In the first two posts in this series, I’ve reviewed the operating models of Couchsurfing (CS) and some competing networks. Now we’ll talk about how they can make money — and hopefully improve the member experience while doing so, rather than degrading it.
The CEO of CS, Jen Billock, lists three potential revenue models:
- Freemium / subscription
- Transaction fees
That seems like a good list to me. Let’s take them one at a time.
Freemium / subscription
Couchsurfing is already halfway to a freemium model: there’s a way for you to pay them, but it doesn’t get you any premium features. It’s called “verification,” and I left it out in the previous posts when I said Couchsurfing has no revenue model, because I think it’s a bit sleazy and not very sustainable.
Essentially you can pay $20 to get a “verified” check mark on your profile, which is somehow supposed to improve trust and safety. As far as I can tell, all that’s been verified is that you have $20. When I did this in 2009, they also sent a postcard to confirm your address, but I’m not sure that’s even required anymore, according to this recent article:
The Post managed to create a profile with a fake name, paid for the verification with a credit card with a different name and was instantly given a “verified” account that comes with a green tick next to the profile.
Billock refused to answer questions about how this process made a profile superior to one that was not verified.
The most active CS members have always been unhappy about the “verification” process. At the old non-profit CS, which raised several million dollars this way, it was described in part as a voluntary donation, which it was, but in ominous language that made it sound like no one would ever trust you without that little check mark on your profile, which was completely untrue and essentially a way of bullying new members into donating before they understood how the network really worked.
When the site went for-profit, they eliminated the verification option, I assume because it was awkward for an opaque for-profit company to ask for “donations” and they realized it had no other practical purpose. But when they realized they might need the money, they quietly brought it back, with even more awkward language to describe what it actually does.
It sounds like they’re planning to start providing more extra features for that $20, which isn’t a bad idea — but I sure hope they change the name to “premium” or something, because “verified” is misleading and will always raise questions. And it obviously makes people less safe if they rely on it as a sign that someone is safe to host or visit.
So what should these premium features be? We got a taste of what CS was considering when they first looked at this model a couple years ago. It was mainly ways to increase a traveler’s chances of finding a host: better search filters, last-minute requests, and “guaranteed” responses (whatever that means).
On a certain level that makes sense, since it targets the people most likely to pay: those who have just signed up for a particular trip they’re planning, because they’ve heard about CS as a free alternative to a hotel. Many (most?) of these people have a frustrating initial experience, sending out lots of requests and getting very few replies. Which is just when they’ll be most willing to pay to improve their chances, especially if it’s still a lot less than the cost of paid accommodation. And if you believe there’s still a good chance that they won’t find a host and they’ll give up on the site, why not offer big discounts for a longer-term prepayment to get as much of their money as possible? (That kind of discounting is often a red flag, something we’ll come back to when we cover language learning products in a month or two.)
As I wrote in 2013 about all this:
Freemium models work best when the premium features are relatively independent of the basic features. If someone else pays for more space on Dropbox, you don’t get less space in your free account. In the case of CS, the main thing they can offer a premium member is various types of priority over non-premium members. You can dress that up however you want, but in the end you’re not really adding a new service, just pitting your existing users against each other: the premium service degrades the free one. If frequent flyers board the plane first, the rest of the passengers have to wait a bit longer. If premium CS members show up higher in searches, then free members show up lower.
But now I can see a larger problem, which is a backlash from hosts. After all, what you’re really “selling” is access to their homes, or at least to their inboxes. And this plan would skew your incentives against implementing features that make it easier to be a host. For example, suppose you only want to host members with references, or members who have hosted themselves — or suppose you’re a female host who only wants to host other women for safety reasons. Well, the pool of members who are most willing to pay would almost by definition be the ones who are least likely to meet common criteria like that. So giving the host simple settings to exclude requests from those people would make the “premium” features less useful and harder to sell. But if you don’t allow that, these premium features make it less attractive to be a host by lowering the quality/relevance of your average request. Either way it’s a downward spiral.
Right now, CS is the only one of these sites with enough active membership and site traffic for advertising to even be worth talking about. They’ve recently started running banner ads that look like basic Adwords or something similar. But they’re surely considering more lucrative options.
On Monday morning we’ll have a guest post from a digital media executive discussing these options in more detail. But for now I’ll just point out two potential problems with this site as a branding vehicle.
The first is that CS has made repeated public statements that they would never have advertising on the site. The company obviously has no problem shrugging off the small minority of members who care enough to point this out, but a company that’s actually paying to improve their image may be more sensitive to them.
Second, the safety issues on CS have created a much larger image problem. Some say that terrible incidents like this or this will inevitably happen on any large enough network — but others make a good case that the company could be doing a better job of at least responding to them constructively when they do happen. In any case, I would certainly hope that CS wants to improve on this front as an ethical matter (and I’m sure they do) but it’s also a practical one if they ever want a salable “brand.”
At this point those are both CS-specific problems. My broader concern about advertising on a hospitality network is how it would shift the incentives for the team running it. Relying on page views and clicks means you’ll be pulled away from facilitating face-to-face meetings and towards keeping people clicking around the site, with more focus on “content.”
This is probably going to mean some professional content — because if we’re talking about just user-generated content (i.e. message boards) then there’s a lot more competition. Sites like the Lonely Planet Forums, Bootsnall, and many others are already all over that market. For longer-term expats there are region-specific options, like Toytown in Germany, that are just as useful. And as with many “Facebook for ____” ideas, Facebook itself is often perfectly serviceable for this purpose, and all your users are already there.
Online forums are also very hard to sustain without having them fill up with spam or trolling. There are only a few forum sites that have really lasted a long time, and those that do either rely on full-time paid moderators (like Metafilter) or on volunteer mods with discretion on how to run their own little fiefdoms (like Reddit, or the old CS where each city’s message board had its own volunteers running it). Another important tool for many of them is upvoting/downvoting of comments, which can be a little harsh for a community-oriented site.
A hospitality network has to maintain a higher level of trust among its users than a purely online forum, so the burden of moderation is even higher. Scandals like this one are bad enough for Reddit, but can you imagine how much worse they’d be if they happened at a site where strangers were actually arranging to stay with each other in person?
The problem with transaction fees is that they’re a slippery slope, however you implement them. If any of the money goes to the host, they’ll start wondering why they shouldn’t list on AirBnB and get a lot more. If it all goes directly to the site, they’ll feel exploited. If it goes to charity and the site takes a fee or commission — a too-cute-by-half idea that many of these projects seem enchanted by — then it’ll never amount to material revenue for the site.
And what about the guest perspective? If you start paying for an accommodation, you’ll begin to have higher expectations. You’ll certainly want your money back if you wind up leaving early. And if it’s more than a few dollars, you’re actually not saving that much over a hostel or cheap hotel — especially in Europe, which has massive chains of super-budget hotels. Nightswapping charges a $10 transaction fee, and more if you haven’t earned enough nights; Kayak has 40 hotels in Paris this weekend for $25-40/night, and Hostelworld has dorm beds as low as $11.
If I were starting a new hospitality network today, I wouldn’t want to rely on any of these approaches. I’d rather start out with a small but mandatory fee just to join the site, and maybe an annual fee to remain a member. I’ll write more about how that could work in a future post. But it’s not very useful advice for any of the existing networks, all of whom have more or less committed to a free and open signup process.
For most of them, I suspect that some kind of advertising or sponsorship will turn out to be the best of these three flawed options. As I mentioned, our next post on Monday will be from a guest writer who can explore this in more detail.