Monday, December 10, 2007

Social Network Aims to Share Ad Revenue with Users

by Tameka Kee, Monday, Dec 10, 2007 7:30 AM ET
THE LUSTER OF FACEBOOK'S BEACON ad program has faded, and News Corp.'s MySpace members have long complained about marketer spam, but entrepreneurs continue go after major advertising dollars with social networks--and Capazoo is the latest entrant in this over-saturated market.

While Montreal-based Capazoo officially launched a year ago, the social network got a revamp this October. The community features the necessary tools of profile creation, image and video sharing, and loads of dynamic content--but what makes Capazoo different is its goal to kick back 7% of net profits to its members through a micro-currency called Zoops.

With Zoops, members can "tip" each other for posting original images, video clips and other content--and ultimately, Capazoo enables them to cash out those Zoops via a branded ATM card. Of course, users need to purchase Zoops in the first place, so some in the industry have questioned just how the actual profit sharing is accomplished.

Although there is a subscription-based membership available, a significant portion of the company's revenue stems from advertising, with contextual, geo- and demographic targeted display inventory, as well as post- and mid-roll video available.

There are also the myriad partnerships with companies like Hertz for discounted car rentals, National Lampoon for content distribution and IMERGENZA for band and concert ticket promotions. But according to Matthew Ross, Capazoo's director of communications, the company's model is built to generate revenue without inundating members with ads.

"Capazoo is what we call a member-driven economy," Ross said. "They dictate what are the most popular videos and other content, and they tip each other for it. We have a policy of no advertising on personal profiles, blogs or user uploaded video." Members can also earn Zoops by referring new friends to the network.

But some in the industry have called Capazoo's operating structure "bloated," noting that for a property with only 13,000 visits in November (as per Compete), 100+ head count and additional offices in Toronto, Atlanta and Miami, the model doesn't seem scalable.

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