http://www.cnn.com/2000/TECH/computing/08/18/freewebstuff.folds.idg/index.html August 18, 2000 by Tom Mainelli (IDG) -- Thinking of trying out one of those services that pay you to surf? Better do it soon. Their own popularity--and vulnerability--is threatening their survival. The latest casualty, FreeWebStuff.com, suspended its surf-for-pay service in July while it looks for a company willing to partner with or buy it. The service experienced huge growth spurts shortly after launch, but the site's engineers soon realized this was due to hackers generating massive numbers of fraudulent registrations. [The use of 'hackers' here is wrong and misleading. Perhaps he should have substituted it with 'CNN journalists' instead. Anyone had the capability of creating fraudulent registrations. Trying to blame "hackers" generically is irresponsible and incorrect.] FreeWebStuff.com's shutdown comes on the heels of news that AllAdvantage--described by Jupiter Communications analysts as a "pioneer" in the unproven surf-for-pay business model--laid off 10 percent of its employees. Earlier in July, AllAdvantage shelved plans to go public after a fiscally disastrous stretch, when it paid out $32.7 million to surfers on advertising revenues of just $9.1 million. Growing Up Too Fast FreeWebStuff.com's story sounds like a cautionary tale a wise old venture capitalist might tell Internet startup cubs. Launched on June 5, the site offered a modified Internet Explorer browser (with integrated ad space) that you could download by entering personal and demographic information. When you used that browser to surf the Web, the company would send you targeted advertisements based on your demographics and the sites you visited, company spokesperson Bill Johnson says. For example, a female surfer visiting the clothing store Gap.com might receive ads for other women's clothing sites. For every hour surfed, you accumulated 50 cents of credit toward items in the company's prize catalog, which included notebook computers and exercise equipment. The idea was to attract a large pool of users that advertisers could then target very specifically, Johnson says. Growth was manageable at first, with 3000 people registered in the first 15 days of operation. Then FreeWebStuff.com's officials decided to drop the relatively sparse prize catalog and offer something people really wanted: 50 cents an hour of the popular online currency Flooz, accepted by a growing number of Web merchants. "It was like the lamb entering the wolf's den," Johnson says. The Flooz offer attracted new customers by the thousands. By June 25, 20 days after launch, FreeWebStuff.com had 10,000 registrations, and participation snowballed from there. In one day the site drew nearly 4500 registrations. The first week of July the site surged to 65,000 total registrations, and staffers started to become suspicious. Automated Surfers Cash In "We assumed people wouldn't cheat us," Johnson says, admitting that in retrospect this was naive. Company officials soon learned that crafty computer users were finding ways to register hundreds of accounts, and the majority of the site's new "users" were fraudulent. Because the site wasn't set up to verify people's registration until they tried to claim their earnings, it was nearly impossible to stop the flow. The small company, with just five technical support people on staff, even hired several of the persons accused of hacking the site in an effort to stop it--to no avail. ["persons accused of hacking the site". This wording suggests people had compromised the machines hosting their service. Compared to the first paragraph, this becomes a big discrepancy. Fraudulently creating additional accounts does not constitute 'hacking' their site.] On July 10 the company suspended operations. Now FreeWebStuff.com is seeking to partner with a security company that can assist with its registration problems. Alternatively, it may sell out to another pay-to-surf site, Johnson says. He would prefer to relaunch the site now that the company has a bit more experience. "We had no idea how large the cheater problem was," he says. The hackers communicated with each other and even set up Web sites explaining how to cheat the site, he says. Johnson estimated only 9500 actual users produced the 65,000 registrations. During its last week of operation the company paid out nearly $315,000. Flawed Model? Despite FreeWebStuff.com's problems, Johnson says he still thinks the paid-to-surf model can be successful--with some modifications. If FreeWebStuff.com relaunches, he'd like to see payments based on a percentage of advertising revenues, instead of flat hourly rates. Johnson says advertisers still value information that helps them save money on today's "wasteful and deceptive" banner ads. "We weren't trying to pump up the numbers," he says. "We were trying to be honest." Uphill Battle Honest or not, companies like FreeWebStuff.com face an uphill battle, says Harry Wolhandler, vice president of research at Web marketing analysis firm ActivMedia Research. Even if they can avoid fraudulent signups, these companies may not attract the types of users advertisers really want, he says. The most desirable users would likely not hand out personal information--and give up privacy--to earn 50 cents an hour. "For people who like free stuff, it's fine," Wolhandler says. For others, however, such services simply aren't worth the hassle. Still, a recent Jupiter Communications survey suggests that a rather large percentage of people actually might consider surfing for compensation to be worth the hassle. In that survey, 47 percent of respondents say they would provide a Web site with personal information in exchange for a chance to win a prize.