who signs up for various online promotions and persuades five other people to participate.
Subscribers are given a choice of 10 different offers, including a 45-day trial of AOL and a two-week trial of Ancestry.com's genealogy service. Typically, the offers are free and easily canceled.
Once the trials are over -- for both the main subscriber and the referrals -- the free iPod is dispatched.
"Of course I was skeptical, but I didn't see any harm in trying," said Collin Grady, 22, from Salem, Oregon, who received his free iPod earlier this month and wrote about it on his blog.
"They never once asked for a credit card number and I didn't have to pay shipping," he said. "I just told them where to send it.... All in all, a very painless process."
Indeed, some customers are so delighted that they've set up affiliate websites, called "conga lines," to persuade others the program isn't a swindle.
"So many people on the web think FreeiPods.com is a scam; I just wanted to prove them wrong," said John Sauer, a 19-year-old student at Boston's Berklee College of Music, who runs Free iPods and FlatScreens .com.
Another site, 17-year-old Tyler Derheim's FreeiPodGuide, features pictures of the delivery truck outside his house, his receipt and, of course, his new iPod.
FreeiPods is one of several websites run by Gratis Internet, a Washington, D.C., "customer acquisition" company owned by Peter Martin and Rob Jewell.
"I can definitely understand the skepticism," said Martin. "A lot of people believe there's no free lunch, but it's definitely not a scam. It's 100 percent legitimate. We're shipping (iPods) every day."
In a joint interview, Martin and Jewell denied the site is a pyramid scheme, like the myriad
Instead, they explained, Gratis Internet is paid a bounty for sending potential customers to sites like AOL, eBay or RealNetworks.
"We're a marketing firm," said Jewell. "We're sending these people to our advertisers. We cringe when we hear 'pyramid' or 'scheme.' We're more closely associated with viral marketing, with the
They declined to specify the bounty, and said the firm doesn't deal directly with the companies involved. Rather, Gratis Internet is commissioned by third-party marketing agencies, such as San Francisco's Adteractive.
For the last four years, Gratis Internet has operated customer-acquisition programs through FreeCDs.com, FreeDVDs.com, FreeVideoGames.com and FreeCondoms.com.
The company has sent out more than $3 million worth of free merchandise, Martin said, including 5 million to 6 million condoms.
Since the launch of FreeiPods.com in June, the site has dispatched more than 2,500 iPods, Martin said, worth more than $1 million.
But in the last few weeks traffic has exploded. Martin claimed nearly 1 million people have recently enrolled in the program, though he said the majority are using phony names and/or addresses.
Martin said about 200,000 are using "confirmed identities," and are in the process of receiving their free iPods. The process takes between six and eight weeks, Martin said. If all are redeemed, the company will be giving away $50 million worth of iPods.
Jewell insisted FreeiPods.com would be able to keep up with demand.
"Its really important people trust us and get their iPods," Jewell said. "We want people to get their iPods because it helps our legitimacy. We count on our users to validate us."
Diego Canoso, Adteractive's vice president of sales, said FreeiPods.com is a lawful and well-run customer-acquisition program.
"We've been working with these guys for more than three years," said Canoso. "They are very good at what they do."
Canoso also declined to specify the advertisers' bounties, but said they can range between $25 and $90, depending on the program and the kind of customer it attracts.
"The money we give these guys (Gratis Internet) is enough to fulfill the promise that the customers come in for," Canoso said.
Canoso said while $90 seems like a lot, it is peanuts compared to the millions spent on TV and magazine ads, which don't guarantee new customers.
"Companies like Columbia House (and) credit card companies, they're happy to pay for customers," Canoso said. "They're happy to send out iPods because they're getting customers in return. Capture is expensive, and they're paying after they've acquired the customer."
And while a lot of customers cancel after the free trial, enough don't to make it worthwhile, Canoso said.
Gary Stein, an analyst with Jupiter Research who follows online marketing, said he was skeptical of the program's economics.
"It seems too good to be true," he said. "You can imagine getting a free CD, but a free iPod is a really big break."
However, Stein said the program is lent some legitimacy by the involvement of Adteractive.
"Adteractive is reputable, without a doubt," Stein said. "It would be a lot more questionable if they were working on their own."
Stein said affiliate marketing has typically been associated with "bottom feeders," but has become more respectable, and profitable, since eBay started paying bounties for new, registered users.
"Affiliate marketing is really taking off," Stein said. "EBay has given it legitimacy.... There's definitely still scoundrels ... but there's tens of thousands of people involved. It's backyard entrepreneurial."
Adteractive's Canoso said FreeiPods.com is at the forefront of performance-based marketing.
"The model is beautiful," he said. "(The companies) are paying for a specific customer after acquiring the customer. It's not branding. It's not non-responsive advertising.... It's low-risk marketing. It's a very efficient system."
There is a record of a resolved complaint against Gratis Internet at the Washington, D.C., Better Business Bureau.
The complaint doesn't specify the grievance, or grievances, and the bureau's director said she couldn't elaborate. Martin and Jewell said they had no idea what the issue was. It was likely a minor "glitch," they said.
FreeiPods.com is certified by Truste, which means the site adheres to the organization's privacy standards. It does not mean the site can be trusted to send out free iPods.
AOL and Ancestry.com didn't respond to requests for comment. The Federal Trade Commission said it doesn't talk about individual companies unless the company is being prosecuted.
