How Did PayPal Move at First?
PayPal began its journey as a side project of Confinity, a security software company, in 1999. The company created PayPal to solve their own problem with online money transfers. What started as an internal tool would soon evolve into a groundbreaking product.
In 2000, Confinity merged with an internet banking business founded by Elon Musk. This merger not only combined their resources and expertise but also provided PayPal with a financial boost through early funding rounds. However, initial attempts at growing the user base through traditional advertising proved ineffective. Advertising was costly, and forming business alliances also fell flat.
Realizing the limitations of conventional methods, the team adopted a bold and unconventional approach: they decided to pay users to sign up and refer others. New users received $10 for signing up, and an additional $10 for every friend they successfully referred. Surprisingly, this strategy turned out to be cheaper than running traditional advertisements.
The referral program was a massive success, rapidly driving user growth. Within a month of its public launch, PayPal had gained 100,000 users. The program became so effective that its impact resonated beyond PayPal—years later, Dropbox adopted a similar model, offering free storage space instead of money, with similarly successful results.
As PayPal’s user base grew, the referral bonus was gradually reduced to $5. Eventually, the network’s inherent value surpassed the need for financial incentives. PayPal had reached critical mass, where the utility and popularity of the platform drove organic growth. By the time the referral program was phased out, PayPal had already invested approximately $70 million in the scheme—a seemingly substantial amount at the time.
In hindsight, this investment was a small price to pay considering PayPal’s meteoric rise in value. Today, the company boasts a valuation of $98 billion, making the $70 million outlay for early growth appear almost trivial by comparison.
Source: www.referralcandy.com