I am sure if you are reading this first part of the two part article that you have seen tons of offers for free iPods or more recently iPhones or many other related electronic devices. If you have not signed up for any of these offers you may be wondering if they are legitimate or not. If you have you signed up for one you may be wondering how you can stop the flood of e-mails that arrive in your inbox everyday.

Before I can answer either question we should first look at why companies would want to give you a free iPod in the first place. The simple answer is that they want to give you a "free" iPod because they can make money doing it. This may seem counterintuitive, so let me explain.

The way most of these offers work is that they first ask you for your e-mail address or zip code to see if you qualify. Not surprisingly everyone who lives in the United States qualifies and sometimes people living in Canada, Australia or the UK may qualify as well. The catch is that to get your iPod you have to complete a few promotional offers from their sponsors, as well as, get five of your friends to do the same.

Now this still may seem like a good deal, who cares if you have to spend $20 or $30 to complete the offers, it is still way less than the $150 for a brand new iPod nano. However, the problem lies in the fact that five of your friends also have to complete the offers. The obvious result of this is, is a classic pyramid scheme, where only a few people at the top will ever see their iPod. At some point it will be impossible to find five friends who are also interested in a free iPod who have not already signed up for this kind of offer.

The companies giving away free iPods make money from these offers in three ways. First, and most obviously these companies will go and sell the e-mail and other information you provided to other marketing firms that will send you more advertisements through e-mail, direct mail or telemarketing. Second, the iPod offering company gets money from the promotions you must complete. They usually make between $10 and $30 per completed promotional offer from the advertiser, who in turn hopes to make money by having you continue using their product or service after the promotional period has ended.

Finally, the company makes money from all the promotions your friends complete as well. This becomes especially lucrative once the pyramid has become sufficiently large enough. To see an example why as well as tips to make the most of this bad situation please read part 2 of this article.