Just adding to what MediaSquirrel mentioned:

http://techcrunch.com/2012/05/24/betterworks-shuts-down/

Thanks for the advice, I have reached out and learnt a great deal from some of their team members and hope to continue to learn from both failed and successful startups in the space. There are other similar and very successful companies in other countries, and thought it would be great to have US startup employees be rewarded as well.

Ok, that's one data point. Without further explanation, that's hardly an indictment of the business model. They could have failed for any number of reasons.

I seem to remember hearing somewhere that it wasn't a business thing but instead a founder-disagreement thing for BetterWorks

BetterWorks and AnyPerk didn't revolutionize employee benefits; they've had these types of arrangements for decades. All they really bring to the table is a web interface. Thus, the problem of scale (especially as it relates to customer generation) matters.

The problem was that the business model doesn't scale. In order to generate partners and customers, they needed a fairly large sales force. BetterWorks was simply never able to generate sufficient revenues to make the model work.