Taxman

My entry this week is really only going to possibly appeal to a small audience of readers as it involves some complaints I have about EntreCard, a blogging network which I am a member of.

For those of you who are not familiar with this service or are currently not using it, it may be a good bet to avoid my ranting this week. Things will be back to normal next week!

With the economy being talked about on every TV and radio station we tune in to lately, I got to thinking about taxes and blogging. Don't ask me why I thought of these two items together since they are not even really related. As my Dad always tells me "Your mind works in mysterious ways".

He usually does not mean that statement as a compliment.

Anyway, I was looking at the 'tax' rate on EntreCard and I was horrified. We are all paying 75% tax on every advertisement we sell to someone. Unbelievable!

To put this in perspective to those not completely familiar with math, for every 1024 credits we sell an advertisement to someone for, we only actually get 256 credits and EntreCard keeps 768.

Sweet deal for them, not so much for us! Have a look at the table below to get the full picture.

Column 1 is the day count, Column 2 is the selling price, Column 3 is what EntreCard gets and Column 4 is what is left for you.



Number of Ads Price in Credits EntreCard Gets You Get
0211
1211
2431
3 8 6 2
4 16 12 4
5 32 24 8
6 64 48 16
7 128 96 32
8 256 192 64
9 384 288 96
10 512 384 128
11 768 576 192
12 1024 768 256
13 1536 1152 384
14 2048 1536 512
15 3072 2304 768
16 4096 3072 1024
17 8192 6144 2048
18 16384 12288 4096

Unfortunately for bloggers there is little to no competition that offer a decent blogging network type of service, so they can gouge you right now without shame, and believe me a 75% tax rate is without question, a gouge!

Now don't get me wrong here, I do like using EntreCard as it has introduced me to a large number of blogs I would not have ever come across and also increased my own blogs traffic somewhat. I like the idea where you can both advertise and surf in order to acquire and spend credits.

My only issue here today is to complain about the exorbitant tax rate they are charging for the 'luxury' of using their service.

So what do we as members currently get for the 75% tax rate with EntreCard, you may ask ?

Apparently not much other than access to the EntreCard network and the odd email telling you the guy who started it isn't making enough money and may sell it. (in fairness, a day or so after he announced he was selling it back in September, he had an 'apparent change of heart' and is no longer doing so. Personally, I hoped he would sell out as I believe it needs new blood & fresh ideas.)


Blogexplosion used to have a great service entitled 'Rent my Blog' which would allow you to set the price to rent space and they would only charge a nominal fee (tax) on it.

It was actually a brilliant idea since the bloggers market would 'adjust' your price. Set too high a price no one wanted it or ask too little, well there would be buyers lined up so you would know next time to raise your price. Unfortunately they discontinued this service some time ago along with a number of other things. Too bad.

Anyway to continue, EntreCard has also put a dollar value onto their credits which is 1000 credits for $6.00 or .006 per credit.

So using my example above, an advert costing 1024 credits is valued as follows:
1024 credits x .006 = $6.14

They keep: 768 x .006 = $4.60

and you get: 256 x .006 = $1.54

A pretty steep price for a 24 hour ad on someone's blog however if you were able to exchange or 'cash in' your credits for cash, it would seem to be alright. But unfortunately you cannot.

Unlike banks that offer both a buy rate and a sell rate for exchanges, EntreCard only sells. So they have arbitrarily set a price of .006 per credit. Since I cannot cash it
in for anything and am not allowed to sell it, the true and accurate value to me is .000 per credit. Nothing, zilch, Dick!

In reality, I am thinking the true value lies somewhere in the middle between my assertion of .000 and EntreCards set price of .006.

The danger that these folks at EntreCard may not have understood is that when you have a country, or in this case a service, with a extremely high tax rate, a black market of activities is bound to spring up in some format.

People were selling credits on Ebay for up to 1/4 of the price EntreCard was charging, so they stopped that and put in a rule only credits can be purchased through EntreCard.

Of course there are other ways to save / make credits to circumvent the system. Lets take my example of an ad costing 1024 credits once again.

If I know the owner of the ad charging 1024 credits is only going to actually receive 256 credits after tax, instead of me buying in through EntreCard at 1024 credits, why not just send him an email and offer to transfer 300 credits into his account. All he needs to do is agree to put my ad on his site somewhere and he not only gets an additional 44 credits, I get to save 724 credits. A huge savings even if I offer him 600 credits. Still cheaper than 1024 credits by a long shot. The savings are even better on a more expensive ad, which in theory should give you even more exposure.

