Smug Edition

By , 3 June, 2010, 5 Comments

Since I started writing professionally in 2005, I’ve covered a pretty wide terrain: from tech to media to energy to regulation to macroeconomics to international geostrategy. The upside of that is the rich and diverse set of experiences I’ve had. The downside is that I rarely stay on a beat long enough to see a company or person I’ve followed through their career.

This blog is great fun for me because I get to write about all my beats at the same time, to keep my fingers in multiple pies even when, professionally, I’m covering just one or two.

Today, I learned that Lending Club, a peer-to-peer loan site has hit the 10 million dollar mark in loans, secured its Series C round of funding and started to tap top talent from other e-businesses. I haven’t written about social media in a while, but way back in 2007, I wrote about Lending Club for BusinessWeek, where social media was my primary beat. I said then:

Too many companies still see applications as marketing rather than as new business. They bring users to an application either to advertise to them or to build a connection they hope will subsequently send users off Facebook and to their main business—a company Web site, say, or its online store. Instead, companies should be trying to make the application into a self-sustaining business that generates revenue through the service it provides on Facebook…On Lending Club, a person-to-person lending company that launched via a Facebook application in May, the social component is at the center of its business model. Borrowers load the application to meet up with lenders from within their existing Facebook networks and social groups. They then negotiate rates directly. Once an agreement has been made, they head to LendingClub.com, based in Sunnyvale, Calif., to enter bank account details, so funds can be transferred directly between accounts. Lending Club takes a small cut, up to 3%, of each loan. Says LendingClub CEO Renaud Laplanche, “Person-to-person lending works best in an a environment where people feel connected to one another, lending to friends and friends of friends.” He also claims that peers trust peers to give better rates than a bank. So far, the site has attracted 13,163 users. With its 3% transaction fees, Laplanche estimates that by the end of August, the company will have moved $1 million since its June launch.But the revenue for the company in the same three-month interval is only $30,000. Given the minimal costs of maintaining the Web site and its relatively small staff of 21 people, this may be enough for now, but as the application grows, its infrastructure costs will expand. Raising the company’s commission, however, would quickly jeopardize its value proposition to users.”

Firstly, I’m ashamed at how poor my prose was back in the day. Secondly, I was wrong about some things (LC did manage to get users from FB to another, independent site). But I was right about more: LC succeeded because it built the ‘social’ into its core model, and did not treat it as a marketing gimmick. And it remains pre-profit because raising its commission would undermine its appeal.

I wrote up LC as part of a feature on businesses tapping the FB app system (which had just launched), and I named it the best of the bunch. That was overkill, obviously. But I did pick a winner. And that makes me feel smug.

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5 Responses {+}
  • smw

    How poor your prose was back then? Hello? What is this self-castigation?

  • Preppy McPrepperson

    "Given the minimal costs of maintaining the Web site and its relatively small staff of 21 people, this may be enough for now, but as the application grows, its infrastructure costs will expand."

    Clunky sentence. I'm not pleased with it.

  • smw

    Ok, it's overly long, but it's not horrible. My bugbears are words like "Firstly…secondly…thusly…." Cut the -ly.

  • Preppy McPrepperson

    Yeah, good point. I should have a post-it somewhere on my laptop that reminds me about my faulty use of adverbs.

  • shazia

    hey only us budhas are supposed to use the "I called it" phrase, but u were always a wise one

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