Making social networking pay - for users

Can websites that promise to pay visitors for visiting really work? Or does history show that they are doomed to fail?

• Bertan Budak
• The Guardian,
• Thursday January 31 2008

A Facebook user's profile

Being paid to spend time on social networks sounds tempting, especially to those who spend hours surfing sites such as Facebook and MySpace. But can websites that promise to pay you for your time really deliver?

Debra Hunting is a user of the social networking website Yuwie.com. Like 400,000 other users, she is paid to read adverts, insert blog entries, upload photos and to mingle with friends and family online.

Hunting has just received her second cheque of $71 (£36) for her "December 2008 Xmas" kitty and is about to email her work colleagues inviting them to set up profiles. Her aim this month is to persuade a further 20 people to join so she can add another "nice amount" to her Christmas fund.

"My friend Jo referred me five months ago," she explains. "I was using Facebook at the time and after watching the set of Yuwie videos (tinyurl.com/2zuk4p) which explained how I'd get paid and what I needed to do, I immediately signed up. I've been hooked ever since."

Pay per view

Yuwie launched last July. It pays social networkers by sharing a percentage of its ad revenue with users. It's ranked among the top 2,500 websites in the world, according to Alexa.com, which ranks sites according to their traffic history.

As well as paying members to generate page impressions, Yuwie's structure means the amount of money you earn also depends on the number of potential users you refer. That structure is like a pyramid of 10 levels, with level one at the bottom. Level 10 users could in theory earn more than $10,000 a month. The catch: you have to refer 59,049 friends who then have to generate 59,049,000 page views. In practice, no user has got anywhere near this: the most anyone has earned in a month is $850, while the average user is said to pocket around $100.

But Korry Rogers, its chief executive, believes that Yuwie has paved the way for a new breed of social networking. "There are hundreds of millions of dollars spent each month in advertising on social networking sites," he says. "Why should the company keep all the money? The users are the ones inviting their friends, the users provide the content and do all the work. Without the users, there would be no site, so we decided it was time that they got a share of the profit."

However, others are not so sure. Similar websites that promised to share revenues with users, such as Edgeio.com (tinyurl.com/zgt2v) and Agloco.com were unable to cover their operating costs and collapsed.

"Let's hope they can afford to pay their service provider for their bandwidth," is one comment on a blog discussing Yuwie (tinyurl.com/3bregs). Another commenter adds: "Looks like another pyramid scheme. 20,000 referrals and 20m impressions for a measly $1,000? Why don't I put that effort into generating those users/impressions on my own site and make $40,000 ?". Another was more succinct:"Nope, it doesn't look enticing."

Yuwie is the latest in a series of similar ventures, not all of which have been a success. Edgeio.com - the site is now up for auction - was a tool for bloggers and buyers. It used content from RSS-enabled sources and categorised millions of listings in a central location and paid its users to use this service. However, it closed at the beginning of December, despite the $1.5m it had received in angel funds from the likes of Louis Monier, founder of internet search engine AltaVista, and the RSS Investors Funds; and a further $5m of funding it received in October 2006 from Intel Capital, the investment arm of the giant chipmaker, and Transcosmos, the strategic investor.

"The company burned through that money according to plan, meaning they ran out this month [December]," says Michael Arrington, co-founder of Edgeio and the maintainer of Techcrunch.com, the influential blog. "The product roadmap was fulfilled, meaning development lags didn't hurt the company. But the revenues didn't come in and user/partner milestones weren't met. And that meant no one else was going to put more money into the company."

Edgeio is not the only pay-to-surf website that has run into trouble. Agloco.com announced its end just days after the demise of Edgeio, saying: "We continue to believe in the Agloco concept, but our revenue is currently not sufficient to give members a meaningful distribution. And though there are increases in membership, the resulting revenue is not enough to support operating costs. As a development team we are unable to continue to use our savings to fund the operations (tinyurl.com/34dkw5)." Agloco was in fact a reincarnation of Alladvantage.com, a site that paid its users to surf by showing them advertisements related to what they were viewing online, via a toolbar.

When Agloco.com's downfall was announced, bloggers were quick to cry "we told you so". Said one: "You'll see another similar company pop up soon and you'll see people taking part again and the cycle's going to repeat itself - I'm willing to bet my money on it," wrote one (tinyurl.com/34dkw5). Another remarked: "It's a bother to get paid to browse and get all this advertising. It's simply a no-no."

At Yuwie, Rogers is upbeat about his company. He says: "We haven't noticed any financial downfall. We're growing each month. Right now we're generating between $30,000 and $40,000 per month in total revenue."

Yuwie pays "between 50% and 60% of our revenue to users each month," says Rogers. Backed by a small team of one database administrator and two helpdesk and content managers, Yuwie eats $6,000 a month in operating costs.

"The way Yuwie is structured, it's impossible for us to go bust," says Rogers. "We don't promise our users any specific rate for page views. The rates we pay our users fluctuate each month based on the amount of revenue the site generates. Since we are paying our users a percentage of our actual revenue, there is no way we can ever owe our users more than what we make."

Bored with the board

But Daniel Waterhouse, an internet sector partner at private equity house 3i, believes that sites like Yuwie will put off potential advertisers. "People aren't going to be interested in reading the adverts, only to make as much money as they can by clicking on loads of banners," says Waterhouse. "The only thing I'd expect to come out of a site like this is spam, and lots of it." He also points out that money earned in this way will be liable to tax.

How long will Yuwie's users remain in love with it? Sophia Bhat, a former user of Yuwie, says: "I stopped surfing and deleted my profile because I was sick to death of the amount of ad space Yuwie allocates to advertisers. It looks like one huge advertisement board rather than a place to social network. Once users realise how much effort it takes to earn even money on Yuwie, they'll pack up and leave just like I did."

Hunting disagrees. "I have nothing but total confidence that Yuwie will prosper. It offers the same applications as both MySpace and Facebook, so users of the site will not get bored and leave. I used to use my Facebook account regularly but deleted it to join Yuwie. I do not regret this decision."

Another user, Sumaer Amar, is less sure. "I didn't like the layout of the site, but all they need to do is make it more interesting - by adding more applications, by using a cleaner format and arranging everything so that it doesn't look so cluttered."

Amar picks up on an important issue for any website user: "I don't like how the red hits your eye - it looks too cartoony.

"Once they offer a good social networking experience, then people will want to keep surfing. They shouldn't rely on the fact that people just want to earn money out of it."

• Contact us |
• Print |
• Clip |
• Send to a friend | Share