Tuesday, January 19, 2010

Scam or Just a Bad Deal? And the Role of Compassionate Cynicism

A couple of weeks ago, I got a very un-detailed offer in the mail about attending an event that would help me create or enhance a web business. It offered a free lunch at the presentation and free MP3 player. I already have two free MP3 players, but I only had to open a checking account and complete a survey for the other for those. So why do I need another – I could visualize scenarios where the other two were in use, and a third would save the day! Okay, free is addictive. And a free lunch just tastes better. More legitimately, a friend does sell beautiful cards over the web, and I hoped to glean tips to advance that (see http://larachasephotography.com ).

Last Tuesday:

I am sitting in a ballroom at the Marriot at RTP with about 100 people who have come for a free iPod, free lunch, and maybe some information on Internet marketing. Even at 5 minutes before starting, it smacks a little of a scam. A testimonial on a brochure says "that speaker changed my life." “All testimonials shared at this event are not typical” is presented on a small portion of the screen up front. It is an exclusive event, a fact that is shared with us several times. It’s a crowd on the older side. The cars in the parking lot don’t seem especially nice or especially bad, so I guess it is a middle class crowd. It’s racially diverse, so I guess they choose a cross section of Durhamites and not the majority white Cary residents working next door in RTP. I don’t know how they choose us, exclusively. They never say. What about me statistically says that I am a sucker?

The presentation is by an enthusiastic motivational speaker-type salesman. He uses a sermon style call and response. “Do you want to make more money using a web site? The crowd responds, “Yes.” My pastor doesn’t use this style. When he asks a question, he would prefer that you disagree with him than tell him a scripted answer.

“Who here uses the web regularly?” Raise your hands. The crowd obliges, as do I from peer pressure although as the presentation goes on, it becomes more of a hand flicker. The Indian guy a row down is even less enthusiastic, but most people are into it.

“Write this down,” he commands and again the crowd obliges. I pull out my pen to avoid seeming out of place as I type my suspicions into the phone. Some excuses for not achieving: I'm broke. I'm too old. I don't know computers. To me, these seem like pretty good reasons to seriously consider avoiding a web business. But then he tells us, “There is no discrimination except self discrimination, unlike the real world full of prejudices. You can sell anything. You don’t need to have any computer skills.” The problem is the approach: wrong web site, no marketing, and no support. The solution storesonline.com, a company with 12 years of company experience, listed on American stock exchange, and it won SSPA Award. I checked this out later, and then did win an award, but it essentially for having a good call center, not for making any of its customers money (http://www.thesspa.com/press_releases/10_2_07_star_awards.asp ) The parent company, iMergent, is publicly listed, but a list of headlines related to it reveal a consumer protection settlement in Australia and a class action suit in the US (http://finance.yahoo.com/q/h?s=IIG&t=2009-12-22T16:11:07-05:00 )

Web site logins would be available at the end of the presentation, with sites instantly ready for design and selling. He then tells us about drop shipping, selling first on your web site and then buying the product afterward to ship directly, with no risk and no effort! No risk and no effort, why hasn’t anybody else thought of that? Now we start to get to the details: he announced a $199 one time startup fee, with a $24.95 / month published-site fee.

But you can save big today and the $199 fee gets reduced to $58 if purchased today, confirming my fears about timeshare type selling. The time share people had previously gotten to the most fiscally conservative family on my street. If they could them, they could crack anyone. My parents seem to be gradually more tempted by the 3 hour presentation. That’s not always a scam, but for a lot of the audience a week of paying for hotels would be cheaper than the annual fees, let alone the upfront capital. The same story for the web site, a cheap Yahoo store or eBay site, would be a better start.

Part of this was a test: could I remain cynical and not buy anything? I didn't entirely trust myself -I thought of leaving all credit cards and checks at home. I often cannot resist new technology. But my wife’s Etsy site was almost free, with fees as you sell. My domain is $10 a year.

Then we get deeper. Having a site is not enough – you need SEO, search engine optimization, to make your site number one on search engines. The pro version of the site tool will only cost you $3600. It sounds like a lot, he says, but the 20% of the people who make 80% of the money aren't afraid to spend the money buy the pro version. Financing is available. "Stinkin' thinkin’" prevents you from making an investment. I call it “reasonable prudence” to require a business plan and a product before investing thousands of dollars. (By the way search Turf Management Ethics, and we are number one. Obscurity breeds searchability).

At 13:07, I want lunch – I haven't listened to a single speaker for 90 minutes for years. Then we get an announcement that we can know even more! On Friday Jan 22, there will be a marketing workshop from 9-4. With the setup cost of $199 reduced to $58 today, the cost also includes workshop, but only if you buy today. Did I mention that you NEED TO BUY TO-FRICKIN’-DAY. That workshop would then give you the opportunity to buy the search engine strategies for thousands of dollars. Okay, you ratchet up the pressure high enough, and I’m getting more suspicious and much less interested.

It goes from a bad deal to almost cruel, when he mentions that your card or check will not be billed until next Monday, so you have time to get money in the account. Should you be buying this if you don't have $58 in your checking account? “Was it worth it to the women who could stay at home with her kids?” he asks. My stinkn’ thinkin cynicism shields were up. If I had to do it again, I hope I would have stood up and announced a scam alert. It would have taken a few minutes for security to drag me out. I could have bought my own lunch. I don’t want to be paternal, but that guy in the wheelchair and people of various ethnicities had suffered enough – they didn’t need to spend money that they wouldn’t get back.

On the other hand, it seemed pretty obvious that this was not a good deal. Why didn’t everybody walk away? I guess if you are shown enough successful Superbowl athletes, you start to think you can catch that winning pass, too. Call it the American Idol Syndrome: U2 sings and makes a lot of money; I have a mouth, just like they do. My mouth can move air, so I can make a lot of money, if I just sacrifice enough. The idea that the presented results are not typical took up less than 1% of the presentation, but was 99% of the importance. Economists call this a tournament system – the top dogs do very well while everyone under them gets very little.

So pray that the electricity goes out in downtown Durham on January 22, so that people won’t buy the expensive SEO options, without careful financial planning and a business plan. But history says people will buy it. And for most people it will be a lemon, but without the scrap metal and used tires to sell off. In the end, I don’t know if it’s technically a scam – it’s just a hard sell with very one-sided information. They are not stealing money out of your bank account. They just appeal to your desire to be well off and independent and get you to write the check.

Searching for information on this, I came across a review. The review is straightforward. The sad thing is the comments of many people who feel they got ripped off:



Katie said...

Daniel, we got the very same invitation here in Macomb! I love your story - sadly I have been in so many of those annoying presentations and never even got a free lunch! Time shares are worse - they practically bar the doors and refuse to let you out until you sign on the dotted line.

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