Scam: Lockerz Bait-and-Switched Its Members with Redemptions

Since our first story on Lockerz, which rewards members with points (PTZ) for sharing and consuming Gen-Y-friendly content [ see story here ], we have uncovered a huge bait-and-switch.

By stopping its long-standing if massively gamed PTZ "redemption" days, where members could get free premium prizes like XBoxes and cash, Lockerz has made members' PTZ practically useless since they can now only get coupons for things available every day, such as a three-month Blockbuster membership trial and discounts on concert tickets.

Seattle-based Lockerz first suspended redemptions in May because of a "nasty new bot," then shut down redemptions altogether in July when it announced its latest funding round -- $45M expected to close in October.
Investors include DAG Ventures, Kleiner Perkins, Liberty Media Corporation and Live Nation Entertainment. The reason the company gave? To improve the user experience.  

The change has led to (by our count) hundreds of complaints on the Lockerz Facebook page. The biggest wave came in July of course, but two months later, it's possible to find at least one complaint about redemptions on practically every Lockerz post. Many are some variation of "Bring back LOCKERZ REDEMPTION!!" Most complaints do not get a direct response from Lockerz.

A spokesperson for the Seattle-based company told LAUNCH that the company had always planned to end redemptions and that there was no bait-and-switch.

"Redemptions were one of the first features we offered on Lockerz, and while they were great for the people who won, we decided to focus on features where many more members could benefit," the spokesperson says. "When we discontinued them, we communicated this to each and every one of our members."

Lockerz currently boasts about 45M unique viewers each month according to press releases, but the company would not share its membership numbers with LAUNCH.

Lockerz member Rudolph Kartashev, from the country of Georgia, is selling his Lockerz account with 14K PTZ for just $10.

Rudolph told LAUNCH he was selling his account and PTZ because he could no longer earn free prizes -- "There's no sense in keeping this account."

Naturally, the Lockerz TOS prohibits selling or transferring your account in any way; doing so can result in the termination of the account and its PTZ and the person being banned.

Lockerz CEO Kathy Savitt, previously an executive at American Eagle and Amazon, told LAUNCH via email that Lockerz routinely investigates users who sell their accounts and bans them. She did not comment on allegations of Lockerz using bait-and-switch tactics.

Rudolph clearly isn't the first to sell his account: "As with many other services on the web, the attempt of users selling second-hand accounts is unfortunately, a common activity that many companies deal with," the Lockerz spokesperson says.  

Rudolph is also not the only one who feels PTZ are worthless.

"I [joined] Lockerz long ago and back then I hoped to get some items from the redemption. Now, I have earned a lot of PTZ, but I just cant use them for anything, so I feel a little like I have been used,"  Dan Sørensen of Denmark told LAUNCH via Facebook. "For me, now Lockerz is just a waste of time. You got better videos at YouTube and I don't care about the PTZ when in the end cant get anything for them anyway."

Here's how redemptions worked: members earned points for taking actions like watching videos and inviting friends to Lockerz. They saved up thousands of PTZ to have enough for great prizes like XBoxes, iPods and cash via PayPal, which they could only get when Lockerz held a redemption day, usually announced the day of or day before.

On redemption days, Lockerz members would flood the redemption page, constantly refreshing it to claim a prize as soon as the window opened. It appears Lockerz would ship the item anywhere in the world and deposit cash to any account, which made it especially popular in places like Russia and the Philippines [ Lockerz currently only ships to 20 countries

To improve their chances, some members created PTZ hacks to rack up currency and bots to snap up items faster than any human refreshing the page could get them. Lockerz apparently had a difficult time keeping up with the bots and hacks, likely contributing to the end of redemptions.

Long before redemptions ended, Lockerz must have known it could not base its business on giving away prizes. In January, Lockerz acquired the photo-sharing site Plixi, which has more than 1B photo uploads per month and already had attracted celebrities who share personal photos there.

"That's now what Lockerz is. Plixi," Fabien Goupil of France writes on a prize forum. "A social network wanna be, with stupid play videos, and stupid dealz."