It’s A Scam!
Tag Archive for 'Finances'
Today I noticed that the CouchSurfing 2008 finances have been updated for the whole year. I whipped up a graph to show where the money goes.
Employee related expenses account for 62.8% of total expenses. In that figure I’ve included salaries, tax, payroll fees, rent, travel, food, and staff development. Admin expenses includes anything not in hosting / verification. Hosting is server costs plus telephone / communication. I suspect most of the telephone / communication expenses belong in Employees, but I left it there to be on the safe side. Finally, verification, the source of 99% of the income, costs only 6% of total expenses. I included printing and mailing in the verification cost.
The numbers are:
Employees: $405’440.59
Admin Expenses: $116’901.33
Hosting costs: $86’723.33
Verification: $36’589.83
It costs more than $400k to staff CS Inc with how many employees? Five? That would be a cost of $80k per person per year.
Hopefully this helps to understand where the money goes.
“I hear servers and domain names are really expensive to maintain, and that some of the ones working on it, especially the full-time employees, are really hard-working, so deserve to be on a payroll. That fact is hard to disagree.. But at the same time, i wasn’t happy to hear that some especially coveted members in the core CS circle get their flight costs to get to the collective covered by the money raised from our donations. And that, just to get someone they really like having around to join them and be their private cook!”
Regarding finances, check for yourself, the finances of the first quarter of 2008 are available. Salaries are the biggest post on the expenses side. That doesn’t include flights and other costs of Collectives. Less than 10% of the income is used for servers and there was a surplus of almost 60.000 US$.
| 7220 • Salaries of Professional Staff |
19,384.68 |
| 7250 • Payroll Taxes |
1,955.63 |
| 7260 • Workers Comp |
139.02 |
| 7515 • Bookkeeping Fees |
1,512.50 |
| 7520 • Accounting Fees |
449.12 |
| 7525 • Bank Service Fees | 8,221.52 |
| 7530 • Legal Fees | 9,867.59 |
| 7540 • Web/ Internet/ Host Fees | 2,960.59 |
| 8110 • Office Expenses/ Supplies | 3,195.01 |
| 8130 • Telephone & telecommunications | 2,208.03 |
| 8140 • Postage, shipping, delivery | 5,730.80 |
| 8160 • Equip rental & maintenance | 13,923.46 |
| 8170 • Printing and Copying |
14.55
|
| 8210 • Rent, Parking, and other occupancy |
4,777.81 |
| 8215 • Building Repair and Maintenance |
215.00 |
| 8220 • Utilities |
917.73 |
| 8305 • Auto/ Fuel Expense |
48.31 |
| 8310 • Travel | 6,223.67 |
| 8320 • Meeting Expenses |
798.64 |
| 8330 • Meals/ Groceries | 10,895.37 |
| 8520 • Insurance – non employee |
138.60 |
| 8540 • Staff Development | 3,589.10 |
(note: meals and groceries were bought in Thailand!)
“I take it that back when CS was a more grassroots thing (correct me if i am wrong), all collective volunteers had to find their own way of getting to them. And that all the work was done pro-bono, even those who were working on improving CS on a full-time basis. In such a case, i wouldn’t think it’s fair that there are people on the payroll now, but those who helped cs in the initial startup days don’t get shit for all that they have contributed… “
CS never was very grassroots. PEople (like me) just tried to move it there. Casey has received a 2000 US$ per month salary ever since there was money coming in. It’s always been under control of Casey, and later Casey and his close friends.
I think paying some people is fine. Though, only people who are really needed, e.g. system administration to keep the site up 24/7, and further, let the community decide where their money is used. Whenever there’s a donation, add some checkboxes where you can give options where the money can go after the basics (administrative stuff, server costs, basic legal costs) have been covered (e.g. none, publicity, collectives, salaries for casey’s friends, food and lodging for groupies).
And don’t pay 2000 US$ per month plus expenses plus flights plus food and lodging. During a stay at a Collective it’s extremely easy to not spend more than 300 US$ per month…
Apart from the flights to and away from New Zealand (800 US$) I hitchhiked to the three CouchSrufing collectives I worked at. The laptop I bought to work on CS (1000 US$) broke quickly after I stopped volunteering, because of an extremely ridiculous non-disclosure agreement was “leaked” that does not allow working on any similar project (e.g. Wikitravel or other social networks).
BeWelcome will take time to grow. The BeVolunteer organization is already far ahead of anything else in hospex world in terms of flexibility, transparency and democracy. The software is about to follow. 3500 members is already a large pool of active people to connect with.
And note that BeWelcome now has (alpha stage) functionality where all members can verify members, for free. And it’s ID card or passport verification, not just address verification (which can very easily be falsified).
