Social network Xuqa's in the black

Cynics take note, social networking and online game startup Xuqa has announced that their daily revenue has exceeded their operating costs and that they will take no more VC funding. They’ve raised $1.3 million from BV Capital and Skype investor Morten Lund; about half of that funding is left a year after launch.

Xuqa is currently focused on poker and hot-or-not style modeling contests but other games will be rolled out soon. Competitors play for “peanuts”, the in-game currency. Modeling contest winners get peanuts, interviews with a partner modeling agency and intros to other agencies. Those peanuts are given in exchange for activity on the site and then redeemed for privileges including the ability to see who has viewed your profile page and tools that can be used in play. Players who reach the highest status level in the game are given a $1000 cash prize.

Users play the games on the site for free and revenues are generated in some very interesting ways. Instead of paying cash for in game currency, users fill out market research surveys, browse Cost Per Action advertisements and refer other users. Other than those pages, the rest of the site is ad free. Site co-founder Ali A Moiz told me that for example, later today there will be a survey for 16 to 24 year old females from Hello Kitty. I think Hello Kitty is dumb – but do they care what I think? No.

Good poker players can “live off the land,” but most users will want to get peanuts by doing surveys and looking at offers. The company has five employees in San Francisco and fifteen off shore developers. It was founded late last year by Ali A Moiz, Prosper Nwankpa and Murtaza Hussain.

I think Xuqa is very interesting and I’m intrigued to hear the news that they are a social networking site that’s actually making money. Is driving users to take market research surveys and look at things like student credit card offers a little creepy? Yeah, I think it is, but I like revenue models based on something other than advertising or asking young people to pay small sums to furnish their “minihompies” like CyWorld does. I like Xuqa.