Here's the Pitch and There's the Catch
by: J Square Humboldt
So there I was, cyber-cruising on eBay, checking websites for sale to see what's hot in the market these days ...
To no real surprise, one of the sites up for bid was a chain letter origination point. It was entitled 'The Five Dollar System.'
The site was well-designed and actually quite captivating in its simplicity. There was a short list on center-stage of the home page, containing three e-mail addresses. The background was green and the graphic was a handshake, providing a subtle setting for what you'd want to believe was a straight pitch.
However, what you ultimately got was a curve ball, and a back-door curve at that.
Here's how the vendor described the site's operating instructions:
"When a user visits your website, he or she sees 'the list' on the main page. You, the admin, will always be number 1 on the list. The user pays $5 to the number 1 spot (you), and then place themselves in the 3 spot, bumping the 3 to the 2, and the 2 to the 1. They then copy the list and send it to as many people as they can. It creates a chain effect and within a week or so, they will start to receive numerous payments themselves. I have arranged the website to have a promotion page. This is a page where you offer promotion at reasonable prices. This makes it so the user will not need to manually send the list to people."
Well, at least the vendor didn't resort to the 'teenager on Oprah' story.
He was advertising this deal as a site that was already making money. Here's what he quoted as his statistics:
"This site has an estimated conversion ratio of 43! That means, for every 43 visitors one will use this service. So this is just a numbers game if you buy 20,000 targeted visitors to your site and pay $36. How many visitors will actually buy the use the service? (20,000 / 43 = 465.12. Over 460 visitors! You can generate 460+ $5 payments in one week or less!"
Now, wait a minute. If the site is already making money, why is the conversion rate estimated? The vendor provided a screenshot of his alleged revenues, but does he really expect us to trust records that are blurred for any reason?
Doing the math, the vendor is stating that his site can produce $465.12 per day, or $3255.84 per week. If so, why would he be so willing to sell that revenue, settling instead for the $36 he could possibly realize in selling the buyer 20,000 targeted visitors?
Perhaps he figured to be compensated by a bid that is 20 times earnings, or something like that. I scrolled back to the auction action to see if this was the case. No, it wasn't. What was his opening askance?
$9.99!
For an estimated (by his own figures) monthly revenue lode of $97,675.20? Even if he was mass-producing these sites, that didn't make financial sense! (Incidentally, a check of eBay and other auction sites didn't show any other Five Dollar System on the block.)
When the bidding closed, 19 offers were recorded and the winner walked away with the site for $79.99.
What a deal! Now, he only has to find 16 suckers to cover the purchase price, probably around 60 more to cover the website hosting fees, and around 8-10 more to buy that targeted-visitor package.
He also has to sleep at night, but given the type of person who would even bid on this site, that may be too deep a thought for him.
Given that this site would join a kajillion others in cyberspace trying to lure the same suckers and given that the vendor has inferred the true value of the site by his sales and servicing prices, it should have dawned on anyone making a bid that no one in their right mind would sell such a system if it actually worked!
Turning to baseball for a simile, one of my pet peeves in that game is when there are runners on first and third base, and the pitcher fakes a pickoff throw to third and then wheels to see if he can catch the runner at first, napping away from the base, under the assumption he'd be leaning to second after seeing that he was being 'ignored.' Everyone who follows baseball knows that move is coming, and I'd like to say that it never works. However, once every five years or so, it does. That means we've got to put up with another five years' worth of pitchers who think it's going to work again. It's annoying!
I think the same thing must happen with these chain-letter sites. There must be enough of a trickle of suckers out there to keep these people clinging to the hope that they can attract enough of them to buy their dream house, $5 at a time. The key word is 'hope,' the most dangerous word in finance, along with greed. That's why a fabrication like 'As Seen on Oprah' doesn't need to be based on a fact (and if you read my previous missive, you know that it isn't). Hope can obscure common sense, just as it surely obfuscates the simple math we cited above.
Downlines of $5 losers just isn't practical as a money-making venture. It would take too many of them for the process to become even marginally viable, so unless the endeavor is going to be a conscience-free hobby, it bears only one real fact:
The only way to make any money at this game is to sell the website that touts it. And if you do, don't spend it all in one place. Try the 'cereal' aisle instead of the meat counter.
About The Author:
J Square Humboldt is the featured columnist at the Longer Life website, which is dedicated to providing information, strategies, analysis and commentary designed to improve the quality of living. His page can be found at http://longerlifegroup.com/cyberiter.html and his observations are published three times per week.
March 2006
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