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PayPerPost scores with $10M in venture capital
Another company with $10 million in venture capital, downtown offices and an expanding work force might be basking in positive publicity.
But a year after Orlando startup PayPerPost began paying bloggers for plugging products, the firm and its founder remain favorite punching bags for many in the tech community.
PayPerPost connects advertisers, who want promotion for products or services, with bloggers for hire. Advertisers determine whether they want a positive, neutral or even a negative review and how much bloggers will be paid. PayPerPost has about 8,700 advertisers and 50,000 bloggers. Most advertisers choose neutral reviews because bloggers are more likely to take those, company officials said.
The company got a lot of heat in its early days, when its bloggers were not disclosing that the companies they were promoting were paying them. PayPerPost officials admit they made a mistake and now require some form of disclosure. Still, critics insist PayPerPost hasn't gone far enough to distinguish its writers from independent bloggers.
There's no question the negative publicity helped the company. The popular technology blog TechCrunch, with more than 650,000 readers, has written about PayPerPost more than a dozen times. The headlines included "PayPerPost.com offers to sell your soul," and "The PayPerPost Virus Spreads."
Still, any other startup probably would kill for that many mentions.
"The naysayers were a godsend for the company," said Dan Rua, a managing partner in Inflexion, a Florida investment firm funding PayPerPost.
Besides TechCrunch, Silicon Valley gossip site Valleywag and other large technology blogs have taken shots at PayPerPost. In March, ValleyWag compared the company to payola journalism.
After spending much of the first year fending off attacks, PayPerPost founder Ted Murphy is trying to show the world he's not the devil that some bloggers would have you believe. And not all of the Internet chatter is negative. Videoblogger Loren Feldman has called PayPerPost "capitalism at its finest."
The most visible part of PayPerPost's public relations campaign is a Web reality show called "RockStartup," which Murphy is shopping around to TV networks. Videographers constantly follow Murphy and other employees to meetings, conventions and encounters with critics.
A recent episode shows influential tech blogger Mike Arrington, the founder of TechCrunch, calling Murphy "the most evil person in this room" at a Web conference in Canada.
Murphy laughs off the insult and accuses Arrington of writing sensational headlines with some of his blog posts. Later in the video, while ironing a shirt, Murphy calls Arrington "rude" and "arrogant" for his comment.
"You can't just keep on getting beat up, you got to fight back a little, especially when something someone's saying isn't true," Murphy says in another episode after an encounter with a different critic. Most of the critics have taken aim at the company's disclosure policy. When PayPerPost first started in June 2006, bloggers did not have to disclose that they were being paid to endorse products.
The company last fall began requiring disclosure, a move Murphy says has quieted some critics and brought in new advertisers and bloggers.
"Not having a stronger stance on disclosure when we launched was a mistake," Murphy said.
PayPerPost's rules mandate that a blogger's site has a link to a disclosure policy, which tells readers that some posts may be sponsored. Other bloggers choose to write in their posts that the content was paid for.
When advertisers create an "opportunity" for bloggers to get paid, they choose if they want bloggers to disclose that they are being compensated. If they do, bloggers must post a "disclosure badge," a little icon at the bottom of a blog entry that indicates that the post is sponsored. That's not enough, some critics say.
"It's like putting a note on page 50 of a magazine that something that appeared on page 4 was an ad," said Jason Calacanis, CEO of Mahalo, a search engine where people put together the search results. "It's still deceptive."
Critics also complain that PayPerPost items artificially inflate an advertiser's ranking in search engines such as Google, which rank sites on a number of factors, including how many other sites link to it.
Murphy and his supporters said PayPerPost is just like any other form of advertising and the reaction has been so strong because the blogosphere is still maturing.
"That's the case in every medium; the world works itself into an equilibrium between organic content and sponsored content," Rua said. "Whether that's TV shows vs. TV commercials or radio songs vs. radio commercials or the amount of space given to organic search results vs. sponsored search results. The same thing will play out in social media."
PayPerPost's bloggers can earn $5 to more than $100 per post depending on the length of the post and the popularity of the blog. To create an opportunity, advertisers pay the company a $5 fee as well as 35 percent of the payment to the blogger.
To get paid for blogging, PayPerPost has a set of eligibility requirements, including that a blog has been active for at least 90 days and that it contains some posts that are not sponsored.
Advertisers are big and small
While some prominent companies including Hewlett-Packard and Sports Illustrated have used PayPerPost to advertise their products, the service also benefits smaller companies who can't afford banner advertisements on popular Web sites, Murphy said.
Kendall Schoenrock, the co-founder of Wallhogs.com, a company that creates customized life-size wall cutouts and other prints, said his company has spent about $4,000 paying bloggers through PayPerPost.
"Without those bloggers who were paid to talk about us, our overall buzz would not be as great or significant," Schoenrock said.
Blogs and bobble-heads
PayPerPost's offices in the Cornerstone Building on Orange Avenue have the feel of a Silicon Valley startup. The walls are painted in shocking greens, purples and blues and employees' desks are filled with action figures, stuffed animals and bobble-heads.
PayPerPost calls its bloggers "posties" and has a wall bearing photos of many of them. Every few months, the company holds "Postie Patrols" where Murphy and other employees show up at the home of a blogger and have them compete in a challenge to win a prize.
One early challenge had Murphy compete with an Orlando blogger to see who could finish a pizza first. The blogger finished first.
At the end of each month, all the employees whose birthdays fall in that month gather for a "cake plow" -- shoving their faces in pieces of cake to celebrate.
"When we hire people, we let them know that working here is a little bit different," said Karen Allen, PayPerPost's Director of Customer Love -- the company's version of customer service.
The company has doubled its staff to 43 full time employees and is expanding its office space. Most of the employees are developers or customer-service representatives. Despite the growth, Murphy said the majority of the venture capital is still in the bank and the company has been operating on the revenue from advertisers.
"Off the money we have right now, we could operate for another two years without issue," Murphy said.
In November, PayPerPost will hold PostieCon, a gathering in Las Vegas of its bloggers and advertisers.
PayPerPost's next big move will come at PostieCon, when it unveils a product, code-named "Argus." The company won't provide details, but executives said it will be a major initiative and it will surprise many people.