My idea about couchserfing was that it could be used as a vehicle to do much more than just hospitality exchange for college aged low-budget travelers. With so much money coming in and such a huge community behind it it would be extremely simple to set up much more sharing and society enhancing projects. E.g. a good friend of mine who also attended the New Zealand Collective is setting up groundcrew.us. If it would have been done from the inside of CS it would have been big by now. Though, on the other hand, I’m extremely happy that I didn’t accept Casey’s offer to host Hitchwiki.org with CouchSurfing…
As posted in the politics and policy group
As Norbert points out here, the LT’s apparent unwillingness to make haste with the 501c3 application for tax exempt status, as well as their unwillingness to publish corporate bylaws or make drafts of these available for discussion, may well be construed as an (attempt at) fraud, because donations and services are and have been obtained under the (currently false) pretense that CS is a charity.
Needless to say, this renders CS extremely vulnerable to all sorts of liability suits, interestingly of the kind that is likely not to be covered by the ToA. Basically, any user who has donated volunteer work or money (besides the verification fee) to CS can claim that he has been the victim of this fraud; add to this the easy access to legal representation in the US (due to no cure, no pay) and Norbert’s prediction that liability is likely to extend to all natural persons working in, and owning CS, and you can easily grasp the size of the time bomb Casey’s currently sitting on.
And how do you reckon that Casey, Jim and Mattthew were to produce the funds needed for compensation if this happens? Precisely, from the sale of CS to a commercial third party, which is entirely within Casey’s right…
No, Couchsurfing.com is not in financial trouble… Yet.
On June 19th, I published a analysis of the CS finances (sheet) , predicting that CS (technically it’s actually just Casey) would be able to hire 3 to 5 extra “employees” by the end of this year. It happened a lot quicker than I thought however (Jim Stone and Mattthew Brauer got hired as well as a thus far unannounced and unnamed developer). This is the part where I say “See! i was right!” and continue speculating.
Let’s have a look at where this money comes from. As far as we know, there is only one source of income for Couchsurfing: donations. This is logical, since there are no banner ads, no paid subscriptions or anything and Couchsurfing has been unable to register as a 501(c)3 organisation in the US so far, which excludes the organisation (actually, just Casey and his friends, since there is no officially elected board) from US government money.
But! Surely people that (mostly) like to travel cheaply cannot afford to collectively donate over 150.000 $ a year (projected for 2007)?!? You’re right. They aren’t donating, they are “getting verified” at 25$ per person (or less if you can prove you live in a poor area of the world). Verification is essentially proving to CS that you are who you say you are and nothing talks like money. If it was just verification they were offering, money wouldn’t need to be involved. I’ve heard of CS meetings where you could bring a passport and 25$ to get verified by an admin. Why would you need to pay if you could just show your passport and be done with it? Because, of course, this verification/donation scam is the main revenue stream for CS. Yes, a scam. If CS was genuinly interested in getting people verified for “security reasons”, a showing of passports would be more than enough. However, I have thus far never met anybody who was able to get verified without paying cold hard cash. The administrative cost of sending you a “verification code” is also negligable, a 2$ “donation” would be much closer to the actual need since all the physical posting is done by volunteers anyway.
In and of itself, this verification/donation scam is mostly harmless, even if the “sliding scale verification” is pretty cynical if you really think about it. (We’re asking people to pay as much as they can affor, so they can “prove” their identities and get the same benefits as those who can afford it, how’s that for intercultural understanding.) I mean, even I fell for it and payed to get verified. Then why is it such a problem?
The trouble is that verification money scales directly with new subscriptions to CS. This in turn means that CS can only continue to afford paying people like Jim Stone if people keep registering (and verifying) at the current rate. This definitely explains why there is so much “verification spam” on CS (visible when you haven’t “verified/donated” yet). If at any point the amount of new users starts to slow down, verification/donation money will automatically slow down as well. If CS ever hits the peak of possible subscribers, income will fall, rapidly. Subsequently, Couchsurfing cannot afford it’s employees anymore and soon it will be in real trouble.
How likely is this? Well, Hospitality Club seems to have hit it’s high point already, with subscriptions slowing down significantly. We can only assume that it’s only a matter of a year or 2 (at the most) before the same thing happens to CS, since both organisations tap more or less the same userbase.
At that point – as they say – things will start falling apart. CS will be practically forced to work with volunteers again at the “top of the food chain”, which no doubt will cause enormous amounts of stress on the tightly formed group that is privately running CS right now. Note that Casey is not preparing “his” organisation for this. It doesn’t appear that any of the donation money is being saved (for instance by not hiring Jim and Mattthew but opening a savings account) and long-term thinking doesn’t appear to be a strength of the organisation anyway. Couchsurfing is technically running on “borrowed” time, on finances that will only last as long as new users keep coming in.
An organisation like CS almost has to run on volunteers, unless it drastically changes its business model. So, either we see banner ads, “payed subscriptions”, “golden accounts”, regular “donation drives” or whatever or we’re going to see a financial breakdown. When that happens, and it most likely will, we’ll be here to pick up the pieces.
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