But I did forget to mention that there is yet an additional tax of 12.5% on all credit transfers. So in this example, to transfer 300 credits would cost me another 38 credits so my true cost would end up being 338.

Yes, The taxman taxes it both 'coming and going'. And why not, EntreCard is really the only game in town right now! (Note there is also a limit of 1000 credits per week to transfer.)

Before I go on, the above is just an example. I am not advocating that you try this but rather just pointing out one way to make your hard earned credits last a little longer. (Please do not email me with any offers to do this as I already have enough credits to last me for the next little while.)

There are a number of 'old school diehards' reading this that love EntreCard in its current form and do not agree. They are probably muttering the old adage of 'don't let the door hit you in the ass on your way out.' Well that really no longer cuts it in this day and age.

Its should not be a 'love it or leave it' proposition anymore. We, as dedicated members, both want and expect more from this service. That is the point of this entry today. Well, aside from my whining & complaining! (that's just a free added bonus!)

This is meant to be a challenge to the owners and operators of EntreCard to lower this ridiculous tax rate. Share the wealth so your users do not need to resort to petty black market activities like the one I outlined above or other equally as foolish ideas.

If we as users didn't care about the service, we probably would listen to those diehards and simply just walk away. But were not. Well, not yet, at least.

The challenge is not for you to arbitrarily drop your tax rate and that's it. It is understood you are in this venture to make a profit. I think no one would have an issue with that.

The challenge here is to look at other areas where your members can spend there credits on and not feel like they are being gouged each & every time they complete a transaction.

Your infrastructure is already in place to perhaps sell banner ads or text ads or animated ads (just to name a few alternative sources of income) that should be relatively simple to put into place.

Why stick with your one source of income, that being the static 125x125 advert? Honestly not only are you limiting your income stream, you are boring a great number of us.

So that is all that is bugging me today. I have now had my say and am curious to read what others think and feel on this. Am I totally off base here ?

20 comments:

tata said...

Truth is, I haven't looked at the math at all. I make my drops, have found dozens of new blogs that I really enjoy (including yours!) and have found a small measure of increased traffic to my own blogs. I never spend much at all on advertising, which I don't do very often.

Reading your breakdown is stunning. I had no idea how much they keep! And what for? It's their market, why do they need to take so much from their members - what do they gain by taxing us so high? That part perplexes and boggles.

Thanks for the insight. Stumbling and digging!

Turnip | Social Networking said...

Your article is interesting, but makes one critical error by using $6.00 as the value of 1000 credits. I too use that value to show how CMF ADS is a bargain compared to Entrecard. But that figure only applies to outsiders wishing to advertise on the Entrecard network. For those in the network, normally people have plenty of credits without doing anything other than dropping. So the actual value of credits is what you earn per hour or how much you value an hour of your free time that it takes to drop 300 cards.

Now, as for the comment "Your infrastructure is already in place to perhaps sell banner ads or text ads or animated ads (just to name a few alternative sources of income) that should be relatively simple to put into place. Why stick with your one source of income, that being the static 125x125 advert?" I agree 100%. I've said repeatedly on my blog that Entrecard should do exactly that. Three times I posted sample widgets of how Graham could easily do that. He ignored me every time. So I created CMF ADS which sells advertising next to the Social Widgets like Entrecard.

Jena Isle said...

Hi slightly drunk,

I was totally flabbergasted to come to know of that exorbitant taxes. Do they really tax us that much? That's highway robbery...lol...I know, I know, I'm over reacting...but , really, I didn't realize it was that much.

Thanks for sharing that info.
Happy blogging.

Mike said...

Great article and the additional comment by Turnip.

I hadn't done the basic math but I did look at the figures in the "transactions" section of EC and saw the effects of the tax.

I wonder if Ben Barden's reason for leaving EC was anything to do with the poll tax?

I actually favour BE now, its less hassle and if you use blog rocket and battle of the blogs like we do I think you get as much traffic. Possibly of a higher quality in the sense of actual readers.

By the way I have just started experimenting with BlogUpp as well.

Grandy said...

Thank you for breaking it down for mer. I knew things were getting costly. I agree with the question of...what do they need all the credits for?

