In my previous blog, I've posted extensively about my experience doing some of the free gift sites such as FreeIpods.com.
Although, I have received both an ipod and ipod shuffle for free, I have still to receive my PDA from PdaTech4Free.com. Now, the news is that the site is closing because they are not profitable. So this prompted me to try and understand why and take a look at their business model.
On all those sites, the idea is to complete a sponsor offer and to refer a certain number of people to the site in order to receive your free gift. So I decided to do some investigation to see why many of the home brew sites are closing down.
Taking a look at the sponsor offers on these sites, it seems that the the website gets an average of 20-30$ per completed offer. In the case of FreeIpods, you need 5 referrals, meaning that they earn about 150$ for each free gift completed. But even with a wholesale discount, they probably still are about 100$ short for each ipod they ship.
So how can they make money? All these sites run on the assumption that a good percentage of members joining will complete a few referrals but will not manage to get the five needed to get their gift. But recently, many people have formed groups, trading referrals and joining conga lines. Meaning that the ratio of users went up, reducing the overall profitability of most sites.
Being somewhat of a business man and liking the fun aspect of such sites, I've decided to create my own but changing the approach slightly so that I'm at least guaranteed to break even and maximize the number of free gifts given. Introducing RewardLadder (http://www.RewardLadder.com)
Right now, I'm starting with a free ipod site, but will expand to more free gifts as membership grows.
The concept of the site is similar to other. Sign up, complete offers and refer friends. But the difference lies in the fact that you earn points for every offer you (and your referrals) complete. At the end of each month will take revenue from our advertisers and send free gifts to members with the highest point number first.
This doesn't mean you need to complete multiple offer, simply that you and your down line must be active to get to the top of the pack. In other words, the more you contribute, the quicker you get your gift. In addition, since gifts are allocated based on advertiser revenue, we can maximize the number of gifts while staying profitable.