Since June Prosper.com runs a referral program that allows Prosper members to refer new lenders or borrowers.

How does it work?

Prosper members are encouraged to put up text links, buttons or banners on their websites that advertise for Prosper. If someone clicks on that link, a tracking parameter included in the link format allows Prosper to detect which Prosper member refered the surfer. Should the surfer sign up the member who referred him will earn:

• in case of a new borrower: 0.5% of the loan amount (up to $125) when the first monthly payment clears
• in case of a new lender: $25 as soon as the first loan bidded on originates

Certain conditions apply – I won't go into the detailed rules here, Tom has already done a fine summary of the rules in his blog – just read it there.

Example: If you click on one of the following buttons and sign up as a new Prosper members I am eligable to earn the referral bonus if you get active:

Up to August 31st there is a huge incentive since new lenders that sign up through the referral program get credited $25 as well to their account.

Does it work?

Although I do not heavily use the Prosper referral links on Wiseclerk.com and considering that most of the Wiseclerk audience are already Prosper users before they discover Wiseclerk, I did have several members sign up through my referral links in the past weeks. Every time somebody signs up through my link, I get an email with the new member's screenname. Most are still in the status 'Registered' meaning after signup they did not take any further steps yet to become a lender or borrower. One became or borrower, but so far failed to receive a loan.

More interesting ways to use referrer links

Wondering how the referral links can be turned from pure ads to a widget that offers additional information and is spread through viral marketing methods. Kevin at Rateladder.com has created a tool that creates code for borrowers to promote their listing on MySpace or other webpages. The tool creates an ad for the borrower listing, showing the title, the photo, the interest rate and the percentage funded. It calls for action through a 'Bid Now' button. Cleary of interest to borrowers. And Kevin profits, since he incorporated his referral links. Therefore should somebody wishing to bid sign up as a lender, he can profit.

The Prosper referral program compared to the referral programs of other p2p lending services

British Zopa pays members 30 pounds for refering an active lender or borrower. This scheme exists since summer 2006 and occassionaly the bonus was increased to 50 pounds for a limited time.
German Smava.de pays members 25 Euro for referring an active lender or borrower.
Dutch Boober.nl awards points for sucessful referral of lenders. These can be exchanged for merchandise, e.g. for 3 referred lenders a member can earn an iPod.
As far as I am aware of Lendingclub does not (yet) have an referral program. (Correct me if necessary!).
It will be interesting to see if and what new entrants like Communitylend.com and Ireloans.com will offer for referring new users.

The next step for even more growth

Currently all referral programs mentioned above have one thing in common. They are open only to existing members of the p2p lending services. Assuming they are successful and the p2p lending serves are seeking opportunities to enable even faster growth then the next step could be to start an affiliate program through networks like Zanox, CJ or Affilinet.

This would allow (semi-)professional internet marketeers to promote the offers. This step would offer two advantages:

• Huge exposure of the ads on many websites. Experienced marketeers promoting the offers (still on pay for performance base – no untargeted advertising spendings)
• Simply by beeing listed many people will sign up for themselves instead of marketing the offer to others.

The only downside are the costs which are typically 30 percent of transaction value. In case of Prosper seeking lender referrals this would add up to $32.5 (25 for the marketeer plus $7.5 for the affiliate network).