Ponzi



  • Last week on the college's mailing list we got an email from one of my would be classmates, about a way to make money on the internet with little to no effort.

    He said it was an affiliate business program. And also that it was in a multi-level structure - which means that if you get someone to join the business, you get part of their revenue. If the people you got to join bring in more people, then they also get part of the revenue of those they've brought in.

    In so far, nothing was out of the ordinary. Affiliate marketing on the internet is as old as banners, and multi-level business, all criticisms apart, is a method employed by companies such as Herbalife and Amway.

    The problem was the product he was selling. It was called... "The Powerful Marketing Kit"!. It's a collection of books, I think half a dozen. One of them teaches you how to do marketing on the internet (basically, how to write rotating ad banners scripts). Another is called, in a loose translation to English "How to buy things from China" (Deal Extreme, anyone?). The rest are focused on the art of selling a product known on the web as... "The Powerful Marketing Kit"!.

    Even funnier is how you get the kit. You don't actually buy it, at least not directly... You register yourself as a reseller of the kit, and then you get one for yourself. The person who brought you into the business gets small share of the registering fee. Half of it goes to the guy who created the kit, and the bulk of the rest goes to the people a limited few levels upwards from you in the pyramid.

    So this guy paid some 50 bucks to buy this kit, and now he's trying to sell it to everyone he knows so he can make 5 bucks a kit. Just so that other people can then sell more kits, for him to make 5 bucks per kit again.

    I questioned him about how the sanity of this, comparing this kit scheme with some other, well, more honest business. After all, there are other ways to make money during one's waking hours.

    His response: "Well, I don't know about other lines of work*, but I bet they get tiresome after some time, right?".

    *AFAIK this guy has never jobbed before.



  • So the guy was targeting people like himself (that is, lazy and incompetent)?  I don't really see a problem with that.



  • @Renan said:

    multi-level business, all criticisms apart, is a method employed by companies such as Herbalife and Amway.
    And that makes it less of a scam . . . . . how?

    One day, a co-worker came up to me and started giving me a big sales pitch for Amway.  He was telling me how great it was and how much money you could make.  He told me a story about a guy who used to be a college professor but quit his job because he was making $100,000 a year selling Amway (This was many years ago when $100,000 was a lot more impressive).  So I said to him "If Amway is so great, why are you still working here?"  He walked away and never talked to me again.

    About a year ago I started seeing Amway televsion commercials.  In one of them, they claimed that they have $8 Billion a year in revenue and "we help more than 3 million people own their own business".  Sounds pretty impressive.  So I did the math.

    8 billiion revenue divided by 3 million people selling Amway products = an average of $2666.67 per person, per year.  And that's gross revenue.  There's the cost of the products, and Amway has to make a profit (and pay for all those TV commercials).  So even if you get to keep 50% of what you sell, which seems ridiculously high, you're making around $1300 a year --- just over $100 a month.  Doesn't seem so impressive now.

    @ Pre-Emptive Pedantic Dickweed Addendum said:

    Yes, $100 a month is an average.  Obviously there are people making more than that, but that just means there are lots of those 3 million "business owners" making little or nothing.



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  • I've been offered those kinds of schemes a few times. Very recently, I was offered it with a modern twist: you "pay", via clicks, to join a web group which basically exists to defraud Google ads by browsing each other's monetized sites via social media links in order to generate false impressions.

    The simple way I've found of getting them to shut up and leave me alone is to ask them, "Where is the money generated?". Well, actually, that question alone doesn't do a lot of good, since you usually have to explain it, and sometimes the explanation trails off into non-zero-sum economic theory. But after a small chat, once they realize they themselves can't figure out where the money is really coming from or how it's being created, they stop to think long enough for me to move on.

    (Once, that technique didn't quite work, as instead I was begged to go to some seminar meeting that would explain everything, promise. I asked him flat out why he couldn't explain it himself, but he just kept going on about the seminar. I wanted to attend in order to be a disruptive troll jerk slash hero, but I already had plans...)



  • The pyramid scheme is pretty fun to do the math against since if you are not one of the very first people to be involved in it you are not going to make much money.  I once did some fun math when someone tried to bring me into one.  The numbers were pretty bad.  You only made money comparable to a salary if you were in one of the top 5 tiers which only equated to something like 500 people, and that was assuming that every household in the US bought into the service.  Then I pointed out that all of those positions were already taken and that under ideal circumstances based on how far it had already filled out that I at best could make only $6,000 a year (again assuming every single household in the US bought into it).



  • @Renan said:

    The problem was the product he was selling. It was called... "The Powerful Marketing Kit"!
     

    AFAIK these schemes are less illegal when there's an actual product involved. The illegal ones involve no products, just the promise of $thousands if you plonk down $hundreds (or whatever).




  • @Xyro said:

    Where is the money generated?
     

    In a printing press somewhere. Normaly in the same country it's used, but there are exceptions. Didn't you mean wealth?

