...Gratis Internet, a Web marketer based in Washington, has developed a system in which it buys pricey products like iPods - www.freeipods.com - and gives them away. To receive the iPod, participants are asked to sign up for one of about 10 different offers and to persuade five others to do the same. They have developed similar programs giving out $700 desktop computers (freedesktoppc.com), $800 flat-screen televisions (freeflatscreens.com) and high-end designer handbags (freehandbags.com). The main difference between the offers is how many others must be signed up for the main participant to receive the "free" merchandise. Its customers include Time Warner's AOL; BMG Music Service, a CD club owned by Bertelsmann; and USA Today, which is owned by the Gannett Company.

Rob Jewell, co-founder of Gratis, says the company gives away 500 iPods a week. It posted revenue of nearly $5 million in 2003 and expects that to hit $15 million for 2004, he said.

"It's a very cost-effective way for advertisers to attract new customers," said Mr. Jewell, who is 27, "and it's good for consumers as well because they're getting a piece of that."

Mr. Jewell and his friend and business partner, Peter Martin, 28, started their operation with freecondoms.com, on which participants get points for purchases or signing up for programs, and the points can be redeemed for condoms.

Then they realized if they incorporated more people into the process they could offer a bigger prize, which led to the iPod giveaway.

They say they do not sell information about their users, and to receive promotional information participants must check a box.

The company provided the names and e-mail addresses of about two dozen people who had received free iPods.

One of those people was Jacob Snyder, a 27-year-old Manhattan resident who works for an architectural development firm in Newark. He said, "I did a lot of research because I didn't trust it."

But after finding what he deemed to be legitimate success stories, he decided to make a run at a free iPod. He signed up for a 45-day free offer for AOL 9.0, which he discontinued after a short trial, and he also convinced five of his friends to participate in one of the offers. Within a month, he received his iPod.

"I think it's pretty cool," he said, adding that he is now participating in two other Gratis programs. "The hardest part was getting other people to sign up."

In contrast, the Consumer Research Corporation has a system where those who become members must acquire six points, one for every service they sign up for.

One of its sites, RetailReportCard.com, offers "free money to shop" when participants register. After providing basic information like name, address, phone number, age and e-mail address, participants are asked whether they are interested in programs ranging from receiving a free mortgage quote to lowering a student loan. Then they are told that to qualify for gift cards they must complete six offers.

RipOffReport.com lists dozens of complaints from participants in that program and others run by Consumer Research.