The Business Model of Couchsurfing.org

Social Media & Consumer Driven Marketing

Prof. Anandakuttan B. Unnithan

The Business Model of

Couchsurfing.org Gerhard Pilz – IE 14/06

IIMK | SMCDM| The Business Model of Couchsurfing.org | Gerhard Pilz

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Table of Contents

1 Introduction to Social Media ........................................................................................ 4

2 Couchsurfing.org .......................................................................................................... 4

2.1 The Concept of Couchsurfing .............................................................................................................................. 5 2.2 Couchsurfing Worldwide ..................................................................................................................................... 6 2.3 Couchsurfing is Free ............................................................................................................................................... 6

3 Business Model ............................................................................................................ 6

3.1 Income from Donations ........................................................................................................................................ 7 3.2 Income from Verification ..................................................................................................................................... 7 3.3 Other Income ............................................................................................................................................................. 8 3.4 Income from Surfing – the Impossibility ....................................................................................................... 8 3.5 B Corporation ............................................................................................................................................................ 8

4 Conclusion & Outlook ................................................................................................... 9

Resources ........................................................................................................................ 10


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List of Figures

Figure 1: Facebook Users by Age as of March 2011 .............................................................................................. 4 Figure 2: Couchsurfer Map ......................................................................................................................................... 5 Figure 3: Main Characteristics of a B Corporation ................................................................................................. 9

List of Tables

Table 1: Facts & Figures about Couchsurfing.org .................................................................................................. 5 Table 2: Revenue Structure of Couchsurfing.org in 2009 ...................................................................................... 7


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1 Introduction to Social Media

Social media platforms and social networking sites resound throughout the land. Since the foundation and

upsurge of Myspace, Twitter & Facebook, there seems to be no possibility of getting around these sites.

In the case of Facebook today it even seems odd not to have an account, and the user base extends far

beyond the age groups that used to be in online social networks before, i.e. teenagers and people in their

early twenties. In fact, when looked at the age structure of Facebook users, the majority now is age 26 or

above, and one out of eight users is 45 or older, irrespective of gender (see Figure 1).

Figure 1: Facebook Users by Age as of March 2011

Source: http://www.kenburbary.com/2011/03/facebook-demographics-revisited-2011-statistics-2/

While the average user of Facebook has 130 friends (Facebook 2011), a very recent study by Matthew

Brashears from Cornell University found, that between 1985 and 2010 the number of truly close friends

has decreased from about 3 to an average 2 (Yahoo News 2011). While there has been extensive study on

the issue of online friends and communities (Cole & Griffiths 2007, Nardi & Harris 2006, Wolak et al.

2003) the question remains if and how connections from online social networks are transferred to an

offline, personal encounter with other persons. One such way is provided by the social platform

Couchsurfing.org, which connects people worldwide who share a passion for travelling and meeting other

people.

2 Couchsurfing.org

The concept of Couchsurfing.org originates with Casey Fenton back in 1999 (Couchsurfing.org 20111),

while the website and portal itself went online in 2004. Since then the user base has grown to more than

3.4 million users (as of 10th November 2011) who come from literally all over the world (see Figure 2 on

top of next page). The majority of Couchsurfers can be found in Europe (51.5 %), followed by North

America (26.3 %). South America (6.4 %) and Central- and South-East Asia (together 8.3 %) are catching

up in this respect.


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Figure 2: Couchsurfer Map

Source: http://www.couchsurfing.org/couchsurfer_map

To get a better idea about Couchsurfing the most important facts & figures are summed up in the

following table (all data retrieved from www.couchsurfing.org/statistics.html on November 15, 2011):

Criteria Fact/Figure

Total number of Couchsurfers 3,450,924

Top 3 Couchsurfing Nations United States (729,473), Germany (324,779), France (293,449)

Top 3 Couchsurfing Cities New York (64,332), Paris (59,821), , London (50,331) with a total

of 84,119 unique cities represented

Is Couchsurfing Male/Female? Male (50.5 %), Female (42.7 %), Several People (6.4 %)

Average Age 28

Most Spoken Languages English (72 %), French (18.7 %), Spanish (17.2 %) with a total of

361 unique languages represented

Table 1: Facts & Figures about Couchsurfing.org

2.1 The Concept of Couchsurfing The vision behind Couchsurfing.org is “a world where everyone can explore and create meaningful

connections with the people and places they encounter.” (Vision Statement Couchsurfing.org;

Couchsurfing.org 20112). This statement is supported by the mission statement to “create inspiring

experiences”, which means that the goal of Couchsurfing is to connect people and places worldwide to

better understand cultural diversity and create a global community (Couchsurfing.org 20113).


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The basic concept Fenton came up with in 1999 was an online platform where on the one hand people

could offer their couch (couch basically refers to any kind of sleeping surface here) for overnight stays and

on the other hand could search for a place to stay. The idea came to Fenton when he had booked a cheap

flight to Iceland and sent e-mails to 1,500 students in Reykjavík asking if he could sleep on their couch.

