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Will Meetup Users Pay or Leave?

By Robert D. Hof Meetup Inc. made its name early in the last U.S. Presidential election season, when Howard Dean backers used the meeting site to form local groups that took the Democratic Party by storm -- at least until the Scream. But Meetup's mainstay members proved to be stay-at-home moms, pug owners, and others who just wanted to find kindred souls to meet face-to-face. In fact, the number of "meetups" has jumped 50% from a year ago, to more than 2,400 a week. The only problem: Meetup hasn't been able to make money off all that enthusiasm.

Now, the company is taking a bold, risky step: In a mass e-mailing on Apr. 12, Meetup told its 2 million members that it's time for their groups to pay up. Starting May 1, organizers of each Meetup group, of which there are currently 54,000 that are actively managed, will have to pay $19 a month, though existing groups will pay only $9 a month for the rest of 2005. Organizers then can ask members to chip in. Founder and Chief Executive Scott Heiferman says he hopes the move will help the 29-person New York City company turn a profit by yearend.

LOSING GROUPS. It's hardly Meetup's first stab at making money. Since it launched in June, 2002, the site has tried to make money at least three different ways, from charging local meeting places for group referrals to offering individual memberships. The privately held company won't reveal revenues but concedes that no income source has really caught fire.

Will the fourth time be a charm for Meetup? Even execs aren't sure. "Nobody likes to hear that something that was free now costs money," says Heiferman. "We expect to lose a lot of groups."

Indeed, at least one organizer is unhappy with the new fee and isn't sure his group will continue. "I'll be honest, I don't know how people in the group are going to feel," says Mike Sedita, who heads an English-bulldog owners group in New Jersey. "I'm not going to put money in it out of my pocket."

CONSENSUS ON FEES. Meetup's move follows attempts by a few other companies loosely called social-networking sites to make money from their growing crowds of users. The dating site Friendster, with 14 million registered users, hopes to make money from advertisements and corporate sponsorships. On Mar. 1, the 2 million-member business networking site LinkedIn launched a for-pay service, charging up to $95 a month for job listings (see BW Online, 3/16/05, "LinkedIn Expands Its Connections").

While business-oriented groups can point to concrete benefits such as finding people jobs, the more socially oriented ones have a bigger challenge. "People want to connect with each other, and the Internet is great for connecting people," says Nate Elliott, an analyst with Jupiter Research in London. "But no one's making any money on it."

Still, Meetup remains unique in bringing people who don't know each other together to meet on a regular basis. So it had to find a new way to get paid for its services, which range from message boards to online tools that help members arrange meetings locally. Heiferman and his team barnstormed the country last year to meet with local group organizers -- via Meetup, of course -- and polled thousands more on the best way for Meetup to raise revenue. The consensus: Start charging group leaders and let them decide how to charge members.

NEW SERVICES. Despite worries that many groups would just stop using Meetup, Heiferman thinks it's time to go for it. For one thing, says the 32-year-old serial entrepreneur, the No. 1 concern of organizers is getting the word out about Meetup and their own groups. That takes marketing muscle, which in turn takes money.

Moreover, Heiferman hopes people in groups that have built up staying power will realize there's no free lunch. "As value is created for everyone, so should value be created for Meetup," says board member Andreas Stavropoulos, a managing partner with Meetup investor Draper Fisher Jurvetson. Or as Heiferman says bluntly: "Meetup doesn't deserve to continue if it's not creating value."

In return for charging a fee, the business is offering some new services that execs hope will keep the momentum going. It's mailing out materials such as customized Meetup identification cards and table placards to help groups work more smoothly. Most important, it's arranging for groups to use eBay's (EBAY) PayPal payment service, so members can pay fees, pony up for special events, and potentially conduct fundraising drives.

"THE GLOBAL ORGANIZATION BUSINESS." Despite resistance from some group organizers, others may be more sanguine about paying up. Financial analyst Sebastien Pigeon heads the 610-member NYC Wine Club Meetup group, and he already charges $10 to $15 apiece for the group's wine tastings. The ability to pay using PayPal, he says, should help him plan events better because those making reservations will already be on the hook to pony up.

Heiferman also takes heart from something he heard from Pierre Omidyar, the eBay founder and chairman who invested in Meetup and serves on its board. EBay has bought auction sites, such as one in Germany, that didn't initially charge for listings. When they began collecting fees, many sellers dropped out. But the marketplaces bounced back because the fees ensured that only worthwhile items were put up for sale -- attracting more buyers and then more sellers.

Ultimately, Heiferman hopes a smaller but more robust set of groups will make Meetup stronger overall. Indeed, he hopes the money will help the outfit keep developing tools to spur more cooperation among groups themselves. Mom groups in a given area could band together to lobby a city for a new park. Some tech writer Meetup groups in India are allying to push for higher wages. "We're not just in the local group business," says Heiferman. "We're in the global organization business."

NICHE FILLING. Grand as that sounds, some observers think there's indeed a potential business there. LinkedIn CEO Reid Hoffman, for one, thinks Meetup is valuable in helping people find others who share their very narrow interests -- just as (AMZN) made a successful business out of selling a wide range of products, many of which weren't popular enough to stock in local stores.

"Meetup has real diehard loyalty," says Hoffman. Soon, it will find out if that translates to cold, hard cash. Hof is BusinessWeek's Silicon Valley bureau chief

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