Entrecard has become one of the most active advertising community. Entrecard credit(EC) has also become one of the most popular currency in the website promotion society, people trade ECs for impressions, backlinks, stumbles and everything else related to website promotion. But one side effect is that some people are attempting to make money by trading ECs. This post is going to tell you why you CANNOT get rich by trading ECs and why is it even harmful for the whole community.
The nature of the EC market:
It seems obvious that the EC market volume is becoming larger and larger without limit. The total ECs keep increase as dropping cards, and the system doesn't charge any "tax" for trading.
So, what will happen when more and more people join the community, and more and more people drop full 300 cards?
Let's consider the extreme case: every people drops 300 cards every day. Each drop creates 2 ECs, therefore every people creates 600ECs for the market every day. So, in average, every people will earn 600ECs/day (no matter how they trade adverts).
So, people get richer and richer in ECs. And ECs will worth less and less.
But this is wrong.
There's another mechanism of the system tries to keep the market stable. That is, when people place adverts, the system will temporarily hold the advertising fee. This is very important. Let's see why.
Since everyone receives 300 drops/day in average, the average advertising cost will keep at 600ECs/day. So if all the money are spent in advertising, everyone will expect to receive an advertising income of 600ECs/day in average.
And that is the maximum advertising income they can earn! No matter how many people place adverts on your site! Because the extra money is held by the system.
So, everyone's gross income is 1200ECs/day, when everyone spends at least 600ECs for advertising. And the system becomes stable only when everyone places two adverts per day.
But what if more and more people keep their ECs to trade for money.
First, as less and less people place adverts, the demand will become smaller and smaller.
Second, as less and less ECs are held by the system, the total ECs in the market will get more and more.
Both will reduce the price of ECs.
So, you will NOT get rich by selling ECs.
What do you think?
Thursday, April 3, 2008
Entrecard economics: make money by selling ECs?
Posted by Eric at 12:00 AM
Labels: Entrecard, Ways to make money (questioned)
Subscribe to:
Post Comments (Atom)
Related Posts
Posts
9 comments:
There is little money to be made anymore. The credit sellers truly are idiots. In the beginning they were making $15 per 1000. Then they began undercutting each other. They undercut each other all the way down to $4. Why? Almost all of them have no idea how to do business. Had they allowed the price to stabilize around $10 they still would be making 2.5x the money with no shortage of customers. But such is the nature of greed. It takes no skill to farm credits, and obviously takes no business smarts either.
Equally to blame is Graham Langdon, owner of Entrecard. He allows splogs because his money is made promoting Entrecard. If he had 1000 real blogs and 6000 splogs, all the better for him. Overnight he could restore the value of the credit, and I have faith he will. There are several steps he could take, none of which I ever expect him to do. 1. Freeze the accounts of the splogs. He sees all the credit transfers and could put the fake blogs out of business tomorrow. 2. Stop allowing free hosts like wordpress to use entrecard. Or allow them but do not permit them to transfer credits 3. Prevent credits from being exchanged between world zones. If chinese goldfarmers want to farm entrecredits, limit their transactions to others from the same part of the world. 4. Limit all outside sales of credits and only allow credit exchanges inside entrecard.
That should read "hosts like blogspot", not "wordpress". It's 2am here, sorry for the typo.
I used to think that it's so hard to make Entrecard credits until my credits gone up to 5000, 6000, and so on..
Not everyone can make the time/effort to make credits, unfortunately. Hence why some people prefer to just buy the credits out of the market.
It's interesting to see how the next Entrecard credits exchange system will impact the economy.. As more blogs join Entrecard, I'm sure the values will decrease even more
I don´t really quite get your reasonings from earning 1200 EC´s a day. 1 drop will not make 2 EC´s nor everybody will make 1200 when advertisement is on 600.
Your extreme case is something that will never happen. I can´t see everybody will always reach the max, nor do we all drop on the same cards always.
It is that last bit which is important, not always dropping on the same sites. Just look at the statistics after a certain campaign has run on a blog. there are blogs that will actually return 1 EC per EC cost, but many campaigns only return 1 EC per 4 or 5 EC´s it costs to advertise on their blog.
As with any business model, people tend to do what works for them. Many people in the EC system use it for there advantage, but everybody has different reasons. Some do want to get as many credits, while others use it to encounter other blogs in their category on only keep their dropping for blogs they really like.
It is a demand/offer situation, right now prices are really low, maybe in time they will settle on a higher amount, when the powerdroppers see they don´t get the expected return on the time invested to get all the credits.
Plus, I am sure Graham will find ways to stabilize the market in order to improve his system.
Thank you all to your comments!
To Turnip:
This problem is really hard to solve. If credit transfer is restricted, the current EC based website promotion market place will die, Entrecard will lose one of its important significances. I agree with you that the website should take more steps to ban those nonserious blogs, but free host blogs are not necessarily be nonserious. I suggest a better blog review team to filter out thost nonserious blogs.
To Michael:
Yes, a lot of people developed efficient ways to drop cards, some claimed that they can drop 300 cards within 15 minute! And making EC is becoming easier now.
With regard to that exchange system, I think it needs more regulation. Like Turnip said, the price of EC is dropping very fast, if that system runs, I think it will even drop more. But maybe it will go to some sort of balance one day. I don't know.
To Mirjam:
The point of my assumption is to predict the extreme case. by "Each drop creates 2 ECs", I mean create 2 ECs for the whole market (1 for the dropper, one for the receipient). All of my anaysis is based on macro scale.
I admit that there must be some strategy issues that I haven't considered in my analysis.
I am also expecting Graham to find ways to improve this system.
I agree with Turnip. What's the point of hoarding credits if you're just going to undercut the price? Their essentially killing the market.
I did learn that you get what you pay for in the Entrecard world. I paid for a cheapie graphic design over a week ago and heard nothing from the seller. I should have just paid the extra couple of hundred credits and went with a more established sellers. Where the heck is the refund button? Lol.
I am still new to Entrecard (just joined this week). Thanks for the informative post. It gives me a little more insight to Entrecard.
Eric-
I'm also not exactly sure how dropping one 'Card equals two for the dropper. I can't see "hoading" EC, but conventional wisdom would say that, the fewer credits available, the more valuable they become [Of course, this assumes a limited supply of EC, which is not the case].
If you have time, check out my three posts from last month on the EntreCard situation at:
http://the-blog-lab.blogspot.com, a site which, like yours, is provided with FREE hosting, but is as serious as anyone else's
To dani:
I got a great deal on graphic design, too. My previous Entrecard logo was so ugly! But for the shop, I don't even know how to post an item for sale. Anyone can tell me?
To Concho:
Welcome to Entrecard world! I've been here for just a little less than a month, but I can't describe how much benefit I get from it. I will say it is a great booster for start up bloggers.
To mike riley:
Well, I didn't mean that dropping one card will give the dropper 2ECs, but will give the whole system 2ECs, one for the dropper, the other for the recipient. your three articles are very informative, btw.
Post a Comment