Blog Post

You're Better Off Working at Starbucks Than Running a Social Network

Peanut Labs, a company that couldn’t find a business as an also-ran social network, took a different route and now conducts market research on social networks using virtual goods to reward survey takers. The San Francisco-based startup said today it has raised $3.2 million from Leapfrog Ventures and BV Capital (which had funded its original and now side project, the social network Xuqa). The Series A-1 round brings the company’s total funding to $4.5 million.

Of Xuqa, Peanut Labs CEO Murtaza Hussein said today:

“The CPMs are so low it’s really hard to build a real business unless you have several billion page views and your own sales team. Social networks get 5 to 10 cent CPMs, and less outside the U.S. At one point we were averaging 3 cent CPMs. We figured out if we all got up and worked at Starbucks instead we would make more money as a company than selling 300 million impressions a month of ad space.”

Peanut Labs employs 46 people, 20 of them offshore, and claims to be profitable with “seven-figure revenues” from unnamed “name brand” customers. Partners such as LiveJournal, ijji, and (fluff)Friends make around an average of $3 per completed survey; Peanut doesn’t disclose how much it keeps for itself.

On a side note, this isn’t the only story in the last 24 hours that tempted me to return to GigaOM to follow up on something I wrote way back in the day.

6 Responses to “You're Better Off Working at Starbucks Than Running a Social Network”

  1. I have to disagree with the title and overall gist of this post.

    There is room for more social networks: not just room, but NEED for niche, target-specific social networks. They don’t have to be set up for profit, though.

    I am the founder of a a social network for people touched by diabetes called TuDiabetes.com. Since March 2007, we have pulled in over 2,200 members and growing steadily while making an impact on people that suffer from this condition one person at a time.

    So, as you can see, there is room AND need for more social networks. Not all of them have to be in it for a profit. Of course, we are a non-profit!

  2. lpapworth

    How about, instead of not working at Starbucks they also move out of advertising into a revenue model that works for social networks? Both SKTelcom’s Cyworld and Sulakes Habbo makes many times the revenue that ad-only MySpace ($2 and change per year) makes. There’s more to life in communities than CPMs.
    Revenue in social networks

    Then again from an “also ran” social network to rewarding low quality consumers with crap pixel products – these guys would have trouble finding gold in a jewellry store :P