Mahalo Confirms No Real Money Put Into The System By Mahalo

In a long-winded promotional piece for Mahalo.com, ABC news stated “… it (Mahalo) will jump start the economy by dishing out several hundred thousand dollars among current Mahalo members and beta testers.” You can read the entire article here.

A reasonable reader might take from this, the notion that Mahalo is, in fact, putting a huge amount of dollars into the system, in exchange for M$. This is, however not the case. Jason Calacanis, CEO of Mahalo, pointed to the M$5 redemption code sent to users recently to back this claim up, when asked if he stands by the statement in ABC News. There are a few problems with this. By his own admission, rather than “several hundred thousand dollars”, Mahalo predicts it will pay out “$10,000″, though this does not take into account the 25% fee, so cost predictions are actually $7500 (and lower, as we will see later). That’s a far cry from the original claim of “several hundred thousand”. Mahalo also mentioned it’s $100 questions, as source of inputting money into the system. It seems as though it will take several years, at this rate, for Mahalo to get anywhere near the amount it claimed would be used initially to “jump start” the system.

 What is perhaps, more troubling than the inflated figures given to ABC News to promote the site, is the fact that, in actuality, Mahalo has not put any real money into the system at all. Whereas those outside the company, are required to transfer real money into the system in exchange for Mahalo’s virtual currency, in order to offer M$ as tips, Mahalo suffers from no such limitation. It was confirmed by a company insider that Mahalo simply generates the M$ without valuing them by converting them from cash. While Jason Calacanis engaged in quite a lot of spin on this issue, he did not dispute this, but he avoided directly acknowledging it, as well.  That will come as no surprise to the growing number of users who suspect not everything is as it appears to be, on Mahalo Answers.

In response to my assertion that Mahalo not putting up any real money to utilize the M$ like anyone else is required to, puts ordinary users at a disadvantage, Jason had this to say, “Not sure what you mean here. Are you saying we have an advantage in that we can buy dollars at a 25% discount? That is true, but we still have to pay out the cash.” While I agree that Mahalo “can” buy the dollars at a 25% discount, the reality is Mahalo does not buy them at all.  It offers nothing in exchange for the M$ and pays nothing unless they are turned into real money.

Why is this relevant? Because, in this system, Mahalo incurs no cost at all in utilizing M$, only in cashing them out. When a regular user buys M$ which are immediately devalued 25%, in the hopes of having a question answered, they have no vested interest in what someone does with those dollars. The reason for this is, quite simply, they’ve already paid for them. They buy the M$ with the motive of exchanging them for information. Mahalo, on the other hand, suffers no penalty from offering M$, because the company does not “buy” them at all. Mahalo then, has every motive in keeping those M$ in the system.  The longer they do, the more use they get out of something that literally cost nothing to obtain.

Mahalo staff have been quick to claim Mahalo itself has no motivation to game the system. Given that Mahalo incurs no cost at all for it’s use of M$, unless a user cashes them out, some may argue they have more reason to game than anyone else. In fact, Mahalo has made no secret that it’s system is designed to keep those M$ passing around, and not being converted to cash. There is a M$40 requirement to be met before a user is able to take that money out of the system at all. Most regular users will NEVER reach $40, or will do so only by expending hours upon hours of work researching answers. Mahalo is well aware that the majority of the M$ it is flooding the system with, will end up in dormant user accounts before the M$40 mark. This enables not just a “25% discount”, but ensures only a fraction of those M$ will ever need to be purchased by the company itself, which does not pay until they are cashed out.

In addition to this, Jason Calacanis posted upon the site, that in the future Mahalo is likely to require a minimum tip amount to ask a question at all.  Isn’t it nice to see that Mahalo does not play by it’s own rules, and that it’s CEO feigns incomprehension to those who believe the system is “rigged” in Mahalo’s favor. As if this platform was not already tipped in Mahalo’s favor enough, having stealth employees funneling those unpaid for M$ round to other employees, demonstrates what lengths Mahalo is willing to go to, to get it’s user content at bargain basement prices, while other users pay for the privilege. I’ve recently learned that Mahalo employees are not permitted to exchange their M$ for money. If this is the case, it only exonerates any suspicious activity on their part, while pointing the finger clearly at Mahalo itself.
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5 thoughts on “Mahalo Confirms No Real Money Put Into The System By Mahalo

  1. I’m sorry Bud, but I really want to understand what the issue is here. Are you upset that we are putting money into the system and paying people? Yahoo Answers, Askville, wiki Answers, etc. put nothing into their systems for the users…. we’re the first product in the world to pay out ANYTHING.

    In terms of the ABC quote I stand by the couple of hundreds thousand dollars because we sent out 45k emails ALREADY with M$5 coupons on each one. If they all get claimed that would be a couple of hundreds thousand. So far only 10% or so are claimed.

    We might pump even more money into the system to keep it going and to get the researchers more motivated to join the system. What’s wrong with that?

    Is the issue Mahalo staffer’s rankings? If so we could remove ourselves from the rankings, but frankly we’re already dropping out of them thanks to the folks who are doing such an amazing job–like you!

    Perhaps I can understand better what you issue is if you tell me how we could solve it?

    Everyone really loves the contribution you’ve made so far and we’re sad and perplexed by this response… we really want to understand!

    all the best,

    Jason

  2. Oh wait, is the issue you think we don’t have the money to pay people? If you do a little researcher you find that Mahalo is a professional, venture-backed company that raised over $20m. We have the funds we are giving out in coupons… we are not making this up!

    In fact, our investors are the same ones who did Yahoo, Google, YouTube, AOL, MySpace and Atari! We have the money in our bank account. It’s real money. If you come by Mahalo I’ll show you a bank statement. 🙂

  3. Do you expect Mahalo to give cash to itself so that it can get M$ from itself? The point is that the M$ that users receive from the company can be converted into cash at any time at a fixed exchange rate.

  4. I, for one, congratulate Bud for keeping an eye on Mahalo Answers. The blog should stay alive and point at everything that he thinks is wrong with Mahalo. This makes researchers decide whether they should spend their time on Mahalo or not. He should also recognize when he is wrong and post an entry containing all points of view.

  5. The first product in the world to pay out anything? Jason did you forget that Google, ChaCha and several other sites have done this before? In fact there are several sites out there that provide “professional” Q&A services.

    Bud’s question seems pretty straight forward. You stated you are going to jump start the economy by dishing out “several hundred thousand dollars”. From my math it looks like right now at the most you are pushing $17,000.

    10% of the 45k emails= 4500
    4500 x 5M$= 22,500
    Subtract your 25% off the top
    Totals $16,875

    Factor in all the M$ currently suspended in Mahalo staffers accounts (which keeps getting cycled around) or M$ that will likely go unclaimed by users not reaching their cash out goal and you can drop that number considerably.

    As Bud said, this is all assuming the money ever actually goes into play, because right now its all “virtual cash”. Mahalo hasn’t actually paid anything out yet, unlike users wanting to ask questions whom have sent Mahalo their up front payments.

    My personal question still remains, why is it that Mahalo has taken to profiteering from its users? Didn’t you once say Mahalo could run without generating outside revenues for up to 4yrs? Now it would appear you guys are doing a little double dipping. You get to collect ad revenues, collect cash from the front end (users asking questions) and then collect an obscenely high fee from the backend (users cashing out).

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