    </pedantic>



  • @Anketam said:

    and that was assuming that every household in the US bought into the service.
     

    I can get you a deal. Send me 100 dollars and I'll send you the IPv6 addresses of ten thousand non-humans in our arm of the galaxy. Convince two percent of them to send you 100 dollars each and you will have doubled your money. No limit on the size of the pyramid!

     



  •  MLM can become legitimate if most of those involved are there because they want the product - the cleaning products or cosmetics etc. If there are a few hundred buyers for each person selling, it's all good. It's a legitimate, if inefficient, way of distributing something.

    If you can't think of anyone wanting to be involved for the products sake - it's a pyramid scheme. Send money and you are a fool. Receive money and you are a criminal.



  • @El_Heffe said:

    @Renan said:

    multi-level business, all criticisms apart, is a method employed by companies such as Herbalife and Amway.
    And that makes it less of a scam . . . . . how?

    Well, eventually someone actually gets a physical product, and the business isn't entirely based on recruitment of new members. Yes, that's a big part of it, but again, there's the actual selling of products.

    You CAN make a decent living off Amway selling, but you have to be a pretty awful person to manage it. Those who make anything close to reasonable money will be constantly harassing family, friends, and coworkers to buy something from them that could more easily purchased from a regular shop.

    Basically, it's not really a scam. It is actually a business. It's just a terrible business.



  • @_gaffer said:

    Those who make anything close to reasonable money will be constantly harassing family, friends, and coworkers to buy something from them that could more easily purchased from a regular shop.

    I had a guy try and sell me Amway while we were both watching our kids in the playground. He started the conversation with a joke when I told my son "Mummy's in the potty".

    I could never do it.



  • The best (best not meaning good) pyramid schemes sell a service and not products.  With those you only have to get your friends and family to switch a service and let it do its thing.  Also find it funny when they seperate their business into two companies the 'ethical' real business and the 'marketing' (aka pyramid scheming) business, that way when the pyramid scheme gets exposed as what it is and the business goes under the actual business can protect its reputation. 

    Since only the top tier people make money in this scheme, I propose that we create our own pyramid scheme that would put us on the top and make tons of monies.



  • @AndyCanfield said:

    I can get you a deal. Send me 100 dollars and I'll send you the IPv6 addresses of ten thousand non-humans in our arm of the galaxy. Convince two percent of them to send you 100 dollars each and you will have doubled your money. No limit on the size of the pyramid!
     

    Do all the fleas in your trailer have an Arduino attached to them?



  •  The real WTF is citing "Ponzi" in a thread about pyramid schemes. A Ponzi scheme is a different one.



  • @Medinoc said:

    The real WTF is citing "Ponzi" in a thread about pyramid schemes. A Ponzi scheme is a different one.

    More of a specific type of pyramid scheme, really. The main thing is that only the perpetrator is supposed to know that it's a pyramid scheme dressed up as an investment.



  • @Medinoc said:

    The real WTF is citing "Ponzi" in a thread about pyramid schemes. A Ponzi scheme is a different one.

    Wow a pedantic dickweed, here on DailyWTF? Shocking.



  •  @robbak said:

     MLM can become legitimate if most of those involved are there because they want the product - the cleaning products or cosmetics etc. If there are a few hundred buyers for each person selling, it's all good. It's a legitimate, if inefficient, way of distributing something.

    If you can't think of anyone wanting to be involved for the products sake - it's a pyramid scheme. Send money and you are a fool. Receive money and you are a criminal.

     

    Well, I've gotta disagree there. Since the only product(s) sold using (a form of) MLM with an established and proven track record of sellers who really want to use the product is illicit drugs. In most juristictions selling them is a crime. It is interesting though how production constrained supply, and resource constrained demand can somehow make this weird business model viable. 

    Guess thats how we'll get our food after the singularity / apocalypse... 

     



  • @caffiend said:

    Since the only product(s) sold using (a form of) MLM with an established and proven track record of sellers who really want to use the product is illicit drugs.
     

    What about Tupperware? That is a useful legitimate legal product, sold using a form of MLM!

    Hmm...

    @caffiend said:

    Guess thats how we'll store our food after the singularity / apocalypse... 

    :)



  • @Lorne Kates said:

     

     

    Ever since I got a 1080p monitor text in lots of images just looks unreadably tiny.

    I can only imagine what this image would look like on one of those fancy new "retina" displays.



  • None of what you're describing falls under "little to no effort."

    Course, I never found lying to people to sell something to be easy.  



  • @MiffTheFox said:

    I can only imagine what this image would look like on one of those fancy new "retina" displays.
     

    Super-high dpi displays like Retina don't display images at a 1:1 pixel ratio. That would be stupid. I posit that you've never seen such a display.

    Instead, raster things are rendered at some dpi like 72 or 96. Vector stuff, like text, will take full advantage of the display's pixels and be super-sharp.

    Depending on the image and the resample quality of the software, it provides images with that fun slightly blurry scaled-up look.


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