ScratchBack Seems Designed to Only Scratch Their Back

I came across ScratchBack a couple of days ago and am still trying to figure out who (besides the company itself) actually benefits from this interesting little widget. The premise is pretty simple, but I'll just be lazy and give you the official pitch-

ScratchBack is an online "tipping" system. It allows you, the publisher, to accept tips and "give back" links* or images* in return.

You name your price on your tips, and you earn money from every interaction through our easy-to-use automated system. It's free to sign-up, and you can have a TopSpot widget on your website or blog in minutes.

So, at first glance it looks like any of a number of WP plugins that offer a more attractive way to add a PayPal Donate button to your site. Instead of having a boring button sitting in your sidebar and/or repeating the same tired "Buy me a beer/milk/coffee if you like this post" line to every blog entry. Sounds like a great idea.

In fact, not only is the widget fairly attractive and completely customizable, but with ScratchBack your donors actually receive something in return - a link back to their site. This makes it seem more like a "Pay $x.xx to be on my blogroll" type of thing. Again, though it's in a more attractive package then simply adding that text above your blogroll and would probably get a little more attention as well. Since it doesn't seem nearly as "commercial".

ScratchBack seems to be a win-win. I get more donations to my site via PayPal and my donors receive a link, all wrapped up in a nifty widget that happens to be the new hotness. But there's one major difference between ScratchBack and these existing tip systems that the folx at ScratchBack are going to great lengths to hide from you. If the ScratchBack Widget doesn't increase the amount of your tips by at least 60%, you'll actually be losing money.

I haven't seen this mentioned anywhere else (despite the more than 80 blogs that have posted about it (according to Technorati) in the last 3 months). So maybe I'm wrong. But I don't think so.

Expense 1 - ScratchBack takes a commission out of every "tip" you receive. At the moment this commission is apparently 54.4% I have to say apparently, because ScratchBack refuses to share the actual percentage. That number is based off the few reports I've been able to find from actual ScratchBack users. So if you set your tipping level at $5, you'll only receive $2.28.

The largest red flag any company can throw out to the world is a refusal to inform users of their costs and fees. Hell, it's illegal in many industries not to disclose your fees ahead of time. But ScratchBack refuses to do so. They even went so far as to make a blog post titled "How Much Commission Does ScratchBack Take?" where they not only didn't answer the question, but posted a video instead of text meaning I had to waste a full 60 seconds of my life listening to Jim dodge "the numer 1 asked question" about his service.

Of course this is supposed to change after they're out of Beta, but who knows when that will be or what the percentage will be at that point. Besides, the fact that it may change is no reason not to disclose what you're currently charging customers.

Expense 2 - The truly hidden expense is lost interest. If your PayPal account is based in the US (I'm not sure about other countries) you have the option of joining the PayPal Money Market Fund. This pays you interest on the amount of money in your PayPal account just like a savings account does. The rate fluctuates, but has hovered around 5% for the last couple of years. Your interest is calculated on your balance each and every day.

ScratchBack holds the "tips" that you've received until you've reached a minimum of $25. Additionally, "[p]ayments are made at the end of a thirty-day cycle. It can take up to 15 days to remit payment to your PayPal account at the end of each cycle." In other words, if you earned $25 (or more) in "tips" today you wouldn't receive any of that money until around December 15th. That's more than a month of interest that ScratchBack is receiving on your "tips" that you should be receiving instead.

An Example - If you receive $100 in "tips today, you will have $45.60 in your ScratchBack account and pay them $54.40 in fees. Additionally they will earn another $5.12 in PayPal interest on those funds (assuming they don't move it to a higher yielding account). You, will lose that same $5.12 in interest.

End result:

- Your visitors spend $100
- ScratchBack makes $59.52
- You make $45.60 (in 45 days)

If you simply used any other system to receive that same $100 in tips today and left it in your personal PayPal account you'd have $105.12 in 45 days. That's a 57% loss of revenue.

So the only benefits I can see ScratchBack having over the free options are that "it's nifty" and "its new". And for that I should give up roughly 60% of my blog tip earnings? Count me out.