Real money has proven a real problem for online research, helping breed professional respondents and incentives for people to cheat so they can qualify for cash payments -- not to mention that it gets expensive to pay hundreds or thousands of people real money to take each survey.
Now Peanut Labs, which morphed last year from social network Xuqa into a firm that recruits members of other social-networking sites to take surveys, believes it has an answer both for the besieged online-research industry and social media in search of elusive revenue.
By paying respondents in the virtual currencies of their respective sites, Peanut Labs is producing response rates of 29% -- four times the industry average, said co-founder and CEO Murtaza Hussain. He said virtual currency also helps weed out the professional respondents rife in other online research. ComScore has estimated that 50% of online survey responses come from 5% of the population.
A different pool
Because virtual currency is considerably cheaper than the real stuff, research firms and marketers can afford to shell it out liberally, even to people who don't make it through a survey's screening questions or just to keep people involved with a panel between surveys. That eliminates incentives to fudge answers or hunt for new surveys to make money, Mr. Hussain said.
Other panels use banner ads to troll the web for respondents, dangling a chance "to make a living taking online surveys," he said. "The pool we attract is very different, and we found the overlap between our online panel and others is significantly lower than that between other online panels."
Why would people choose 500 units of play money to feed imaginary pets over $5 in cash? Mr. Hussain conceded it puzzles him. But in tests, Peanut Labs has found that 80% of people choose the virtual currency over cold hard cash or $5 iTunes gift cards.
Peanut Labs grew out of Xuqa after Mr. Hussain found he could make more money serving up survey respondents to researchers than anything else. The San Francisco-based firm now reaches 70 social networks and 12 million users. But Peanut Labs doesn't conduct research itself; it funnels respondents to other firms instead.
Bigger than Microsoft?
He said Peanut Labs is the largest revenue generator for Facebook, given the relatively low cost of ads on the site. Facebook didn't return calls for comment, but it's unlikely Peanut Labs could surpass the estimated $75 million in revenue Microsoft is expected to generate this year by reselling advertising (though it's not clear how much the single biggest advertiser pays).
With social-media audiences skewing young and unmarried, Peanut Labs' relevance is limited for many projects. But Mr. Hussain said researchers seeking Gen Y input -- including three movie studios, 30 of the Fortune 100 and about half of the 30 largest online-research firms -- are using the firm avidly to fill out survey pools.
Kristin Luck, president of research firm and Peanut Labs client Decipher, said response rates from its panel are significantly higher than normal, adding, "Beyond that, the answers tend to be significantly longer and more thoughtful."
That may not be saying much. Research firm Burke earlier this year found an average of 14% of online respondents from 20 panels gave contradictory answers to the same question.
The Advertising Research Federation has launched an Online Research Quality Council to address problems with online surveys. Bill Cook, ARF's senior VP-research and standards, isn't sure Peanut Labs or virtual currency will solve all the problems but said Mr. Hussain "has an idea which on the surface sounds very interesting and germane."
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Contributing: Abbey Klaassen