It sounds like a crazy business plan: 'We will make money by giving away gadgets to the general public'. Any prospective investor would surely run a mile on hearing such an opening speech.

Well, if they make it through what seem like wild claims, everything may start to make a little more sense.

Many websites have sprung up around the internet over the last few years offering to give away not insignificant gadgets such as a free MacBook Pro or free iPod Touch. Obviously these expensive items aren’t simply shipped to people for no return, it's the stages that these 'customers' have to go through to get the free gadgets that provides the return.

All of these free gadget sites operate on the same principle, that of commission. The customer, in order to get their free MacBook Pro, has to sign up to an offer provided by third party companies. These offers may include free DVD rental through LoveFilm (who hope they don’t cancel their trial and become a paying customer) or signing up to a membership style book club site. A lot of these offers can be something really useful to the customer, which in turn makes persuading them to sign up so much easier.

Once signed up the customer then has to get some of their friends to also sign up. The number needed depends on the free gift they want, but a MacBook Pro could require around forty signups, or referrals, although the number varies slightly from site to site.

So, once the initial customer has got enough referrals to get their MacBook the company running the site has approximately forty sets of commission. If they get $35USD per sign up then that's $1400 to buy the MacBook Pro with. The cheapest MacBook on the Apple store is $1200, so you're already into profit, although admin and site running costs need to be factored into the equation. The real profits come from bulk-buying these gifts and through those customers who don't complete the full requirements. Many will loose interest after say ten referrals so they don't get a free gadget, but the site owner still gets their ten plus sets of commission. This is where the real profits are made.

If you are interested in taking this interesting idea further then FreebieJeebies would be a fine example of one of the most successful sites operating in this field.

Many thanks for looking and if there are any questions on this subject I'd be pleased to help.