News

ZapMe! ‘free’ computer labs could prove costly for schools

From eSchool News staff and wire service reports
December 1st, 2000

Thousands of schools might be left in the lurch thanks to a change in direction at ZapMe!, a company that made headlines in 1998 with its promise to supply schools with free computer labs in exchange for advertising on student desktops. According to earlier company statements, more than 5,000 schools signed up.

With none of the fanfare the company used to usher in its controversial program, ZapMe! has ceased providing new computer equipment to schools and is warning it might have to remove installed equipment or charge those schools that accepted its offer in the past.

Company representatives promised not to charge for the installed computers until they have exhausted all other potential sources of funding for the equipment.

Rumblings that the too-good-to-be-true deal was coming undone began to be heard in early October, when Gilat Satellite Networks Ltd. acquired 51 percent of ZapMe!’s approximately 44.3 million outstanding shares, at $2.32 per share.

That transaction marked the beginning of the end for free school computer labs. The restructuring also reduced the ZapMe! workforce from 180 to 138 employees.

In a company statement dated Oct. 3, ZapMe! announced that the company “plans to begin reducing its emphasis on the free-service business model” and intends to focus on a new fee-based model and on commercial and public markets.

The statement assured users that “currently served schools will continue to receive internet service, although going forward, the company will discontinue the installation of free computer labs for schools.”

But a few schools already had the PCs on-site and were merely awaiting installation. Officials from a high school in Plainfield, Conn., told the New York Times that the change in corporate strategy has proved disappointing and costly for that school.

Plainfield High School already had received a free satellite dish and a server to be connected to the ZapMe! network. All that was left at Plainfield was to hook up the system.

According to the company, the Plainfield district superintendent received an eMail message from a ZapMe! employee, indicating that the Plainfield High School would not be receiving the free computer lab, as promised.

Instead, the company would give the school several choices. First, administrators could elect to pay for the installation and hardware they had been promised for free—in that case, they could wait a while and determine exactly how much it would cost the district—or they could ship the computers back to ZapMe!

“It was quite a shock,” Superintendent Mary Conley told the Times. Plainfield reportedly had spent $4,000 to prepare the computer room for the new lab.

“Losing money like that could be a devastating blow, depending on the availability of funding at that school. I know we could not afford to waste even one dollar to a wrong decision,” said Ted Maddock, technology director at El Diablo High School in Concord, Calif. El Diablo was one of the first districts in the country to adopt ZapMe!

“If we had to pay for the service [that was previously free through ZapMe!], it would mean we would have to take the lab out. Even with California’s Digital High School initiative, I still don’t think we’ll have the money to pay for the lab we have now,” said Maddock.

The new corporate strategy was only one of the changes at ZapMe! The change of corporate ownership also involved a reorganization of the company’s leadership. On Oct. 9, the board of directors announced that Lance Mortensen was appointed chief executive officer and Rick Inatome was named chairman of the board, essentially trading positions.

“Although the company is no longer focused on my passion, education, I will enjoy supporting Lance as he leads the company in this important new direction,” said Inatome.

Despite ZapMe!’s assurance that currently served schools will not be discontinued, Mortensen can make no promises about the continuation of free services.

“After we have exhausted many opportunities, including—but not limited to—partnerships, joint ventures, the outright sale of the network, foundations, government grants, and other alternative options, only then will we have to make some difficult decisions,” he said.

“The goal is to never have to remove equipment or charge schools anything, but frankly, if we are unsuccessful in finding an alternative solution, we can’t promise them we won’t have to present schools with some options,” said Mortensen. “If that is the case, we may have to have schools pay for the service, or we will understand, and we’ll take back the equipment for them.”

These developments are only the latest in the controversies surrounding the company. ZapMe! has long been the subject of heated disagreements involving its business model, which promised free computers labs to schools, with a catch.

The free labs were granted in return for placing advertisements in the lower left-hand corner of ZapMe!’s browser, an action that spurred educators and activists to protest the commercialization.

