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Paying for Popularity Can Be Fraud
- el_benhameen 8y agoTangential, but I love when non-fiction writers have a strong writing style. I was about three sentences in when I thought “boy, this sounds like Matt Levine”, and so it was.
- hkmurakami 8y agoEven the titles have a distinct Matt Levine flavor to them.
- mirimir 8y agoYou don't even need a "buddy". Because, if you know what you're doing, you can be the buddy. Or thousands of them. Whatever it takes.
- gowld 8y agoIt's a shame about the burger thing. If they'd found someone a bit savvy, they could have parlayed their fame into far more money than the cost of the tourist hordes, and been well places to either retire or re-set the business.
- jimbo999 8y agoit is almost like people are too greedy to realize the con /s
- jl2718 8y agoOr they do realize the con, but they don’t care because pure speculation works anyway.
- deleted 8y ago[deleted]
- delbel 8y agoI though this was basically the main business plan on flippa, like an open secret. And I have even heard that some books on "new york times best seller list" are just books moving between warehouses to generate invoices.
- hkmurakami 8y agoMany newspapers do this to inflate subscriber numbers and sell ads.
- weinzierl 8y ago> And I have even heard that some books on "new york times best seller list" are just books moving between warehouses to generate invoices. This probably doesn‘t help. The “The New York Times Best Sellers“ is a curated list. High sales don’t guarantee a placing on the list. This is not even a secret: When William Blatty sued the New York Times because The Exorcist had only been on the list, he lost the case. The defense was that “the list did not purport to be an objective compilation of information but instead was an editorial product.“ [1] [1] https://m.huffpost.com/us/entry/us_11409822?guccounter=1 https://m.huffpost.com/us/entry/us_11409822?guccounter=1
- yesenadam 8y ago>The Exorcist had only been on the list Think you meant "had not been". p.s. Enlightening article, thanks.
- weinzierl 8y agoI thought he sued because he was on the list only for a very short time when sales numbers justified a longer time. This is wrong and I should have written "had not been". Thanks for the hint.
- ryanmercer 8y agoI love their emails "Dog diaper changing article site making 70 billion dollars a month! Only 12k$!" Uh huh, sssssuuuurrrreeee.
- Jerry2 8y ago>I pay my buddy $10 million to buy a million e-widgets from me. >My buddy pays me $10 million for a million e-widgets. How does this part work? Is this real money changing bank accounts or just promissory notes/credit?
- goatsi 8y agoGenerally the e-widgets will be on app stores or somewhere like Amazon so real money will have to move. On a smaller scale companies will often use Paypal to send people the full cost of the item after a positive review is posted.
- georgeecollins 8y agoYou hire a firm to download your app, watch an ad or make a purchase. The firms gets a bunch of people in a virtual sweat shop to do this. You lose some of the money to labor costs and fees. But you also make some of it back in "organics" because your app goes up the charts. There lots of companies that do this, but they dress up what they are doing as marketing.
- gammateam 8y agoThe article offers one example buried within its rant about private equities and crypto offerings I thought that was funny Basically all they had to do was disclose to investors that they were buying downloads. This can be done in a variety of ways such as mentioning a contract with the firm or service providers, and that is enough information for potential investors to look up the company.
- istinetz 8y agoYes, but the whole point of buying eyeballs is to deceive investors. If you tell potential investors, "I have 14 million unique monthly users, but I pay for 13 million of them", they're just gonna stare at you blankly and not invest.
- gammateam 8y agoThats why you dont word it like that But you can do it compliantly, like some of the examples in the article did
- TangoTrotFox 8y agoThis is also why I think the idea of combating fake reviews is not really viable. I sell a widget for $20 with real costs of $8. I expect positive reviews will increase my ranking as well as purchase rate the order of let's say $5million+. I give my widget to 10,000 people on the condition that they agree to write a positive review for it. I just spent $80,000 (and then some change to get in contact with those 10,000 however) to make $5 million+. And those reviews are "real". The whole point is that as we enter into an ever more connected world popularity of views start to mean less and less because "popularity" can be so easily faked. Imagine once there are bots that can compellingly market products (or ideas/politicians/etc) in language to the standard of a Tweet, which isn't exactly a high bar. Suddenly now you could have literally millions of "people" advocating for something that perhaps only a handful actually want or believe in. It's also perhaps presumptuous to imply that this technological milestone has not already been reached. Even draconian ideas like trying to remove anonymity would likely do little to nothing since, as in the reviews example, people can simply be incentivized to play ball for what amounts to peanuts compared to the stakes for those doing the incentivizing.
