Lead developer Gavin Andresen was the originator of the idea, and until late 2012 his site was giving away whole bitcoins in some cases. Look at this transaction, for example. In today's value, 18 BTC is worth over $4,000. Not too shabby. If you're interested, here is a list of some of the last payouts Gavin's faucet gave.
Since then, and even as the price of a Bitcoin has soared into the hundreds of dollars, faucets have grown into an industry all their own. Some are themed, others are simple, and far too many are either broken (never pay out) or advertise for obvious scams, like the April Coin Ponzi. There are hundreds of Bitcoin faucets at the moment, and new ones coming online every month. In this crowded field, an entrepreneur has to do a lot to be unique. Modern faucets require a certain amount of advertising revenue to be profitable. Believe it or not, it is a model that can work. To stand out, they have to do something that no one else is doing. Most don't care about standing out; it should be mentioned. Most are content with whatever traffic they get, confident that if it all goes wrong they can simply not make the payouts.
One such unique faucet caught this writer's eye recently, PaidBooks.com. This site allows you to earn a small amount of Bitcoin for reading classic books on the site. Every ten minutes, it pays into your balance, and at the end of the week, your balance is sent to your Bitcoin wallet. This is unique in the faucet space, and so CCN decided to get UK-based Daniel D'Alien (who will be coming out with his real identity before too many months have passed) on the line for an interview about the business model of giving away money.
Difficult to Monetize
Daniel started his first faucet, Bitcoin Aliens, about nine months ago. He says it was rough at first, and not just because he bought into Bitcoin at peak prices. Giving away money is a tough business model to master, and for the first while he lost money at it.
I saw all the positive news about Bitcoin and I knew that I wanted to get involved. My background isn't technical, I'm not a developer, I can't make an exchange or technology that fits on the block chain, but I knew that I could blog about it. I could write about it and get other people interested in it, educate people I guess. So my goal is to be the blogger and the interviewer […] And that sort of wasn't really profitable.
That led me on to faucets. […] It's quite hard to monetize. In my opinion, it's a really baby niche, it's as if gold investing were just starting or stock trading or commodities trading were just getting started. People don't know what to do yet, there's isn't any guides to it. There isn't any products to sell. So then I saw the faucet model, and I decided to give that a try. They looked to be high traffic websites with adverts on them, […] so I tried that, and eventually scaled it into a couple of quite big faucets.
Later on, he realized that he could engage the user on a deeper level than just simply having them click a few buttons for a reward. He thought about (and is still considering) doing a video-based faucet similar to PaidBooks, but first he has to see PaidBooks through. He says it costs him a few grand a month at present because he is paying folks to add the books to his website. They tried an automated way at first, but it had a lot of problems. He's also having to avoid content that is high in disk space, because his faucets overall are incredibly high traffic affairs, with some users coming back as often as they are allowed to.
Other cryptocurrencies have also jumped onto the faucet game, with a wide array of alt-coins being available through sites like MultiFaucet.tk. Daniel estimates that he is the third largest faucet owner in the industry, with the guys who own Bitcoin Zebra and FreeBitco.in presently ruling the roost. It's important to note that those folks have been in the business quite a bit longer, and at least in the case of Freebitco.in, they have no discernment about the advertisements they run. On this matter, Daniel said he is very conscious.
I think [faucets] definitely get a bad reputation, and there is a bit of crap out there. […] I see the real dark side of Bitcoin from this view as well, because you need the advertising money and it's good to have the advertising money in Bitcoin, but then someone will advertise a Ponzi on my website and I've got to sort of monitor it and check on it and get rid of it. Some of the ad platforms – the whole economy in Bitcoin, even on this micro level where you can buy and sell advertising while paying people in Bitcoin, a lot of our business is running purely off Bitcoin, but some of the advertising networks are, in the spirit of Bitcoin, they're anonymous. So if they run a Ponzi, they can just come on and advertise and then back out and there's no trace of them. So I think that needs locking down a bit. I think there should be a bit of regulation.
It's hard to disagree with the way faucets and tipping services can grow the Bitcoin world. Before people truly understand it, taking the plunge of investing money can seem quite daunting. The added problem there is that they are thus unable to see how it works, to experiment with it, which might lower the odds that they'll jump in and invest some of their fiat money into it. Says Daniel:
I think it's quite a cool way to, you know, this is how you get a wallet, we'll send you the micro units of Satoshis, they get them in their wallet, and then they learn what Satoshis are, what the value of that is. Then they can send it to people. They can use ChangeTip to tip it on. And yeah, it's a very micro way to get involved in Bitcoin.
Daniel's PaidBooks.com is pushing the envelope for faucets. He says he won't stop there, he just has to stop hemorrhaging money on it before he pushes into a new development. The Bitcoin Aliens app is currently the 8th "Bitcoin" search result in the Google Play store, with mostly wallets occupying the top five slots. Daniel is confident that he will make PaidBooks as successful as his other endeavors, and from there he says he will continue to innovate in this space.