ZapMe Zaps Schools on Free PCs
SAN FRANCISCO
-- ZapMe Corp., a company that gave schools free computers and
Internet access in exchange for the right to display online
advertisements, has told 2,300 schools nationwide that they must
either give back the equipment, or start paying for it.
The company is now
focused on providing high-speed Internet access to corporate
clients.
In a letter dated Nov. 10, ZapMe
told schools it will no longer subsidize school computer labs
through advertising revenue. If the schools want to keep their
computers, they'll have to lease or buy them.
ZapMe Chairman and Chief Executive
Officer Lance Mortenson blamed pressure from consumer groups, which
criticized ZapMe's use of advertising in schools.
Mortenson said the criticism is the
number one reason the company has abandoned the business plan.
"It just became an impossible model. People didn't want their
brands associated with something Ralph Nader was going to
attack," Mortenson said.
He also blamed the move on the
perception that advertising on the Internet is not a viable source
of revenue. Israel's Gilat Satellite Networks, which bought a 51
percent share of ZapMe in October, insisted that the company
discontinue the school-based program as part of the deal.
Shares of ZapMe are trading below
$1 on the Nasdaq, well below year-ago levels when the stock traded
as high as $13.75 per share.
The ZapMe network is a digital
sandbox of about 10,000 websites that students can use. To go
outside to the company's controlled network, students need parental
permission.
ZapMe started the giveaways in
1997. About 15,000 schools applied for the program, and 50,000 free
computers were handed out. The catch was that the computers would
run ads and that they could be taken back at any time. As schools
across the country learned last month, that possibility was closer
than they imagined.
ZapMe has offered to lease the
computers to schools for $833 to $1,322 per month, depending on the
size of the computer lab, which can range from five to 15 computers.
Schools also have the option of buying the equipment for $6,000 to
$13,000 per lab. ZapMe has offered to help schools find funding to
keep the equipment.
Mortenson said ZapMe plans to move
any returned equipment into businesses such as restaurants and auto
body shops, industries that the company is targeting in its new
subscription-based business model. He predicted that about half of
the schools would return the computers.
Andrew Hagelshaw, executive
director for Commercial-Free Public Education, an Oakland,
California, group which harshly criticized ZapMe, said the company
was too controversial to succeed.
"It's the perfect example of
what happens when you rely on companies to do these things," he
said. "ZapMe promised something to schools and now, because of
business conditions, they have to take it away."
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