Profit and Incentives


A few weeks ago the Couchsurfing™ management decided to force all users to pay for the service, barring everyone from their accounts until they pay up.

Couchsurfing™ never should have been made a for-profit. While the founders may have seen no other choice, the point stands. There is certainly a moral dimension to driving profit from the hospitality of others', evident in the clear outrage of experienced hosts at the recent change. However, if we investigate the effect of this profit motive on the mix of incentives on the platform, we begin to see a more systematic cause for the downfall of Couchsurfing™ as a service.

As much as the people working on the platform want to optimize for a great experience for users, they are beholden to their investors. The platform needs to optimize for profit, or at the very least is constrained by profit. This notion factors into every decision made by Couchsurfing™ since it was structured as an explicit for-profit company, and is confirmed by people working inside the organization.

As much as Silicon Valley would like to reject it, there are many ideas out there where profit would run against the incentives of making that idea successful. The practice of couch-surfing is one of those ideas: you cannot successfully monetize its user base while meeting the needs of its community.

This is because Couchsurfing™ does not produce or facilitate any exchanges that could be monetized — at its core, it is a service for making real-world connections and messaging people. Because couch-surfing is a non-transactional practice, the company cannot skim off a percentage of the monetary exchanges between its users in a way similar to Etsy or eBay. Similarly, Couchsurfing™ has committed to not selling user data; the users are (allegedly) not the product, and so cannot be sold. The last remaining revenue streams are essentially donations (which are difficult to solicit through a for-profit company), and advertising which did not generate enough revenue given the traffic to pay a team. The decrease in activity and sign ups caused by the COVID-19 pandemic further exacerbated a long-standing issue at the core of the for-profit Couchsurfing™.

Given no way to sufficiently monetize Couchsurfing™ in its original format, there was no choice but to compromise on the mission and to make space for profit. The company claims to have trialed over 10 monetization strategies, ranging from more tailored advertising, commercial partnerships, and selling merchandise, to more egregious ones such as allowing hosts to charge surfers, charging surfers a fee to confirm a stay, and — for some reason — even starting a cryptocurrency.

They eventually arrived at a verification fee model, where we can see altered incentives playing out. Users could choose to "verify" their profile for a one-time payment, adjusted by location. To create an incentive to do this, a limit of 10 messages per week was imposed on unverified users, vastly changing the dynamics of the platform. With limited messages, unverified surfers are more likely to message hosts who they believe will be more likely to host them — ie. hosts with tons of references. Instead of a more even distribution of surfing requests throughout a city, this now caused a concentration of requests to "super-hosts", disrupting the local host community.

With the verification model in place, the main way to make money was off the users, and so to maintain revenue targets, new users had to be pumped into the system and encouraged to buy verification. This ended the natural growth curve of Couchsurfing™, and the platform was filled with people who didn't often get properly inducted into to the community, including various users who take advantage of others and made some feel unsafe.

We fundamentally believe there is no way to extract monetary value out of the types of interactions that Couchsurfing™ ought to facilitate even though they provide immense societal value. Compare it to a favor network: you surely have friends who you could easily ask to help you move house for the morning and just buy them a few pizzas and some drinks as a token of appreciation. By doing so, you lean on your social capital through your network of friends, and you save either a day's worth of money hiring movers or the time it would take to do it alone. There's no way you could write an app that makes money off this: it would either be weird (do you list all your skills on it?) or destroy the human touch of contacting your friends (do you just choose what kind of service you need), making them much less inclined to help you. This illustrates the concept of societal value, and how there are cases where even great societal value can be impossible to turn into monetary value.

Furthermore, it is almost impossible for the incentives to be aligned between app makers seeking a profit from app usage, and users of an app like Couchsurfing™ who are seeking to not use the app but rather spend time with real humans. Maybe the best example to illustrate this point is Facebook. Being a large advertising company, they sell the attention of their users to advertisers. It's a big win for them to make each user stay a few more minutes scrolling through their feed, looking through ads that translate to revenue for Facebook. The purpose of Couchsurfing™, on the other hand, ought to be to get people to stop looking at the app, and instead meet up to hang out or surf with the amazing human being that they just connected with at the end of the platform.

Our plan to fix it: Non-profit structure

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