Pay-to-Surf Model Takes a Wipeout
Analysts have wondered whether such companies can survive.
However, there isn't a need for further proof, as a number of players in the space have either relaunched themselves or added other revenue streams. One of AllAdvantage's biggest competitors, MValue, will soon launch SweepSurf.com where consumers can enter to win $1,000.
Even smaller competitors, such as ClickRebates.com, have shifted their focus. ClickRebates has repositioned itself as a business-to-business provider of pay-to-surf tools.
The pure business-to-consumer model of having consumers download toolbars that serve them ads and promotions as they surf the Web seems to be dead, according to Jim Nail, senior analyst at Forrester Research, Cambridge, MA. "AllAdvantage was the largest, most successful and most legitimate company. If they can't make it work..."
AllAdvantage is banking on its expansion into other areas to drive the company into the black. "With the market in 1999 there was not a problem reaching profitability," said Jacques Clay, chief operating officer at AllAdvantage, Hayward, CA. "The market has changed."
But this sounds like damage control, said Nail. "The online ad market is growing healthily. Their venture capital cash dried up. That's not about profitability. If the VC had continued to flow for another couple of years, maybe they would have gotten to profitability. But it isn't, so now they have to do something else. Which mainly means they have to stop handing out cash."
The new ADvantage Network will have the company's sales people sell advertising on behalf of other marketing devices such as ISPs and desktop application providers. Five companies, including freeinternet.com and ForMyCause.com, have agreed to have AllAdvantage sell ad space on their behalf.
AllAdvantage's WOW...Win on the Web Sweepstakes will launch Sept. 1. It will offer a jackpot of $50,000 every day. Members receive one entry for every three minutes a day they spend using the company's Viewbar. They can earn up to five entries each day. The company expects to give away $18 million annually.
Clay claims the motivation behind the launch of the sweepstakes component was "to attract a demographic above and beyond our own. The concept of giving benefits and advantages to consumers is something that's still driving the company. The original form is still alive, we're not going to kill it," he said. Although, he did mention that the "cost structure to pay-to-surf is much more expensive than sweepstakes." But Clay refused to quantify exactly how much more expensive.
However, one of the 15-month-old company's early Securities and Exchange Commission findings stated the company paid out $32.7 million to members between December 1999 and March 2000, but pulled in only $9.1 million in advertising.
Nail wouldn't be surprised if they move away from the pay-to-surf model entirely. However, this will take time. "If they cancel it immediately, everyone will bail on them," he said.
ClickRebates hopes these companies flee from the space, as it is looking to sell pay-to-surf technology to major companies. The idea is that the Yahoos and Procter & Gambles of the world will want to offer this type of marketing program to encourage customer retention and build their brands online. "We're happy the way it's shaking out. It will clear the path for our partners," said Chris Yeh, CMO and founder of ClickRebates, Santa Clara, CA.
"Pay-to-surf will be dominated by the Yahoos who can offer it as part of their overall suite of services. The benefits are, in addition to creating a new revenue stream, providing a branding opportunity," said Yeh.
Yeh claims it was the company's plan all along to move out of the pay-to-surf space and into the BTB world. "We wanted to acquire critical mass of consumers early. Once we proved our concept we were going to become an infrastructure company."
ClickRebates still has its BTC offering, which has 350,000 members. AllAdvantage has an estimated 2 million members.