The more I think about it, the more I honestly believe that killing the community is killing the bottom line.
As long as there was a sense of community; active groups and group leaders, a lender community, borrowers who wanted to stay active, cooperation with Prosper, people stuck around, and bid on loans. Even after it was becoming obvious that the ROI would be poor...
Prosper's reaction to groups, in retrospect, was overkill. While I was as vocal as anyone about removing the tools of corruption from the hands of GL's, and as withering in my attacks of shamelessly corrupt GL's as anyone, I never wanted the group concept extinguished. I just wanted it reformed in such a manner that all group members would stand to benefit from a group's success (i.e. real shared rewards), and corruption would not be rewarded (match rewards and the actual shared rewards). My reasoning was that it would give everybody, borrowers included a stake in sticking around and contributing to both the community and Prosper itself.
Running off the lenders was the next obvious blunder. Things never had to spiral as far out of control as they did. I blame Shira for much of that; I also blame Witchel. Near the end, when the forums had pretty much run amok with criticism, they really did have to do something. But had the community liason really been a liason, people would never have gotten so angry.
So: now a borrower comes to Prosper, and it's like going to E*Loan, except a lot more complicated. Not much fun, only for the desperate, and there is no personal connection made with the lenders, which is the most important aspect of p2p lending.
The incentive that once made me study the loan performance data for hours upon hours while crafting "Market Performance Weekly" threads is gone completely. The incentive for any lender to take Prosper seriously is gone.
Rather than becoming the eBay of loans, which I really thought it might, Prosper has become a convoluted E*loans for the subprime and shaky. They've taken out all reasons for anyone to spend time there, but have not replaced it with better performance.
And thats why you have thousands of new lenders every month and flat-to-falling growth...
Incidentally, the loan volume chart's slope very closely resembles the Alexa traffic graph AmexFan posted a couple of weeks ago.