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Earlier this week, the buzz at the Consumer Electronics Show in Las Vegas was that Larry Page, Google’s cofounder and president of products, would be unveiling a low-cost, Google-branded, networked PC. The device even had a nickname: the “Google Cube.”

The rumor, first circulated by pundit Robert X. Cringely, and expounded upon by the L.A. Times this week, centered around a computer running a nonMicrosoft operating system and featuring only a minimum of native, or desktop-based applications, relying instead on applications available on the Internet. Most of the intelligence and applications for the unit (word processing, spreadsheets, Internet, etc.) would reside online.

Google quashed those rumors yesterday, though, and reports in the Wall Street Journal and elsewhere now indicate that the company will instead announce a downloadable video service and “Google Pack” – a handful of media-centric applications.

But, despite its recent no-show, many people believe a device like “Google Cube” will arrive someday, from Google or another company. And despite conventional wisdom that launching a low-cost, commodity-like PC is a fool’s errand, there’s a lot that makes sense about a cheap, network-centric computer, whether it’s a Google product or not.

Certainly, the strategy of selling low-cost – or no-cost – PCs to jumpstart interest in more lucrative programs is not new. Nor has it been particularly successful. Larry Ellison’s mid-1990s Net PC was one of the first mainstream efforts to put the intelligence in the network and return to an era of “dumb terminals.” Later, in the late 1990s, Internet service providers such as Empire.net gave away PCs in exchange for lengthy memberships. In 1999, Free-PC, a company launched by dot-com incubator IdeaLab, gave away PCs in exchange for user’s agreeing to have the margins of the computer screen occupied by banner ads. None of these attempts survived the dot-com implosion.

When asked in 2002 by Wired News to name his biggest mistake of the bubble-era, Bill Gross, the erstwhile CEO of IdeaLab, responded: “FreePC was one of my worst ideas.” But showing prescience even in the depth of the post-bubble fallout, Gross went on to envision “some point where there is a device that will give you some access but will be advertising-supported.”

That time might well be now. Recent advances in software, combined with a resurgence in online advertising and widespread adoption of broadband access, make it so. The most lucrative advertising online today, on a pure cost-per-thousand basis (the basic unit of determining how much a single online ad costs), is the ads surrounding video snippets. This form factor wasn’t viable in the late 1990s – broadband connections didn’t reach enough homes. And until around three years ago, the online ad market was still struggling to reach its pre-bubble highs.

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