According to Gary Ruskin, director of Commercial Alert, a Washington, D.C., consumer advocacy group affiliated with Ralph Nader, “The breadth of the coalition against ZapMe! was notable. Right, left, and everyone in between thought ZapMe! was a terrible business model.”

Commercial Alert believes that ZapMe! put children at dangerous risk of exposure to commercial advertising and compromised their education.

Not so, argues El Diablo’s Maddock: “I never saw commercialism as a threat. To be honest, the kids were not interested in surfing ads. The target audience was just not as good as ZapMe! thought it would be.”

“I am extremely disappointed and saddened that our critics considered our business model inappropriate, but I don’t think that schools ever did,” said Mortensen. “We got thousands of schools hooked up to the internet, and yes, our advertisers did underwrite that cost.”

The breaking point may have come when ZapMe! proposed a ZapPoints program, which would have collected personal information about the kids accessing the online ads and sharing summaries of that information with advertisers. But the ZapPoints program never came to fruition, according to the company.

Mortensen places the responsibility for ZapMe!’s demise squarely on the shoulders of groups like Commercial Alert.

“I’d actually like to congratulate our critics for a job well done. They have successfully helped remove technology from our schools. That does not benefit anyone. All they are doing is hurting kids by not providing them with access to information,” said Mortensen.

Maddock has his own ideas. “I don’t think the business model was as viable as they thought. It is part of the shakeout in the whole dot-com industry,” he said.

Whoever was responsible for the change in ZapMe!’s model, schools will be the ones to suffer, educators agree. “The program meant a lot for us. It meant that a school that previously had no internet connection could allow teachers to take their classes to the lab and do high-speed, high-quality internet research,” Maddock said.

ZapMe!

http://www.zapme.com

Commercial Alert

http://www.essential.org/alert

ZapMe! ‘free’ computer labs could prove costly for schools

eSchool News Staff Reports
December 1st, 2000

Thousands of schools might be left in the lurch thanks to a change in direction at ZapMe!, a company that made headlines in 1998 with its promise to supply schools with free computer labs in exchange for advertising on student desktops. According to earlier company statements, more than 5,000 schools signed up.

With none of the fanfare the company used to usher in its controversial program, ZapMe! has ceased providing new computer equipment to schools and is warning it might have to remove installed equipment or charge those schools that accepted its offer in the past.

Company representatives promised not to charge for the installed computers until they have exhausted all other potential sources of funding for the equipment.

Rumblings that the too-good-to-be-true deal was coming undone began to be heard in early October, when Gilat Satellite Networks Ltd. acquired 51 percent of ZapMe!’s approximately 44.3 million outstanding shares at $2.32 per share.

That transaction marked the beginning of the end for free school computer labs. The restructuring also reduced the ZapMe! workforce from 180 to 138 employees.

In a company statement dated October 3, ZapMe! announced that the company “plans to begin reducing its emphasis on the free-service business model” and intends to focus on a new fee-based model and on commercial and public markets.

The statement assured users that “currently served schools will continue to receive internet service, although going forward, the company will discontinue the installation of free computer labs for schools.”

But a few schools already had the PCs on-site and were merely awaiting installation. Officials from a high school in Plainfield, Conn., told the New York Times the change in corporate strategy has proved both disappointing and costly for that school.

Plainfield High School had already received a free satellite dish and a server, to be connected to the ZapMe! network. All that was left at Plainfield was to hook the system up.

According to the company, the Plainfield district superintendent received an eMail message from a ZapMe! employee, saying that the Plainfield High School would not be receiving the free computer lab, as promised.

Instead, the company would give the school several choices. First, administrators could elect to pay for the installation and hardware they had been promised for free—in that case, they could wait a while and determine exactly how much that would cost the district—or they could ship the computers back to ZapMe!

“It was quite a shock,” Superintendent Mary Conley told the Times. Plainfield had spent $4,000 to prepare the computer room for the new lab.

“Losing money like that could be a devastating blow, depending on the availability of funding at that school. I know we could not afford to waste even one dollar to a wrong decision,” said Ted Maddock, technology director at El Diablo High School in Concord, Calif. El Diablo was one of the first districts in the country to adopt ZapMe!

