So basically, all you get for your $20 a month is a badge saying that you're cooler than people who didn't pay. And for your premium membership, you still get the same crap service that freeloaders get.
Are people really that stupid? Asking people to pay something for nothing reeks of arrogance. I'm starting to think Frind got lucky with PoF.
That's the psychology that the luxury goods market exploits. A $30,000 watch won't tell time any more accurately than a $30 watch, nor will it look much better than, say, a $500 watch, but some people who can spring for luxury items do simply as a token of wealth. Just look at the stereotypical nouveau riche spending habits.
On the ludicrousness spectrum it's slightly less ludicrous than virtual gifts, I'd say.
As for POF/Markus making more money that way, I guess it's like a game to him, figuring out what works and getting a kick out of beating (up) the big guys.
Have you been living in a cave for all of humanity's history?