It can be difficult to explain the value of going to SXSW. I’ve been back for over a month now and I’m still processing information and insights from sessions like this one…

Session: Got great UGC, poor monetization?

Mundane though the point may be, SXSW is far from infallible when it comes to selecting panelists.  The session was billed as presenting ways to monetize user-generated content (UGC). The Lockerz people who did the session actually had no business addressing this topic because their platform is not about monetizing UGC – it’s about monetizing 13-30 year old eyeballs by offering brands a channel to reach these people (a.k.a. Generation Z) through Lockerz’ eStore and through on-site display ads.

Lockerz home page.

How the platform works

However, the Lockerz platform is interesting. It appeals to young people by leading with the promise of a monetary reward – deals on cool stuff kids want. It gives them these deals by rewarding them with points for practically every single action they take on the site. Users get points for uploading pictures, watching videos (yes, watching videos), answering trivia questions, listening to music, inviting friends to join, and of course, buying things. At any time, users can “cash in” the points they accumulate and buy something – and if they have enough points, discounts can be as high as 100% (you can check out the company’s intro video on YouTube here).

Does it work? Well, in just under a year, the site has amassed 17 million members. And presenters claimed that 25-30% of them log in at least once a day. Serious numbers.

Two things make this model interesting:

1. It doggedly “fronts” itself to the outside world as a community, not as a loyalty program or an ad platform or an eStore, even though it is clearly actually these things moreso than a community. In that sense Lockerz duped #SXSW in suggesting they are a community that monetizes UGC. A quick run through the site during the session made it obvious to me and to others that UGC is not the focus at all. UGC is in fact strictly a sideshow. I think this is sad, because it isn’t honest. And I can only assume the owners are being less than honest because they are afraid – afraid that if parents and advertisers knew the extent to which children were being manipulated into thinking they are part of a “community” there would be outrage. And maybe they’re right. It is a very 1984-feeling model. And I hate to say it, but my guess is this is just an awkward prototype compared to sleeker versions on virtual drawing boards today. After all, young people are both consistently coveted as a demographic and relatively easy to manipulate – and the success of Lockerz shows how these facts can be exploited to advantage.
2. Lockerz apparently supports itself mainly through advertising and through other paid product and media placements from major companies desperate to reach Generation Z. The platform is interesting in that it combines game theory, loyalty, e-commerce, and sharing in a way that seems to be working. They probably don’t make make much on the products sold in the store, but they are subsidizing those sales through online advertising and product/media placements, which are probably selling like hotcakes and for a very pretty penny (again, there is no demographic more coveted by advertisers today). That’s why it makes sense for them to try so hard to get and keep kids on the site as long as possible and as often as possible. But presenting the site as a “community” focused on UGC is just not accurate. The site and its users derive little or no benefit from the vast majority of UGC concerned. There is no real collaboration, idea sharing, life sharing, etc. between members. UGC here is strictly about either exposing kids to media/products or keeping them on the site and/or showing advertisers how “engaged” they are through their activity – thus justifying what are likely some of the steepest online ad fees you’ll find anywhere.

Is it just me or is this creepy?

Prototype for an Orwellian nightmare? Or just a kids’ version of your typical loyalty platform in fancy ”dudz”? You tell me…

Editor’s Note: This post was also published to the Gage Marketing blog.