- deleted 8y ago[deleted]
- athenot 8y agoThis is the most positive thing I've read in a while. Perhaps we'll reach a point where it becomes ingrained in society that popularity in numbers actually means nothing. Quantities of shallow praises become worthless once the praises are indeed exactly equal to zero. Then maybe our tribal instincts will kick back in and we as a society will return to seeking few but high quality praises, from people we trust and with whom we are connected on a human level—ie. deeper, multi-faceted connections.
- Asooka 8y agoThere's a fool born every minute, so I doubt such knowledge will become common organically. Better yet, have a class on basic tropes used to manipulate your decisions aimed at teens taught at some of the free online universities (e.g. Khan Academy). I don't want to suggest rolling it into an actual high school class, because I don't think official regulated school classes are agile enough to handle the rapid change of the online landscape.
- server123456 8y agoddsfdsfdf
- hopranch 8y agooh?
- tehsauce 8y agoIsn't paying for popularity the basis of advertising?
- oliveshell 8y agoSure, in a certain sense. But the subject of the article is something fundamentally different in lots of the nuanced ways that a useful, complete mental model of the world so annoyingly and doggedly hinges on.
- _Nat_ 8y agoThey mean that it's fraud to mislead people by gaming their assumptions about performance indicators. Specifically, they're saying that paying for one kind of popularity (e.g., sales of widgets or good reviews on Amazon.com) is fraud when that popularity is meant to trick people into believing that it implies a subtly different kind of popularity (e.g., sales of widgets from independent third parties or good reviews on Amazon.com from unbiased reviewers).
- Derek_MK 8y agoThis isn't advertising. The article talks about a specific action, which is paying someone to buy cheap things from you, so you can tell investors that you have a lot of sales.
- lordnacho 8y agoFairly well know in old school business: You buy a crappy house somewhere, and you sell it to a friend for a lot more. He might reciprocate, too. You take your increased prices to the bank as evidence that you have more equity, which you use to back a loan. You buy another crappy building.
- omarchowdhury 8y agoWhy would the bank loan you based on a house you just sold? Either way, bank lenders send appraisers.
- lordnacho 8y agoI don't know why, but sometimes they are not as thorough as they should be with due diligence. Point is in illiquid markets, sometimes there's no price other than what a few people in the consortium have paid to swap stuff amongst each other. Even if you sent an appraiser, he'd have to take traded prices into account.
- isolli 8y agoWell let's see how appraisers fared here [0]: "Intra-family flipping In the past two years, the Soni family essentially created their own market in Santa Ana by flipping enough homes in a small area, said Lackner, the appraisal fraud specialist. In at least three cases, homes flipped from one family member to another – sales later used by appraisers to give credibility to high asking prices for other properties in the area." [0] https://www.ocregister.com/2009/11/12/wamu-loaned-millions-to-oc-home-flippers-with-fraud-history/ https://www.ocregister.com/2009/11/12/wamu-loaned-millions-t...
- JumpCrisscross 8y ago> You buy a crappy house somewhere, and you sell it to a friend for a lot more This is an inefficient way to inflate asset values. What you’d actually do is put your garbage house in a special purpose vehicle (SPV), sell 5% of the SPV to your friend at a stupid price, get the SPV appraised based on that transaction, have the SPV take out a non-recourse secured loan based on that appraisal value, pay your friend back (plus something for him) and then jingle mail away. The key is leveraging the cash your friend has to put in. That’s the scarce resource. Disclaimer: I am not a lawyer. This is not legal advice nor advice of any kind. Please don’t do this.
