The idea of paying people to watch advertising, an impossible dream before the internet arrived, has become a reality. Nine weeks ago, a company was launched in San Francisco that hopes to usher in this new era.

Businesses that give viewers non-cash rewards to watch adverts include Juno, the e-mail service, and FreePC.com, the company that gives away personal computers preset to show adverts at the screen's edges. There are also two companies, CyberGold and MyPoints, that pay cash or near-cash. But both pay per response, not per view: the former when you visit an advertiser's web site; the latter when you click on an advert.

The big idea of AllAdvantage.com - so big that it seems almost banal - is to pay you 50 cents an hour for keeping a little advertising window open on your PC screen, whether or not you respond. The window, called a ViewBar, communicates with AllAdvantage.com's servers whenever your PC is connected to the internet. It downloads adverts that change periodically, and you can switch it on and off at will.

The only information you need to give the company to collect the money - capped at 40 hours a month, or Dollars 20 (œ12.50) - is the name and address to which you would like your monthly cheque sent.

The company was started by four people led by Jim Jorgensen, 50, a serial entrepreneur whose most recent start-up was DiscoveryZone, a set of 300 indoor adventure playgrounds sold to Blockbuster Entertainment in 1994.

The business arose from a discussion of internet privacy, and from the idea of assembling a large group of individuals who could maintain their privacy but sell their attention and their aggregated data to advertisers. The "aha", Mr Jorgensen says, was to create a downloadable piece of software for showing the adverts.

But the team had a second idea, perhaps even more brilliant. To encourage members to recommend others to the company, it built one of the web's first multi-level marketing machines. In addition to your own hourly 50 cents, you can also collect 10 cents on the hourly viewing of everyone you recommend who joins the service and a further 10 cents on the viewing of those they recommend, and soon to the fourth level.

If you think this sounds like a chain letter, you will not be surprised by the company's progress. When it launched the service on March 29, after about six weeks of software development, it asked 80 friends to recommend it to everyone they knew - and 10 days later the membership had reached 250,000.

Mr Jorgensen says membership now stands at about 1.2m, with 100,000 or more joining each week. The risk is that by paying per hour viewed the company will lose money unless it sells enough advertising.

Pointing out that the software is still in betatest, a staff member e-mailed me to say that AllAdvantage.com has not yet sent download details for the Viewbar to members.

Instead, the company has spent the past weeks increasing its headcount from eight to 50, negotiating with advertising intermediaries to sell "run of network" adverts on its behalf, and raising venture capital - from Asset Management/Alloy Ventures - to supplement the founding Dollars 200,000.

But shotgun banner advertising is only the first of many revenue streams that AllAdvantage.com hopes to create. Because the ViewBar shares data with your web browser, it can tell the company which web site you are looking at, or which keywords you have entered. Using this data, it can sell advertisers the chance to reach highly targeted groups of people. Keyword and site-specific adverts command a far higher price than "run of network".

In future, the company will be able to sell other forms of targeted advertising too. Because members have to give a name and address to receive their monthly cheque, the company has a reliable zipcode database. (You can sign up from outside the US, but not receive revenue yet.) It plans to use this to sell advertising to shops wanting to reach only local customers.

Another plan will be to invite members to provide more information about themselves in return for higher rewards. When I suggested to Mr Jorgensen that he should increase the hourly rate for customers who are willing to give their ages, income, hobbies and so on, he replied that the company already plans to offer "gold" membership, with rewards yet to be decided, for those willing to provide such extra data.

Better still, AllAdvantage.com can gather data from members' behaviour, and then use it to sell more targeted advertising at higher prices. "After we watch you surf for a while, you'll tell us who you are," says Mr Jorgensen.

AllAdvantage.com also plans to become a mega-affiliate for online merchants. Companies such as Amazon are willing to pay even the tiniest web site a 5 per cent commission on sales it brings in, Mr Jorgensen points out. So his company expects far more attractive terms for bringing millions of members. Members will receive most of the affiliate revenue they generate in the form of discounts added to their monthly cheques; the company will keep a proportion.

The biggest risk facing AllAdvantage.com is that it will grow too quickly and fall over. Mr Jorgensen believes its database, built by a big Oracle reseller, is robust enough. He has outsourced the printing of cheques to a third party company, and spent Dollars 150,000 on an integrated e-mail and phone customer service package.