Hayward, Calif.-based AllAdvantage said on its Web site that it has pulled programs that paid people to surf the Internet--thereby ensuring they viewed advertisements--because "the advertising and capital markets have changed so fundamentally that it is now impossible to continue our infomediary incentive programs and benefits."
AllAdvantage's site said the company will not sell, lease, distribute or disclose personal information to third parties. Sweepstakes winners and members who have reached the payment threshold will be paid.
According to Peggy O'Neill, an analyst at Nielsen/NetRatings, AllAdvantage may be planning to license its back-end technology to other Web businesses.
AllAdvantage could not immediately be reached for comment.
Since it was founded in 1999, AllAdvantage had sought to offer daily sweepstakes, promotions or cash to Web surfers who allowed the company to collect personal data about their online shopping habits and who used its Web browser. Advertisers then paid the company to reach people interested in their products.
Although many sweepstakes Web sites received a big boost in Web traffic in September 2000, AllAdvantage had become plagued by difficulties by the end of the year. Nielsen/NetRatings said the number of visitors to AllAdvantage's Web site significantly dropped; traffic in June hit 2 million visitors but fell by December to 547,000 visitors.
The company went through several rounds of layoffs in the past year. In November, AllAdvantage cut 150 employees; in July and August, the company shed nearly 160 employees in efforts to trim expenses.
As recently as October, AllAdvantage said its business model was sound. Analysts, however, were unfazed by the company's demise.
"I'm not surprised" about the Web site shutting down, said Christopher Todd, an analyst at Jupiter Media Metrix. "I think we saw it coming for quite some time."
To avoid being swept into the dot-com downdraft, Todd said sweepstakes sites must focus their efforts on serving advertisers as well as consumers. By paying people to surf, analysts said companies such as AllAdvantage were working from a shaky business model.
"Magazines don't pay people to read a magazine," Todd said. "They charge people because paying people to look at advertising is not necessarily an effective model."