After getting many replies of students telling to show him “their” Reykjavík and spending the weekend in

Iceland he decided to ask 3 of his friends (Daniel Hoffer, Sebastian LeTuan, and Leonardo Silveira) to

cofound Couchsurfing (Sunderland 2009).

2.2 Couchsurfing Worldwide As can be seen from Figure 2 on the prior page, Couchsurfers now are spread all over the world, offering

places to stay in metropolitan areas like New York, and areas as remote as the Antarctica. The

internationality of Couchsurfing was important from the very beginning and can be interpreted as a main

reason why many volunteers worked on the improvement of the site from the beginning. Two more

facets that internationality brings along and are important concerning Couchsurfing are variety in terms of

culture and legal systems.

While cultural variety by Couchsurfing is seen as one of the main benefits (Couchsurfing.org 20112) of the

platform it also accommodates the risk of cultural misunderstandings and the highly dependable variable

of motivation for being a user of the platform. Variety in terms of legal systems plays an important role

when it finally comes to people surfing at another Couchsurfers place – e.g. thinking of prosecution when

a crime happens. This issue for example requires Couchsurfing.org to store all messages sent through the

platform.

2.3 Couchsurfing is Free One of the prime characteristics of Couchsurfing is that the Couchsurfing host is not allowed to charge

money from the person who is surfing. However, the person surfing another place may bring a small gift

or show an act of kindness such as cleaning the dishes (Couchsurfing.org 20114).

Without having discussed the business model, this fact is a crucial point that has large influence on it. The

service of Couchsurfing.org as a platform is and will always be for free (Couchsurfing.org 20114). Thus,

the fact that Couchsurfers do not charge each other for hosting makes it impossible to create revenue

from the original idea.

3 Business Model

When founded, Couchsurfing.org was a non-profit organisation solely dependent on the contributed

support from its users through donations. This model has not changed since then with the majority of


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revenue still coming from direct contributions. Table 2 below gives information about the income

structure as of 2009.

Income In US$ In %

4000 • Revenue from direct contributions

4010 • Contributed support Donations including verifications

1,162,287.69 99.45 %

5300 • Revenue from Investments

5310 • Interest-Banking Bank related interest and short term investments

2,008.54 0.17 %

5400 • Earned Revenue – Other Any revenue earned from sources other than donations and interest

5411 • Non Inventory Sales Commission Merchandise Sales

1,711.16 0.15 %

5460 • Other Revenue Miscellaneous Income

2,635.06 0.23 %

Total Income 1,168,642.45 100.00 %

Table 2: Revenue Structure of Couchsurfing.org in 2009 Source: http://www.couchsurfing.org/organization_finances_2009.html

3.1 Income from Donations As can be seen in Table 2 virtually all income comes from direct contributions that are either donations or

revenues from verification. Running costs for maintaining servers and further development of the website

have to a large part been covered by donations, similar to Wikipedia. Thus, Couchsurfing.org relied on the

goodwill of its users and supporters.

3.2 Income from Verification The other main source of income comes from the verification process that Couchsurfing.org offers. This

process is a quite simple background check of the users and involves 3 steps. First, Couchsurfing requires

the user to save name and address with the user information. The next step is to confirm identity with a

secure form of payment (credit card, bank transfer) of $ 25 (Wright 2008). After this step is successfully

completed, Couchsurfing.org will send a postcard to the home address of the user. The postcard holds a

verification code that is to be entered in the third and last step of the verification process.

When users get verified a logo will indicate this status on their profile. On the one hand this is one way in

which Couchsurfing.org creates income, on the other hand it is done for safety reasons, as the verification

makes sure that the user really is the person s/he indicates to be. As of November 15, 2011 the number of

verified Couchsurfers is 279,536, which corresponds to 8.1 % of the user base.


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3.3 Other Income Other income concerning Couchsurfing.org at the moment is virtually inexistent (see Table 2). Although

the income from merchandise is believed to have risen in 2010 there is no disclosure by Couchsurfing.org

supporting this assumption.

3.4 Income from Surfing – the Impossibility As mentioned earlier, Couchsurfing.org offers the services of its platform for free and urges its users not

to ask for money when they are hosting another Couchsurfer. Else, a user doing so will be banned from

the platform. This basic principle has an extensive impact on the business model of Couchsurfing.org. If

kept in perspective travelling platforms like Expedia do nothing different from the service that

Couchsurfing offers – they connect the host with the guest (i.e. the surfer). The only difference is that the

host in this case charges money for his offer. Thus, by the core idea of forcing people not to charge for

their offer, Couchsurfing.org foregoes the opportunity to create revenues from commission.

3.5 B Corporation In August 2011, Couchsurfing.org announced to change its business structure from that of a non-profit

organization to that of a so-called B corporation. “Certified B Corporations are a new type of corporation

which uses the power of business to solve social and environmental problems.” (B Corporation 2011).

According to a letter of Fenton to the Couchsurfing community this step was taken mainly because

Couchsurfing needed a new structure to cater to all the various needs arising around the platform. The B

Corporation format was chosen to fulfill the structural needs of the growing network. An earlier attempt

for certification of Couchsurfing as a 501c(3) non-profit organization had failed with the US government ,

because hosting and surfing were not accepted as charitable activities (Fenton 2011).

