Hospitality Networks:
Advertising & Sponsorship

One of the revenue models that Couchsurfing is exploring is advertising sales. I wondered how much they could actually make that way, and I assumed their best best would be some kind of partnership with a travel brand rather than just banner ads (as they’re doing now). But I don’t know much about it, so I asked someone who does. Nick Chapin is Head of Publishing at digital agency theAudience, and was previously Head of Strategy at Kameleon.

To be fair to Nick, I wasn’t able to give him much data to go on, since the company wouldn’t give me very much. But I passed on the 1m monthly average users and 200k daily average users that they quoted me, and asked for a ballpark estimate of how much they could make with that kind of traffic. Enter Nick:

It would be interesting to know what Couchsurfing’s regional breakdown really looks like. I say that because it’s hard to sell partnership against a diffuse global demographic, unless they’re high-net-worth luxury consumers. Marketers tend to buy partnership either as a vanity that supports their brand values or as a proxy for a specific audience—and very few brands are shopping for scattered global eyeballs. Or, more accurately, working with media budgets earmarked against a global audience. Most buys are driven by local budgets, with specific regional targeting.

So unless there’s a brand that just really wants to be associated with the proposition, it’s hard to see a partnership with CS selling off the shelf. Given all that, I’d question the suggestion that some kind of site buyout or partnership makes more sense that CPM-benchmarked advertising.

The advantage that Couchsurfing could offer advertisers is the same one Facebook leverages so well: their traffic is entirely comprised of trackable, registered users who have forfeited a lot of personal info—which can be used to target advertising carefully. That means much higher CPM rates.

With CS, you’re also working in a sector (travel) that has some very lucrative digital advertising opportunities: mainly affiliate-based targeted ads. Specifically air travel and hotel bookings. Most of the big travel aggregators pay a chunky referral fee to a host who drives a click-through that results in a sale. A few examples:

While you’d assume that Couchsurfers aren’t the most affluent group, they surely over-index on travel purchase. And, moreover, do so directly in parallel with site visits. Connect with someone in Thailand … book a ticket to Bangkok, right? Further, you’d also assume that many users don’t find the hosting connection they’re looking for on the site and book a hotel instead. Making it a great place to serve up a ready-made alternative to whatever the audience is searching for.

I’ve logged into CS and, as far as I can tell, they’re only running standard Google AdSense banners on the site—about the least sophisticated way to monetize a page. That means that some lucky advertisers are getting a lot of cheap value. They buy Google ads against verticals or keywords, like ‘travel’, and they end up with potentially lucrative eyes on their ads. Some may even be targeting the CS domain. I’ve seen a lot of ads on CS for AirBnB, who presumably have a very robust ad buying program targeting travel sites like these. At the moment they’re getting to Couchsurfers on the cheap.

But of course AirBnB and others would be happy to pay much more if the ad inventory was enriched with even simple CS data. At the moment, if I search for hosts in Italy, I just see generic AirBnB ads. If they could instead show me specific flats I could rent in Milan in the event that I can’t find a host, everyone wins.

Anyway, a targeted ad product seems like the most obvious revenue stream to me: basically set yourself up like a boutique travel-focused Facebook. Dig into your data and model a sexy demographic, integrate some smart targeting tools, and take it to market. Call your audience “global fun seekers” or something sassy like that. Show that, yes, they are under-employed—but they are also predominantly middle-class and over-index in marketable areas. Travel, mobile device use, online STD medication purchases, etc.

Now, off the back of a more developed pure-play advertising proposition like this, there’s probably a partnership model that starts to look appealing too—but let’s push the Facebook parallel a bit before exploring that.

Facebook’s only revenue stream is ads. (They call them ‘promoted posts,’ but a rose by any other name…) And they have been hugely successful at selling them since they switched to a more aggressive targeted model over the past couple of years. Facebook uses your profile information to serve ads deemed relevant to you. They may lose out to Google in terms of pure advertising volume, but their incremental ad prices are much, much higher, because advertisers know exactly whose eyeballs they’re buying.

Now, some preliminary research shows that a Facebook user generates $20-40 annually for the site. So let’s say a Couchsurfer is worth … maybe $5-10 per year with a similar model? So, even if you only really have an active base of one million users, that’s still potentially a nice return.

Above and beyond a smart ad model, I’d also think about partnerships in a similar space. For example, could you do a deal with Kayak or SkyScanner (or even EasyJet) offering targeted ticket promotions as “special Couchsurfing deals”? It’s hard to say how much that could be worth, as it would probably have to be structured as an affiliate business partnership rather than a straight-up sponsorship. But still potentially interesting. There might be a whole pipeline of business around special offers—like a traveler’s Groupon—you could build into the platform. Something that would offer users genuine value, targeted to their travel plans, rather than trying to flog them whatever Google serves up.

Finally, there might be some brands that would buy into sponsoring the site writ large. Like maybe … Puma? Global, youth-focused, target their ads at urban nightlife and active lifestyles. Or more likely a travel brand who wants to tie themselves to the spirit of CS. As an outlier, maybe even a global bank? They like to invest in altruistic concepts to combat their profiteering image, and spend a lot of money targeting young people signing up for new accounts.

It’s a stretch, but it wouldn’t be hard to draw up a shortlist of people worth approaching. From a sponsorship perspective, the CS brand has an appealing ethos to offer—but also some bad publicity, which might keep a lot of brands away.

Any way you slice it, this would take a lot of work to negotiate. But, with the benefit of doubt, I can see potentially selling something like that for … another $500k to $1m per year?

The real problem here, however, is that a potential sponsor would probably want the site to offer a much more robust “content” offering. The era of paying to slap your logo on something is long gone. And, right now, what would a sponsor get? Branding around the edges?

Any brand worth their salt would want to be integrated into the CS community, and work with the site to co-create higher value engagement content (i.e. video), to drive community participation in branded conversation.

Which gets us to a deeper point: to sell CS to brands at any kind of truly sustainable level—and, really, to thrive as a digital platform—Couchsurfing probably needs to evolve as a media offering. If it became a place where an engaged community of registered users consumed, shared, and commented on travel and lifestyle content, there would be a lot more to sell. CS could offer (apologies for the wanky ad buzzword) “native” ad formats, e.g. sponsored articles, films, promotions and even real-world events.

But without that kind of development, there’s precious little to sell. Even the best banners are ultimately cheap. That’s why Facebook has done everything it can to shift its ad offering toward promoted ‘brand content’, and is pushing video so hard.

The bottom line is: digital properties can still sustain themselves (handsomely) through advertising and brand partnerships. But the bar has been set high.

My gut feeling is that there’s a very decent proposition in all this for CS. But let’s not forget that they aren’t the only site struggling to make it. It would take a lot of work and brains to build and sell this as an advertising platform. But with their user base, it would be an enticing challenge to take on…