“If we had to pay for the service [that was previously free through ZapMe!], it [would mean] we would have to take the lab out. Even with California’s Digital High School initiative, I still don’t think we’ll have the money to pay for the lab we have now,” said Maddock.

The new corporate strategy was only one of the changes at ZapMe! The change of corporate ownership also involved a reorganization of the company’s leadership. On October 9, the board of directors announced that Lance Mortensen was appointed CEO and Rick Inatome was named chairman of the board. Previously, Mortensen was chairman, and Inatome CEO.

“Although the company is no longer focused on my passion, education, I will enjoy supporting Lance as he leads the company in this important new direction,” said Inatome.

Despite ZapMe!’s assurance that currently served schools will not be discontinued, Mortensen can make no promises about the continuation of free services.

“After we have exhausted many opportunities, including—but not limited to—partnerships, joint ventures, the outright sale of the network, foundations, government grants, and other alternative options, only then will we have to make some difficult decisions,” he said.

“The goal is to never have to remove equipment or charge schools anything, but frankly, if we are unsuccessful in finding an alternative solution, we can’t promise them we won’t have to present schools with some options,” said Mortensen.

“If that is the case, we may have to have schools pay for the service, or we will understand, and we’ll take back the equipment for them,” he added.

Controversial model

These developments are only the latest in the controversies surrounding the company. ZapMe! has long been the subject of heated disagreements over its business model, which promised free computers labs to schools, with a catch.

The free labs were granted in return for placing advertisements in the lower left-hand corner of ZapMe!’s browser, an action that spurred both educators and activists to protest the commercialization.

According to Gary Ruskin, director of Commercial Alert , a Washington, D.C., consumer advocacy group affiliated with Ralph Nader, “The breadth of the coalition against ZapMe! was notable. Right, left, and everyone in between thought ZapMe! was a terrible business model.”

Commercial Alert believes that ZapMe! put children at dangerous risk of exposure to commercial advertising and compromised their education.

Not so, argues El Diablo’s Maddock.

“I never saw commercialism as a threat. To be honest, the kids were not interested in surfing ads. That target audience was just not as good as ZapMe! thought it would be,” he said.

“I am extremely disappointed and saddened that our critics considered our business model inappropriate, but I don’t think that schools ever did,” said Mortensen. “We got thousands of schools hooked up to the internet, and yes, our advertisers did underwrite that cost.”

The breaking point may have come when ZapMe! proposed a ZapPoints program, which would have collected personal information about the kids accessing the online ads and sharing summaries of that information with advertisers.

“Those computer labs weren’t free,” said activist Ruskin. “Violating the privacy of school children is a high cost.”

But the ZapPoints program, according to the company, never came to fruition.

“We never violated anyone’s privacy. Commercial Alert called what were trying to do ‘borderline child abuse,’ but we never took a name, an address, or a phone number from any child. It is just ridiculous,” said Mortensen. “We even had Pricewaterhouse Coopers come in and do a privacy audit. Yahoo! and Microsoft don’t even do that.”

“To my knowledge ZapMe! never did use any tracking information. All they had was a ZIP code, the user’s gender, and age,” agreed Maddock.

Maddock has his own ideas about why ZapMe! has had to change its business model.

“I don’t think the business model was as viable as they thought. It is part of the shakeout in the whole dot-com industry. I’m sure the bad press also had some effect. The sharks were definitely out,” he said.

Mortensen places the responsibility for ZapMe!’s demise squarely on the shoulders of groups like Commercial Alert.

“I’d actually like to congratulate our critics for a job well done. They have successfully helped remove technology from our schools. That does not benefit anyone. All they are doing is hurting kids by not providing them with access to information,” said Mortensen.

Whoever was responsible for the change in ZapMe!’s model, schools will be the ones to suffer, educators agree.

“The program meant a lot for us. It meant that a school that previously had no internet connection could allow teachers to take their classes to the lab and do high-speed, high-quality internet research for the last three years,” said Maddock .

Links:

ZapMe!

http://www.zapme.com

Commercial Alert

http://www.essential.org/aler

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