Social networking has been notoriously hard to monetize. Despite loads and loads of inventory, hitting on an ad model that works has proved thus far elusive. Traditional banners haven’t worked, contextual ads have been lackluster, selling app installs isn’t sustainable, and getting people to sell to their friends hasn’t worked. There’s just no native ad format for social networks. A new startup that launches today called SocialCash thinks it has hit on the solution: incentivize ad participation with free stuff.
Note: See update at the bottom of this post.
SocialCash, which has been running a private beta with 15 app developers, including the super popular Friends for Sale app on Facebook, consists of two main products for developers: BannerCash — a traditional banner ad network for social applications, and PointCash — the more intriguing of the two and described by the company as “a virtual currency engine that allows users to complete advertising offers for points or coins.”
What that means, is that users are given the option to earn stuff in return for completing offers — like applying for credit cards, getting information about vacation rentals, receiving free trials of magazines, or finding out their credit score. The offers subsidize the reward (like, say, an iPod Touch or an XBox 360) and the developer gets a cut.
If this sounds familiar to you, it’s because the company behind SocialCash is Gratis Internet, who is also the company behind the famed FreeIpods.com. Gratis has been in business since 2000, and has given away $20 million in products over the past 8 years (their first site was actually FreeCondoms.com, which did $20.5 million in revenue in its first 4 years by handing out condoms to college kids in exchange for personal information that it sold as leads to other companies).
The Gratis concept works for two reasons: 1. people love free stuff, and 2. in order to get the stuff, users must invite a certain number of users who also complete the program (the number varies based on the value of the reward). So the customer pool grows virally and exponentially. Once users feel confident enough that the site isn’t a scam (and seeing the in business for 8 years notice — which is an eternity on the Internet — goes a long way toward making people comfortable), then the concept is a winner. But will it work on social networks, where advertising methods that have worked elsewhere have thus far not worked?
That’s a tough call. We can look at FreeCondoms.com as an example, though. FreeCondoms.com made its return to the web in September of last year as a Facebook application built around the same concept — complete offers, get free condoms. Sounds like a winning idea for college kids. But as the graph below shows, though Facebook users initially loved the idea, the novelty quickly wore off and the app is down from highs of about 54,000 active users last fall to just over 1,000 today. Clearly, the viral spread didn’t work as it has for Gratis’ other sites.
Right now, monetization of social networking traffic is in the “throw everything at the wall and see what sticks” mode. Gratis is trying something new with SocialCash, at least. Whether it sticks remains to be seen. In addition to their BannerCash and PointCash programs, SocialCash also promises a third program that’s “so awesome, we can’t even tell you about it yet…” Hmm.
Update: Via a comment from Gordon Peters of Social Cash, it turns out that I was mistaken — the company is actually not attempting to bring the FreeIpods.com concept to Facebook. The relevant parts of his comment:
(1) SocialCash does not give away free products to Facebook users. Instead, SocialCash is a suite of tools that enables awesome app developers to monetize their traffic.
(2) BannerCash is an ad network for social networks that is built upon Gratis’ strong CPA relationships across the globe (and these advertisers happen to have unlimited advertising budgets… which leads to 100% fill rate for our inventory).
(3) PointCash is a monetization solution targeted to application developers who have an existing virtual currency system. For example, a gaming developer may give its users 5 blackjack credits per day automatically… however, if that user wants to play more than 5 times per day, the user would need more blackjack credits. [Enter PointCash stage left]. PointCash provides a fully-managed set of advertising offers to the developer who offers their users an opportunity to earn more blackjack credits by participating in the ads (typically surveys, free trials or online purchases). The advertisers pay a bounty for every user that signs up and SocialCash passes on the majority to the developer. This easy-to-integrate advertising solution is a great way for developers to augment any existing revenue streams while simultaneously increasing user engagement with their application. Everyone wins.
So it would appear that Social Cash is a CPA banner ad network and a points management system. To be honest, we’re somewhat disappointed. While the FreeIpods.com model may not have worked, at least it was something novel for Facebook. CPA banners are nothing new and points management/advertising tie-in management, while somewhat more intriguing, is of limited or no use to most social app developers.
