You’re Better Off Working at Starbucks Than Running a Social Network

Peanut Labs, a company that couldn’t find a business as an also-ran social network, took a different route and now conducts market research on social networks using virtual goods to reward survey takers. The San Francisco-based startup said today it has raised $3.2 million from Leapfrog Ventures and BV Capital (which had funded its original and now side project, the social network Xuqa). The Series A-1 round brings the company’s total funding to $4.5 million.

Of Xuqa, Peanut Labs CEO Murtaza Hussein said today:

“The CPMs are so low it’s really hard to build a real business unless you have several billion page views and your own sales team. Social networks get 5 to 10 cent CPMs, and less outside the U.S. At one point we were averaging 3 cent CPMs. We figured out if we all got up and worked at Starbucks instead we would make more money as a company than selling 300 million impressions a month of ad space.”

Peanut Labs employs 46 people, 20 of them offshore, and claims to be profitable with “seven-figure revenues” from unnamed “name brand” customers. Partners such as LiveJournal, ijji, and (fluff)Friends make around an average of $3 per completed survey; Peanut doesn’t disclose how much it keeps for itself.

On a side note, this isn’t the only story in the last 24 hours that tempted me to return to GigaOM to follow up on something I wrote way back in the day.