By now, if not soon, most of the major players, big and small, have established an Internet presence to supplement their off-line business activities. Retail suppliers, mail-order houses, and even factory outlets have well-developed and often impressive websites. Business is booming and profits are soaring; ecommerce is the latest buzz word at the industry trade shows; and, as transactions online gain consumer confidence, surfers and shoppers are digging out their credit cards and checkbooks at an exponential rate.
A large number of online businesses are just that and have never operated in “real” space. The Internet is an entrepuneur’s paradise with low startup and operating costs and a global market. No one needs to know if you operate your business out of a suite of offices or a corner of your bedroom. And “on the Internet, nobody knows you are a dog” (famous cartoon in The New Yorker Magazine, http://www.newyorker.com/).
But one man’s paradise can often turn out to be another man’s purgatory, figuratively speaking. Because of the anonymity factor on the World Wide Web, there are two separate classes of victims associated with less than pristine business practices on the Internet: the hapless consumers who are mislead into forking over their hard-earned dollars, and legitimate entrepreneurs competing for those same said dollars.
Some of the ‘Net-based scams that have recently caught my attention are presented as free business opportunities and, whether they actually cost money to replicate or not, their aim is to get a lot of people to pay good money for nothing. Yes, someone will get wealthy but it won’t be the webmasters who do all the work, promote the product and close the sale…it will be the mastermind who conceived the plan in the first place. That is the economic structure of Multi-Level-Marketing and Pyramid schemes both on and off the Internet.
Some key phrases to watch for are: effortless profits, residual income and “this is not a scam.” Some of their most effective propaganda is designed to make the potential patsy feel stupid if they don’t take advantage of “this breakthrough opportunity” to “get in at the ground level” and “make $40,000 to $50,000 a year doing nothing from the comfort of your own home.” “After all, what have you got to lose?”
We might well dismiss this underground economy and decide that its participants deserve what they get for falling for such a scam; after all, “You can’t cheat an honest man.” (P.T. Barnum) But is that really true? The following is a laundry list of assumptions that help explain how these schemes perpetuate and why they are so dangerous.
It's well known that pyramid/Ponzi schemes:tend to appeal mostly to the poor, uneducated and easily-led lower classes;
tend to have their biggest appeal during periods of socioeconomic instability and/or high unemployment;
have tendencies to exploit shortcomings in ‘make-work’ schemes otherwise known as ‘workfare,’ especially when the private sector is involved;
are almost always ‘too-good-to-be-true’ when it comes to phraseology;
will sometimes use testimonial letters employing devices or strategems aimed at DISCOURAGING independent verification of earnings claims (perhaps claiming the use of initials, etc., for same may be ‘to protect their right to privacy’ or some such Mickey Mouse--or may even signal that the real correspondents are paid-off ‘shills’ or ‘singers’ expected to say glowing things about the scheme to fool the unwary); and
have that one ‘fatal flaw’ they never tell you about--i.e., the danger that such schemes will actually collapse for want of new investors, taking especially new investors into the abyss.
(quoted from a newsgroup post with permission from the author, kahunaaccidentale@yahoo.com - see also: Council of Better Business Bureaux, Inc. and/or the National Fraud Information Centre)
In hard times, people have a tendency to grasp at straws out of desperation. Others tend to pull themselves up by their bootstraps and set out to create an independent income (independent of all but themselves and their customers) and the Internet has proven to be a great place to do just that. However, sorting the legitimate businesses from the latest shell game is a delicate and often impossible task which hurts free enterprise in ways that aren’t always easily recognized.
Having a great site and a good idea and the moxie to make it all work isn’t enough. ‘Netrepreneurs also need the confidence of their target market. This is accomplished in a number of ways, but mostly by establishing and maintaining a presence on the web and always conducting oneself in an ethical and conscientious manner.
Providing accurate and complete contact information, answering email in a timely and literate fashion, providing a product or service of substance and value: these are ways to gain a reputation that will drive your online success. SPAM (Unsolicited Commercial Email), off-topic and cross-posting to newsgroups, high-pressure or esteem-attacking techniques: these are ways to cheat people, to invade their privacy and to manipulate them into doing business with you.
Why is it, then, that honest, hardworking businesses are going broke in cyberspace while today’s flim-flam-(wo)men are laughing all the way to the bank? What is it about the modern consumer that makes MLMs and Pyramid schemes so successful? Is it economic desperation? Or, perhaps, the persistence and talents of the con artists? Or, do lots of people really have lots of money to throw away?
If honest business owners become as loud and obnoxious as the scam artists, will they get their share of the cyber dollar as well? That may be one way of making a quick buck, but it is not the way do business on the Internet! It takes two to do business: the consumer and the provider; and to do business effectively and ethically takes the same formula.
The ‘Net is proliferated with websites that focus on Internet marketing, the ins and outs, dos and don’ts, whys and wherefores. There is also a plethora of websites geared toward consumers, warning them about the possible pitfalls of spending their money on the Internet. Consumer protection, itself, is becoming a profitable business opportunity online with a large number of new services cropping up that provide “verification” or “authentication” of business offers, free to the consumer but costly for the company that needs such a stamp of approval.
I admit it. I’m an old-fashioned girl who yearns for the days when a (wo)man’s handshake was as good as (her)his word…days of trust and honor, days of fair deals for everyone. Nah, I’m not holding my breath waiting for a revival of that scenario and neither should anyone else. There’s just too many dogs on the Internet pretending to be something they’re not and getting away with it.
Copyright © 1998-2006 by Judy DeNeal
Originally Published Online - Spring 1999