Couchsurfing.org (CS) is a global network of people who host each other when travelling and organize various social events. Founded in 2003, it’s not the first or only such “reciprocal hosting” network, but it was the first one to tap into the younger backpacker demographic and reach a significant scale, with over 5 million current members.
I realize that most of my readers here are not CS members, so this may seem like an insidery post. But whether or not you have any personal interest in CS, what’s happened to it over the last year is a sad but instructive story about the “high cost of free” and the current state of the social web.
CS was run as a non-profit for most of its existence, free to join and funded by donations. The bulk of these donations came from a somewhat disingenuous “verification” system: if you “donated” at least $25, they’d send you a postcard with a code that you could enter to prove that your address was real. This process was promoted as a lot more important than it really was, and a lot of new members (myself included) got the impression that it was all but mandatory. This didn’t bother me that much, but I understand why some found it deceptive, and it was the first illustration of the difficult tightrope act of funding a site like this while keeping it completely free and non-commercial.
At any rate, several million dollars were raised this way, and the money seems to have been managed and spent in a pretty haphazard way. On top of this, it’s unclear whether the core mission of CS — helping people to find and host each other — is really a charitable cause. Along with the loose financial controls, this apparently (and understandably) caused some doubt at the IRS as to whether CS should qualify as a legitimate non-profit, raising the specter of a massive back tax bill and huge legal costs. In any case, the donations were not keeping up with the network’s rapid growth, and the website was becoming slower and buggier by the day. Something had to change.
In the end, CS abandoned its pursuit of non-profit accreditation, converted into a for-profit corporation and simultaneously accepted millions in venture capital. Virtually nothing was disclosed about the terms of this investment or the resulting ownership structure, but it seems highly likely that it made the founder of CS, Casey Fenton, into an overnight multimillionaire. His co-founder Daniel Hoffer was appointed CEO.
Since CS was largely a volunteer-built organization, many of the most active members were understandably furious that anyone would be making profits on the back of their time and effort. Others were concerned about their personal information being sold to advertisers and the other potential privacy consequences of CS becoming a business. And a few members have issues with corporations and/or capitalism in general, and felt betrayed by an organization that they thought was aligned with these views.
Personally, I don’t have an inherent problem with CS as a for-profit. I believe the founders when they say that non-profit status was unsustainable, and I don’t fault them for not setting up a better structure and funding approach at the beginning. They were smart guys who created a great organization, and it’s unfair to expect them to have been brilliant businessmen as well. I don’t even begrudge them the money — Fenton in particular has devoted a decade of his life to the site, it’s been a huge success, and why shouldn’t he get some compensation for that? All that said, I was obviously interested in the goals of the new investors and what direction the organization would take.
So at any rate, a lot of members were concerned, for a variety of reasons. And the company made a firm decision to respond to all of us, not with facts or honest disclosure, but with a firehose of patronizing bullshit.
Step #1 was to insist that they were not becoming a for-profit corporation at all, but rather a “benefit corporation” or B-Corp, which meant they could focus on things other than profits.
It’s hard to work out what this B-Corp designation means exactly, but as far as I can tell it’s a bit like those J.D. Power auto tests that seem to give every car a different trophy: a marketing tool masquerading as an independent rating agency. Your company writes a big check to this “B Lab” organization, they go through some kind of complicated “evaluation,” they declare you a “certified B-Corp” and then you slap it all over your website. It’s unclear whether any company has ever written the check and failed this evaluation; I emailed them a month ago to ask, and I still haven’t heard back. I’m not holding my breath.
To be fair, there does seem to be a legitimate legal movement behind all this, which is trying to legislate, state by state, a new kind of corporate structure in which the corporate board is not responsible solely to shareholders, but also to the environment, the company’s customers, members of the local community, and so on. That sounds like an admirable goal to me, and I wish them the best of luck. But I don’t see what it has to do with this “certified B-Corp” program that CS is participating in, which involves far fewer (if any) binding legal changes.
The State of California, where CS is based, has actually passed this B-Corp legislation, and the company could have reincorporated there under a B-Corp charter. They decided to stay incorporated in Delaware instead, a more business-friendly state where the B-Corp charter doesn’t exist, and go for just the “certification.” Of course, you won’t hear a word about this distinction in the way they promote their B-Corp status.
Step #2, of course, was to hire a public relations firm and tailor their “message” — you can read about it in this fawning article, which reads like a PR plant itself:
In July, CouchSurfing spent more than $10,000 to hire the San Francisco-based PR firm The OutCast Agency, whose clients include Zynga and Facebook. OutCast’s execs put Fenton and Hoffer through an intensive media-training program, spending hours grilling Fenton and Hoffer about their competitors and whether or not they were sacrificing their ideals. “They pointed out that it was important not to let the reporter frame the conversation,” Hoffer says.