B Corporations get certified by the non-profit company B Lab, which addresses the following 2 problems:

1. Current corporate law makes it difficult for businesses to take employee, community, and

environmental interests into consideration when making decisions

2. The lack of transparent standards makes it difficult to tell the difference between a 'good

company' and just good marketing

The main issue of a B Corporation is not profit-related such as with a non-profit organization but stands

on 3 pillars, which are social and environmental performance standards, higher legal accountability

standards, and building business constituency for good business (B Corporation 2011; see Figure 3).


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Figure 3: Main Characteristics of a B Corporation Own depiction according to http://www.bcorporation.net/about

The structural change from a non-profit to a B Corporation made it possible for Couchsurfing to raise

$ 7.6 m of funds with 2 venture capitalists, both who are thought to be socially responsible. This funding

round enables organizational changes within Couchsurfing.org and the hiring of personnel for the

proposed expansion by Hoffer (Lacy 2011).

4 Conclusion & Outlook

The platform Couchsurfing.org has seen the transformation from a non-profit organization that relied on

its donors and the verification process as a second source of income, to a for-profit B Corporation that

enabled the organization to raise funds for its further development.

Although the cash injection will do good to Couchsurfing in terms of securing maintenance and

accelerating the development of new features one question remains: Can a non-profit organization that

was carried and developed by its users be turned in to a for-profit corporation without losing its

community character and the contribution of users to development? This question can not be answered

by now as too little time has passed since the changes were made. However, there is already protest

against the change among the user base as they have contributed money and code to the website over

several years (Johnson 2011). It will therefore be interesting to see how Couchsurfing further develops as

a B Corporation and/or there will be spin-offs that will continue to follow the original idea with a non-

profit model.

Meet comprehensive and

transparent social and

environmental performance

standards;

Meet higher legal

accountability standards;

Build business constituency

for good business.

B Corporation


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Resources

B Corporation 2011, B Corporation – What is a B Corp?, available ONLINE:

http://www.bcorporation.net/about [accessed November 16, 2011]

Cole, H. & Griffiths, M.D. 2007, Social Interactions in Massively Multiplayer Online Role-Playing Gamers, in:

CyberPsychology & Behavior, Vol. 10, Issue 4, pp. 575-583.

Couchsurfing.org 20111, Couchsurfing – Our People, available ONLINE:

http://www.couchsurfing.org/our_people/Founders [accessed November 10, 2011]

Couchsurfing.org 20112, Couchsurfing – Vision, available ONLINE:

http://www.couchsurfing.org/about.html/vision [accessed November 15, 2011]

Couchsurfing.org 20113, Couchsurfing – Mission, available ONLINE:

http://www.couchsurfing.org/about.html/mission [accessed November 15, 2011]

Couchsurfing.org 20114, Couchsurfing – CS Basics, available ONLINE:

http://www.couchsurfing.org/about.html/faq [accessed November 15, 2011]

Facebook 2011, Statistics, available ONLINE: https://www.facebook.com/press/info.php?statistics

[accessed November 10, 2011]

Fenton, C. 2011, Couchsurfing – A letter from co-founder Casey Fenton, available ONLINE:

http://www.couchsurfing.org/news/article/145 [accessed November 16, 2011]

Johnson, B. 2011, After going for-profit, Couchsurfing faces user revolt – Tech News and Analysis,

available ONLINE: http://gigaom.com/2011/09/01/after-going-for-profit-couchsurfing-faces-

user-revolt/ [accessed November 16, 2011]

Lacy, S. 2011, CouchSurfing Raises $ 7.6 m; Will Users Cry “Sell Out”? | TechCrunch, available ONLINE:

http://techcrunch.com/2011/08/24/couchsurfing-raises-7-6-m-will-users-cry-sell-out/ [accessed

November 16, 2011]

Nardi, B. & Harris, J. 2006, Strangers & Friends: Collaborative Play in World of Warcraft, available ONLINE:

http://dl.acm.org/citation.cfm?id=1180898 [accessed November 10, 2011]


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Sunderland, P. 2009, CouchSurfing: Making a Global Connection | Delta County Independent, available ONLINE:

http://www.deltacountyindependent.com/back-page/8312-couchsurfing-making-a-global-

connection.html [accessed November 15, 2011]

Wolak, J., Mitchell, K.J. & Finkelhor, D. 2003, Escaping or Connecting? Characteristics of Youth who Form Close

Online Relationships, in: Journal of Adolescence, Vol. 26, Issue 1, pp. 105-119.

Wright, T. 2008, 10 Ways to Improve Your Couchsurfing Odds | Matador Network, available ONLINE:

http://matadornetwork.com/notebook/10-ways-to-improve-your-couchsurfing-odds/ [accessed

November 15, 2011]

Yahoo News, 2011, More Facebook Friends, Fewer Real Ones, Says Cornell Study, available ONLINE:

http://news.yahoo.com/more-facebook-friends-fewer-real-ones-says-cornell-154709141.html

[accessed November 10, 2011]

The Business Model of Couchsurfing.org

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