I will have to research further what Turnip was referring to.

Thanks for the rant...hopefully it made you feel better, but it helped others in the process. :)

Miss Tique said...

mmm, I've read pretty much every page of the Help section of EC and there is a place where they say "You get 25% of the price paid to advertise on your site. The other 75% get deleted from the system to prevent inflation. "

see here more: http://entrecard.com/docs/doku.php?id=advertising

And I don't know about others, but the thing doesn't piss me off at all. I'm mostly for the fun. The exposure is a collateral advantage. Therefore, I take things as they come and don't really care about the number of credits earned/paid.

Cheers, man!

Mizé said...

Hi. I like Entrecard very much, it brought me visitors and I found great blogs (that otherwise I wouldn´t have). That´s the main reason I like it so much, but it would be better if we could earn some bucks with ECs.
I think Entrecard could find a way to buy us the ECs, even if it was for a lower price than they sell, or change for useful products/services/ vouchers, etc(they tried this).
They do keep alot of credits and they only can be used in advertising, this means credits don´t have a real money value. Like you mentioned it cost us the time to earn them, and that´s difficult to price, right?
That´s what I think. Thanks for sharing your thoughts too. Cheers.

Cromely said...

I dont' have a problem with it. My understanding is that the don't take those 75% ECs and sell them -- instead they simply disappear from reality.

Which is okay, since they are actually just appeared from nothing when someone click a widget.

Were they to remain, then a lot more people would have a lot more credits to burn and would spend that on ads. That would drive up the ad costs to the hundreds of thousands, and ultimately millions of ECs. The value of each individual credit would plummet to miniscule levels, making it harder to buy ads on sites.

The fact that they take so much out of the system is why each credit you do get it useful.

Atniz said...

Stop complaining about it and read http://entrecard.com/docs/doku.php?id=advertising

Entrecard doesn't keep 75%, it is flushed away to control the value of EC in the market. The larger the Entrecard family grow, the higher flush away rate might take in place.

Don't misunderstand the concept here.

John Sullivan said...

Hey man for a drunk that was about the best damn written and coherent post I've read from a blogger is quite a while.And one I actually read through excellent look forward to your next assignment uncovering the facts etc Nice work :)
PS yeah they should have a better rate but I just deal with it and try to keep the flow going :)

blackzero85 said...

lol yeah.

The best damn written post about EC. ^^

Ben Barden said...

@Mike, my departure has nothing to do with advertising tax. My post at zenworking.com is a good explanation of why I left.

Web-Betty said...

Interesting post. While the tax does seem very high. It is, essentially, a tax on nothing if you do not BUY ECs. While I'd love more ECs to advertise more, I don't buy them. :)

Da Old Man said...

Considering they really don't cost me anything, and I get them from blogs I would read anyway, it's fine with me.

Preston said...

I think you are overreacting. Entrecard is a free service to begin with. You pay nothing to be a member and yet they supply you with a huge database of blogs which you can easily access AND the supply a unique way to visit them. I think the bigger problem with Entrecard is that many of the droppers who visit my blog simply drop and leave with no interest in checking out my blog. That gives me a false traffic read.

Jade said...

As one of my history teachers put it, "there are two things you can always be certain of in life: death and taxes."

Most have heard the following: "the internet is not the real world." at one time or another.

Taxes in "reality". Taxes online...I think there are some serious realists out there. Even worse, there is not "Supreme court of the Internet" to appeal to. What is this internet world coming to (don't answer that)?

Tamika said...

I'm new to this EC thing so I haven't figured out a whole lot yet, but this sounds like "highway robbery".

Tamika

Canucklehead said...

whoa! lots of comments here!
for me, the key here is that since i don't buy them, their value is zilch. so, their 75% take is worth slightly less. I think you've hit upon a key point here but i certainly hope you don't lose any sleep over it. CHEERS!

/yes, I'm slightly drunk.

petra said...

Just more proof they are nothing but a bunch of commie bastards! Let's all just get drunk and maybe we can forget about them.....

musiqcentral said...

I was a member of entrecard as well myself...till they all of a suddent deleted my blog, all was ok before, but I had to stop my blog and start fresh and they deleted me... I have done this before and it was "ok" before, now its not... I had been a member for a length of time that deemed "gradnfathered" in my eyes... but i guess not

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