Well-heeled startup using fictional money to change Internet economy
Robert Rocha
Province
Capazoo’s creative director, Guime Oudro, wants to shake up the world of online networking. – CNS
MONTREAL — Silicon Valley wisdom holds that a great tech company starts small — by tradition in a garage — and slowly grows as it proves itself.
Google started that way. So did Apple and the social-network darling Facebook. So are thousands of startups worldwide that want to make their fortunes on the Internet.
But what if one starts big from the get-go? What if an entrepreneur commands millions of dollars and throws it all into a company with a hundred employees, rooms full of computers, and very few clients?
Is this a reckless return to the dot-com bubble days? Or is it a bold charge at Internet notoriety?
Capazoo is a new Montreal-based social network that fancies itself the next stage in the evolution of social networking, and it’s betting on the latter. It wants to unseat MySpace and Facebook as the reigning champs of online socializing.
And it has $25 million from pro-athlete investors and a well-known entertainment brand behind it. Its rationale: Social networks are nothing without their users.
It’s individuals who add the funny pictures, videos and blog ramblings that make other users stick around. So shouldn’t users be compensated for the popularity of their content?
To this end, Capazoo’s model offers two significant twists: Users who post popular content can profit from their contribution — but only if they pay a yearly fee.
“There’s this growing backlash that sees corporations making money on the backs of content producers,” said Robert Samuels, general manager of Capazoo, taking a swipe at YouTube and its cohorts that are capitalizing on user-generated media. “People are basically saying: ‘I want to be appreciated, not taken advantage of.’ “
On the surface, little sets Capazoo apart from others. Users create profiles, share pictures, videos and music, and keep personal blogs.
Its grand idea is to foster a micro-economy in which users “tip” each another with a fictional currency called the Zoop. New users are given an allowance of Zoops they can give away at will. They can then buy more Zoops at a penny each.
This, founders claim, will encourage users to post interesting content that others will want to tip. Good content will attract more users. Professionals will want to promote their videos and music there.
That’s the theory.
Capazoo gives users the option to convert their accumulated Zoops into real cash. But to do that, you have to be a paying member, at $25 to $35 a year, depending on the package.
These VIP members receive a debit card carrying their Zoop balance, which they can use at most bank machines.
This melding of virtual and physical worlds will be Capazoo’s greatest test.
If its big bet succeeds, Capazoo will surprise a lot of skeptical observers in the tech world.
“Starting small is definitely the way you start these days, especially if you don’t have an edge in the marketplace,” said Barry Parr, an analyst with Jupiter Research.
“I’m not saying it’s impossible to beat these guys [MySpace and Facebook], but there are few historical precedents to show it can be done. Once a leader is established, it’s very hard if not impossible to do it.”
Samuels dismisses the criticism.
“We’re not your average startup,” he said. “Our growth plan is significant, we have to have the infrastructure.”
Capazoo’s spending spree includes $5 million for Web hosting services, an amount deemed absurd by startup standards. “In a few years, someone else will come up behind us, so we have to prepare for that, too,” Samuels explains.
To its critics, Capazoo’s biggest red flag is that it’s funded almost entirely by private individuals. The company’s co-founder and president is Grant Carter, a former defensive end for the Alouettes who married a CBC reporter and moved to a suburb of Atlanta to become a banker.
Major investors include NFL, NHL and NBA personalities.
National Lampoon, the satirical magazine popular among the college set, last week took a minor stake in the firm.
© The Vancouver Province 2007