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Marketing the “$100 Laptop” (A)
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INTRODUCTION
In 2002, Professor Nicholas Negroponte, successful venture capitalist, author, and cofounder and
chairman emeritus of the Massachusetts Institute of Technology (MIT) Media Lab,1 announced his
intention to build a personal computer so cheap as to make it possible to provide Internet- and
multimedia-capable machines to millions of children in developing countries.2 The concept—later
referred to as the “$100 Laptop”3—was launched at the Media Lab in 2003 before being spun into a
separate nonprofit association, One Laptop Per Child (OLPC), founded by Negroponte in January
2005.4 The news made global headlines that conveyed a mixture of admiration and derision. OLPC’s
critics said Negroponte’s $100 laptop could not be built.5 Technology executives argued that such an
extreme drop in price was impossible.6 Intel Chairman Craig Barrett dismissed it as a “$100 gadget.”7
Yet in 2005 Negroponte unveiled a working prototype of a $100 Laptop at the UN World Summit
on the Information Society (see Exhibit 1 for photos). The machine, which used freely available, open
source Linux software as its operating system (OS), was the instant hit of the show.8 Although aimed
at primary school children (aged 6 to 12), other age groups could use it too. “People get it quickly,
they sleep on it, and very often they wake up the next morning saying, ‘Oh my god, this is a really
big change,’” said Negroponte. “The appeal was obviously the price, and people realize that you can
do one laptop per child. When it sinks in, they realize that you would not propose ‘one pencil per
classroom.’”9
Computers in the Classroom20
The Idea
In 1999, Negroponte had seen the power of laptops firsthand at a rural village school that he and
his wife established in Cambodia. There, children used rugged Panasonic “Toughbook” laptops
equipped with Wi-Fi Internet capability via a satellite link.21 “A village that had no books suddenly
had access to Google,” recalled Negroponte. “It changed their lives in several ways, improving self-
esteem and empowerment and fulfilling the passion for learning.”22 The laptops made school more
popular and drew appreciation from parents as well, since, in a village with no electricity, the laptop
became the brightest light source in the house. “Talk about a metaphor and a reality simultaneously,”
Negroponte reflected, “It just illuminated that household.”23 That visit prompted the idea of
designing a basic laptop model that would link people in developing countries to the world.
At the time, most computers were used in the developed world. By 2003 there were about 496
million PCs in use in the largest 67 countries in the world, with 178 million in the U.S. followed by
Japan (45 million), Germany (27 million), and the U.K. (22 million). By the end of 2006, the total
number of PCs in use had risen to more than 755 million. While experts estimated that PC usage
worldwide would exceed 1 billion in 2008 and double by 2015, the bulk of the growth was expected
to come from countries such as Brazil, Russia, India, and China (BRIC), accounting for the more than
800 million new PCs by 2015, and other emerging economies as incomes rose and telecom
infrastructures improved.24 (See Exhibits 2 and 3 for worldwide forecasts.)
Selling the Concept
In OLPC’s early stages, the “$100 Laptop” label was a misnomer; Negroponte had predicted an
initial cost closer to $150 per machine, although he expected the price to fall as more units were
produced.75 By November 2006, Negroponte said the $100 Laptop’s manufacturing cost was below
$150 and that it would fall below $100 by the end of 2008.76 Negroponte believed that even the
poorest country could afford “about $200 per year per child.” OLPC had estimated that a connected,
unlimited Internet-access $100 laptop would cost about $30 to own and run per year. “That has got to
be the very best investment you can make,” he believed. “Period.”77
Furthermore, “each school year you should have something new that lowers the price,”
Negroponte noted.78 Based on a $10 per unit margin for OLPC, only 20 full-time OLPC employees,79
and Negroponte’s own target of 100 million laptop sales, the $100 Laptop initiative was often referred
to as Negroponte’s “billion-dollar idea.”80
Technology and Emerging Markets
Despite best intentions and innovative technology, the success of the $100 Laptop was far from
guaranteed, as demonstrated by the checkered history of technology introductions to emerging
markets.87 With cell phones, for example, despite rapid subscriber growth, pricing had long remained
a concern, and was seen by some as the biggest obstacle to broader adoption. Investcom, which ran
cell phone networks in Africa and the Middle East, estimated that the number of users would double
in those markets if the cheapest handset were priced at $30 instead of $60.88 Lower handset prices
would build subscriptions in developing regions, where prohibitively high hardware costs were
blamed for low adoption rates in areas where network coverage was available.89
In early 2006, as part of a program to facilitate economic growth in developing nations, the GSM
Association (GSMA), a lobbying group made up of hundreds of wireless service providers who
sought to make GSM the world’s dominant mobile phone standard, sponsored a bid to develop a
handset that would wholesale below $40, including follow-up shipments of sub-$30 handsets, with
the ultimate goal of attracting 100 million new users.90 Motorola won the contract.91 Even though the
handsets’ low cost, made possible by economies of scale, would not be cross-subsidized by high-
margin handsets or by any “corporate social responsibility” program, Motorola expected to earn a
small margin on each handset sold. Motorola planned to use its factories in mainland China to
produce the six million low-cost phones in half a year. By January 2007, Motorola had shipped six
million sub-$40 handsets, as well as an additional six million sub-$30 handsets, to mobile telephone
operators in emerging markets including India, Pakistan, Bangladesh, Indonesia, Philippines,
Malaysia, Thailand, Turkey, South Africa, Nigeria, Egypt, Algeria, Russia, and Ukraine.92 In the early
stages of the rollout, executives acknowledged that the low pricing in emerging markets had been
necessary to build market share.93
Competing Options
In May 2006 Intel launched its own cheaper laptop (the Classmate PC) targeting developing
nations as part of its “World Ahead” program. The day after announcing plans to invest $1 billion in
education and training as part of its program, Intel underlined its commitment to closing the
technology gap between rich and poor nations with a device that used flash memory instead of a
hard drive and ran Microsoft Windows XP. “No one wants to cross the digital divide using
yesterday’s technology,” suggested Intel president and CEO Paul Otellini, in a thinly veiled swipe at
OLPC.106 The $285 model cost more than OLPC’s price tag of $175 per laptop, but the Classmate PC
offered enhanced capabilities and the ability to run stripped-down versions of Linux or Windows XP.
Intel hoped to reduce the price below $200 once mass production began.107