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[Fred93]

In a lot of ways there has never been a better time to be a place like prosper. ... the cut that they are taking from the borrower yield is massive now. For example, borrower APR is 11.45% but the lender only gets 8.35% PRE tax? That's a huge cut.
http://www.prosper.com/invest/listing.aspx?listingID=440174

Yep.  They get a 3% cut and take no risk.  All they gotta do for that money is a credit check up front, some servicing (rather passively accept payments then shove money thru a fully automated lender distribution) and keep some web servers runnin', oh and marketing.  I think their biggest cost is marketing, including advertising, PR, referral programs, etc.  Gotta generate volume to feed the machine.  A 3% markeup is pretty obscene from the lender's perspective, so if they can't make it go with this huge markeup, they will have to give up.

PS: Cute doggie picture on that loan.

[NewHorizon]

I think their biggest cost is marketing, including advertising, PR, referral programs, etc.  

2nd biggest might be payrole.
Just my guess....

[Investor_Ennui]

I think the number one cost is Legal.

[bankomatic]

My biggest problem with the 3% cut is that they take 3% cut from a 30% loan and a 3% cut from a 7% loan (as far as I know). This makes low interest loans less attractive because when they collect 3% on a 7% loan it is 43% share of the total profit collected, and getting 4% instead of 7% (from a lenders point of view) can easily be a deal breaker where it's not worth it to bid, but say getting 27% instead of 30% wouldn't be nearly as bad. I feel that they shouldn't be taking 3% from loans with relatively small yields as is. It has to scale. May be starts at 1% and moves up the higher the interest. You just can't shouldn't take such huge chunks from low interest loans.