AGLOCO launches — will pay you to surf the Web

(See our update on this story here.)

AGLOCO is a controversial new Stanford-based start-up that wants to pay you to surf the Web, in return for access to your online surfing information. It launches later today (Monday).

It was discovered two weeks ago by Gigaom, which blasted it as a pyramid scheme. It is, Gigaom reported, a reincarnation of the bubble-era AllAdvantage, which PC World at the time said was one the worst sites on the Internet. AllAdvantage folded in 2001, when Web advertising dried up. (Here’s a good description of AllAdvantage.)

Gigaom’s report was based on leaked materials. AGLOCO says Gigaom misunderstood some of its intentions. Its founders sat down with VentureBeat, and explained how its model is different from AllAdvantage.

In short, AGLOCO, which stands for “A Global Community” (the company uses caps to refer to itself, despite its lowercase logo) is really a big AllAdvantage sheep in wolf’s clothing.

First, the similarities between the two: The AGLOCO team includes some of the same leaders of AllAdvantage. The model is pretty much the same, too: As with AllAdvantage, the user of AGLOCO signs up with the site, and volunteers detailed personal information, including name, email address, age, city, state, country and postal code. AGLOCO promises it won’t be transferred to a third party. The user agrees to surrender information about their traffic patterns to the site. Like AllAdvantage, AGLOCO offers a Viewbar, a browser-based bar at the bottom of your screen. The Viewbar (see below) displays targeted advertisements based on on content you’re viewing and your traffic patterns. Moreover, the user gets shares in the company for surfing the Web, and for referring others — and benefits go up the more that referee uses the Internet. The referral network goes five degrees (you refer a, a refers b, b refers c, c refers d, d refers e). This applies for any users, not just early adopters, and so the company argues this is not a “pyramid scheme.”

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This targeting aspect is where AGLOCO’s latest incarnation could prove more powerful than last time (which, we note, was significant; people forget that AllAdvantage ranked among the top twenty Web sites, according to Nielsen/Netratings; it had ten million members). Better targeting technology exists today, and affiliate models are more established. Take a hypothetical example: You’re about to buy a book at Barnes & Nobles. AGLOCO will flash a note that you can get a better price at Amazon.com. That’s because AGLOCO has signed an affiliate relationship with Amazon, giving AGLOC an 8.5 percent discount on purchases. Since you’re a member, AGLOCO will pass on say, at 4.25 percentage points of that discount to you.

You win in another way, too: The other 4.25 percentage points AGLOCO keeps for itself accrues to its bottom line. Since you own AGLOCO stock, you benefit. AGLOCO wants to give its members 100 percent ownership. It is not raising any venture capital like last time (AllAdvantage raised nearly $200 million from various VCs including Alloy Ventures, Partech International, Rustic Canyon, Softbank, Technology Partners and WaldenVC). It will take ten percent of the company’s revenue for a management fee. This is worth it, says Jim Jorgensen, one of AGLOCO’s founding team. He says a group of aggressive Stanford business school graduates are negotiating deals with Amazon and other partners on your behalf.

This AGLOCO team is intriguing. Eight Stanford MBAs have joined, which is unprecedented. Many Stanford MBAs join companies before they graduate, but not a grouping this big, and especially not at a time when VCs and other companies are poaching MBAs more than they have in the past. They’re bringing fresh, eager blood to their wise but chastened forefathers who launched AllAdvantage. Jorgensen was co-founder and chief executive of AllAdvantage and is one of 15 in AGLOCO’s founding team (a formal chief executive hasn’t been appointed yet, and the group is acting like a commune, refusing to appoint a leader, or even hand out “co-founder” titles). AGLOCO has named Ray Everett-Church its chief privacy officer, the same guy who was CPO at AllAdvantage (AllAdvantage was the first company to have a CPO).

pidwell.bmpBut the guys who first conceived of AGLOCO are Carl Anderson, an AllAdvantage co-founder and now a hedge-fund manager, and Dave Pidwell (pictured left), a venture partner at Alloy Partners and an early investor of AllAdvantage. Both have given seed funding to AGLOCO. Anderson posted a notice at the Stanford business school’s career center, saying he was looking for someone to start a company. MBA student Akshay Mavani responded, and helped recruit the others. Other seed investors include 4Info chief executive, Zaw Thet and several others.

Anderson and Pidwell also recruited Jorgensen, a tall slender gregarious character who is always quick with a good story. Have him tell you the one about the pre-IPO April 2000 extravaganza bash at his 5,000 square foot home on the Stanford campus. The fundraiser’s guests included President Bill Clinton, John Doerr, Frank Quattrone, all of whom joined Jorgensen at his private table. Even Clinton’s daughter Chelsea was there, with counter-snipers in the trees for security. Elon Musk, co-founder of PayPal attended. (AllAdvantage was bigger than PayPal at the time. Bank of America reported that AllAdvantage cut more checks at the time than any other company, outside of the federal government. So Musk sat at a side table.) Eric Schmidt was there. Two members of the Grateful Dead played. A few days later, in mid-April, the stock market began its free-fall, and AllAdvantage never recovered. But Jorgensen says the event underscored how the company had gained legitimacy in Washington. (Update: To clarify, the event was a Democratic fundraiser, and was not paid for by AllAdvantage.) The uproar around the company had forced AllAdvantage to seek to explain itself on Capitol Hill, and senators ended up liking it. Senator John Kerry supported AllAdvantage’s privacy model, Jorgensen says.

Even so, AGLOCO will be different in key ways, Jorgensen says. Even though AllAdvantage was at the “forefront of privacy,” Jorgensen explains, “we had no idea what we were doing.” This time, AGLOCO is more conservative, making no promises on cash payment levels. In fact, Jorgensen says it was the VCs who had encouraged large cash payments by AllAdvantage (at 50 cents/hr), which had driven the company into the red. AllAdvantage paid out $100 million to its members; a few members were earning $10,000 to $15,000 a month.

For now, AGLOCO simply says it will give members a share of profits. While AllAdvantage hired 250 engineers, AGLOCO is streamlined. It is built on open source software, with developers in China — and AGLOCO will be launching with a Chinese version of the site too. The funky management structure may become a problem, in VentureBeat’s view, because there’s no single leader taking overall responsibility.

If it’s anything like its predecessor, though, AGLOCO will be a company to watch. At launch, AllAdvantage had aimed to sign up 30,000 members within four months. But it hit that number in two days. AllAdvantage’s IPO was going to value the company at $1.2 to $1.4 billion, but it never got there. This time, AGLOCO is already working to list on the London AIM stock exchange.

Is it evil? You decide. We’re betting many people will hold their nose, and take the cash ;)

Below is screen shot of how Viewbar rests at bottom of your page:

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