After that came a creepy set of videos in which Fenton and Hoffer stared into the camera like Stepford Wives and delivered robot-like scripts that were obviously written and/or carefully edited by that same PR agency. And Fenton himself went on a global tour in which he met with local CS members in every city and asked for help in “brainstorming” ways for CS to support itself without donations.
Now, I’ve been pretty harsh so far, but I still think that CS is a great organization and its employees are good people who are genuinely trying to make it better. It’s just that the only way anyone can think of to run a consumer tech company these days is to grow the membership count as fast as possible and deal with any collateral damage after the fact. If CS wants to follow that well-worn path and just become “Facebook for travellers,” then they will certainly keep growing on the metrics they care about, and they might even achieve a good financial result for their management and investors — but, as with Facebook itself, it will come at the cost of a worsening user experience and declining engagement.
If they want to buck that trend, they need to take some clear actions that show they care about their current users, even if it slows down the rate of growth. Here are just a few suggestions:
1. Focus on disclosure and transparency. Drop the B-Corp nonsense. For those members who are completely anti-corporate, it’s not enough to satisfy them, and for those of us who aren’t, it’s just a confusing distraction. In both cases it’s an insult to our intelligence. If you want to be a responsible corporation and not just be seen as one, the first step is to become far more transparent. Sunlight is the best disinfectant. Tell us exactly the terms of the investments, exactly the current ownership of shares and options, and exactly what your current finances look like. Tell us how, if at all, the volunteer programmers and organizers who built the site have been compensated in the new structure, and how those decisions were made.
Start by disclosing everything you were required to disclose as a non-profit and everything you would be required to disclose as a listed public company, then treat that as a starting point and disclose even more. And don’t filter any of it through your PR flacks. I can’t think of anything that would increase my faith in the organization’s good intentions more than better disclosure, and I’m sure a lot of other members would feel the same way. And what could you possibly have to hide, anyway?
2. Allow hosts to filter who can send them requests. For example, my profile says I won’t host anyone without references (from other members who’ve met them) but most of the requests I get are from people who have no references. It’s not like these are bad people, they’re just new to the site and they didn’t read my profile carefully. But I’m not going to host them. So you’re wasting their time and mine by not giving me a setting where people with no references can’t send me requests. And as a result I have my couch “turned on” less often and host less often than I otherwise would, because I don’t always have time to respond to all these extra requests.
Of course, many people do host members with no references, and I admire them for it. They can leave the setting off. Everyone’s happy. What’s not to like?
3. Fix the $#@^$ website. The one way in which CS seems unable to copy other social networks is to make a functional website. They’re obviously aware of this problem, but progress has been way too slow. It’s been a year now since they started taking VC money and that’s plenty of time to have gotten it right. But instead they’ve been fooling around with the design and brainstorming endless new features, when the existing features don’t even work half the time. I just talked to an event organizer last night who had to set up and maintain the same event in two different parts of the site, resulting in different users signed up for it at each page, and she still had to constantly “bump” it within the local group thread just to make sure it stayed visible — and even then, she gets complaints from members who never saw it. And this wasn’t “come see my friend’s band” either, it was a popular meetup that regularly attracts 40-50 people.
Anything that made it easier or more attractive for non-members to sign up — Facebook logins, splash page, marketing videos — was dealt with right away at the time of the conversion. But features that make it easier to actually do anything once you’re signed up are clearly a much lower priority. And things like group organizer tools that are used by the most experienced and dedicated members — well, those are the lowest priority of all. Doesn’t that seem a little backwards? People like this organizer are the heart and soul of the CS network, volunteering their time to help bring others together. Why are we taking them for granted?
Anyway, this post is getting a little long, so I’ll stop at three. But I think you see my point. The core problem isn’t for-profit vs. non-profit, nor is it finding a way to sustain the site financially. There are ways to monetize the current membership without intrusive advertising or privacy violations (current rumors involve a referral arrangement with AirBnB) and even if they don’t take one of those options, I suspect that investors will be willing to keep funding the site for years anyway.
The real problems are these: when there’s a tension between growing your user count and looking after the users you already have, which do you choose? And when that core user base is losing faith in you, do you respond with insincere spin and endless “discussion” and “feedback” designed to pacify them in the short term, or with the kind of real disclosure and honesty and actions that would earn their long-term trust?
It’s common to talk about the conflicts of interest between the users of a free service like Facebook and the advertisers or other “real” customers that pay the bills. But even before you reach that point, there’s usually also this inherent conflict between existing users and new users, and I don’t think that conflict gets enough attention.
A healthy social network will grow at a fast rate organically just by taking good care of its existing users. If your network isn’t growing fast enough for you (or for your investors) then that’s the first place you should look to improve. If you’re pushing to increase the growth rate by other means, you’re probably doing it at the expense of the current user experience. And if you think you can address both at once, you’re probably kidding yourself.
Sadly, most successful consumer tech startups have had very little trouble choosing new users over current ones. Here’s hoping that CS spends a little more time considering it.
[Thanks to several experienced CS members who read this post in draft form and offered their feedback.]