Although Prosper did very badly in its early years and still isn't very strong on collections, it has improved its ability to select candidate borrowers considerably over the years, and its returns since its 2009 relaunch have been better than Lending Club's for 2009-2011, as
www.lendstats.com shows. (Lending Club appears ahead for 2012 so far, but I wouldn't give the current year data a lot of attention as it's still too early to see the effects of defaults.). There are some risks: it has never made money and has stayed alive only because venture capitalists have been willing to buy its stock, and it has a class action lawsuit against it over its earlier (pre-2009 SEC registration) lending practices.
That said, Prosper's outlook is considerably better now than it was a year or so ago. Its originations have been growing very rapidly (although not as rapidly as Lending Club's) and it is moving closer to profitability (although still quite far away). It has developed a strategy to shield new notes from the consequences of the lawsuit by holding the new notes under a different legal entity from the old ones in the hope a suit against the old entity won't be able to reach the assets of the new one. The strategy may work, and even if the lawsuit is successful, it may not ultimately recover much.