Webupon

In the past few years there has been an emergence of “paid to click” or PTC sites on the Internet. This business model seemed to be the perfect win-win way for advertisers and individuals to benefit from one another and make money. The general idea of PTC is that advertisers pay a fee to have their ads shown a certain number of times. Consumers get paid to click on the ad and view it for a certain amount of time. The PTC site takes its profit and everyone is happy.

Despite the rosy predictions, PTC sites became notoriously unstable and shifty, delaying payouts to its members and closing without warning. Many consumers lost not only the money that they had earned from clicking on ads but also money invested in premium accounts and purchasing referrals. Why did this business model fail?

1. PTC sites are not based on a sustainable business model. Having a sustainable business model simply means that the company charges enough of a markup on its product to pay the overhead and make a profit for itself. A typical PTC site offers $.01 per member click, plus it pays $.01 to the member’s referrer as well, for a total of up to $.02 per member click. If you go to the advertiser’s page, you will often find that click packages charge $19.95 for 1000 clicks, and sometimes even less. If 1000 clicks pays out $20.00 (1000 clicks X $.02 per click) this leaves a loss of $.05 per advertiser transaction. Even if the advertising fee is in positive territory, it almost never provides the kind of revenue that a site needs to pay its employees, bandwidth and hosting fees and so on.
2. PTC relies on selling premium accounts and referral packages. One way that the sites attempt to compensate for this lack of revenue is by offering premium packages to its members. For a fee, members can purchase unreferred accounts to boost their referral credits or VIP style upgrades that typically increase the amount of money per click that they receive from themselves and their referrals. While this may seem to help the bottom line in the immediate term, it actually speeds up the failure process of the PTC by actually increasing the loss per ad and widening the gap between advertiser revenue and member payout. For example, in our first model the site was paying out two cents per click to two “normal” members, losing five cents per transaction. If a member buys an upgraded membership, he may receive a bonus of $.0025 per click and $.0025 per referral click. This will raise the total payout for 1000 clicks to $25.00 for a loss per ad of $5.00. The VIP fee will be quickly destroyed by this inequity.
3. Few legitimate advertisers are available. Most companies want to make the most effective use of each advertising dollar that they spend. Knowing that the majority of the viewers are only looking at the ad to make money, legitimate advertisers prefer to spend their ad money in ways that better target the demographic that will desire their product. To keep the interest level of the members up, PTC sites will often give member credit for clicking on internal links (links to pages within their own site). These ads are a 100% loss for the PTC, as no advertiser paid for the views. PTC sites will also offer links to other PTC sites in an attempt to get members to join the other site under their membership. This cannibalism only hastens the loss process of the site.
4. PTC operators are in business for a profit. Even if the PTC figures are set up in such a way as to make a slim profit margin, coding and maintaining a site such as this is not work that an able programmer will be willing to do for a pittance. At some point the site will reach critical mass (maximum amount of members that can still produce some profit) and the operator will usually make a money grab by halting member payouts or greatly delaying them.
5. The vast majority of members do not pay in at all. Most members of PTC sites are in need of extra cash and are unlikely to pay into a PTC, especially at the outset. Most members take a “wait and see” attitude, clicking on ads until they reach the first payout threshold to see if the PTC is legitimate. Even after an initial payout, most members will prefer to continue operating on the site for free until they either build up a referral network large enough to warrant the VIP account or until they can earn enough money from the site that the VIP account pays for itself. This works against the idea that VIP accounts will provide enough revenue to make up for little or no profit on the advertisement end of the business.

Paid-To-Click sites are constantly rearranging their statistics and emerging with website facelifts in an attempt to seem new and innovative, but the classic rules of profit and loss dictate that they will fail, often within months of rollout. Unfortunately this seemingly simple way to make money online is doomed to fold up.