- owens99 8y agoThis is the trick for popular restaurants/take-out food in NYC: Buy a really small shop so only 3-5 people can fit inside and the rest have to form a line outside. Then take orders and serve people really slowly so the line builds. Pick up the phone even if it doesn’t ring and pretend you are taking orders, etc. Pretty much a textbook strategy. Food must still be good, but the anticipation from a long line makes it taste better and attracts a lot more customers.
- tdeck 8y agoThere are a number of ice cream places that do this in SF (Bi-Rite comes first to mind). Basically they encourage everyone to slowly make up their mind while sampling every flavor, so the wait takes at least 20 minutes.
- tokyodude 8y agoThat's a marketing strategy and not just nice service?
- wmeredith 8y agoIt can be both.
- Filligree 8y agoSounds like win-win to me.
- SmellyGeekBoy 8y agoUnless you're at the back of the line ;)
- notyourday 8y agoBecause we all know rent is free and it is better to be seen as cool selling to 30 customers than selling to 300. That's the kind of marketing that makes places have "Marshall's Legal Possession" papers attached to the door.
- pasxizeis 8y agoCurious though: if I give a lot of money to a friend, don't I have to somehow report this to the IRS or something? And when he goes on to buy this stuff, doesn't he have to report somehow where all this money came from?
- ptr 8y agoSure, you need invoices. But I don't think this is illegal with respect to the IRS. Though if your friend doesn't have $10 million in his LLC, then your friend will become insolvent and that might be illegal. On the other hand, if you net your invoices regularly, then maybe the time spent being insolvent is short. IANAA.
- jeremyjh 8y agoBusinesses only pay taxes on net earnings, not on gross revenues. As long as you both do not show a profit you won't have tax liability.
- SmellyGeekBoy 8y agoBusinesses still need to report all revenue, even if they're only taxed on the profit.
- cyberjunkie 8y agoPretty much most of marketing and nearly all of advertising then.
- deleted 8y ago[deleted]
- humanetech 8y agoTangential to the article, but on-topic to the title: I saw the Dutch documentary #followme [0] the other day, about the incredible fakeness of Instagram, where for a couple of dollars you can buy 1,000's of Likes / Followers. And everyone - up to the kids in high school - is doing just that, to buy popularity (the metrics have actually become the determining factor for real-life popularity for many people). Apparently one of the big shots in this shady industry is a Dutch guy (multi-millionaire now), who manages tens of popularity-boosting websites directly or indirectly (and not only for Instagram). He caters to celebrities as well, who sometimes buy millions of followers. For these high-profile actions they arrange special events, according to the docu, like publishing 'fakish' news articles to established news sites (Forbes was mentioned) to coincide with the artificial boost in popularity. This can be considered fraud too, as 'popular' users benefit from influencer marketing deals (free clothing, travel, tickets, money, etc.) and there is a continuous cat and mouse game between illegit popularity boosters and marketeers. Professional investigative companies jumping on this train to filter out the bad apples, etc. [0] https://www.instagram.com/tv/BqcnFY8gEgH/ https://www.instagram.com/tv/BqcnFY8gEgH/
- speps 8y agoIs there an English subtitled version of the documentary?
- humanetech 8y agoNot yet, that I know of. But I have sent a inquiry / request to the producer Nicolaas Veul. I agree it would be great if that was added.
- swongel 8y agoNot sure if available outside the Netherlands, however there's a version on the NPO 3 website with 16:9 aspect ratio: https://www.npo3.nl/followme/22-11-2018/VPWON_1291086 https://www.npo3.nl/followme/22-11-2018/VPWON_1291086
- choot 8y agoHe only lived in Netherlands, he wasn't dutch. I think you talk about this guy: https://www.linkedin.com/in/lorenzo-green-86161610/ https://www.linkedin.com/in/lorenzo-green-86161610/
- kristianc 8y agoWhen this was floated on Twitter the other day, a number of prominent VCs chimed in to say that due diligence would see this coming a mile away.
- cowsandmilk 8y agoSure, their VC firms might do the due diligence, but Giga Entertainment (in the article) has a form D showing there were at least 179 accredited investors who acquired shares. There's a lot of people not doing due diligence that you can defraud.
- ian0 8y agoWell they are hardly going to say the opposite :P
- CPLX 8y agoVC's always say that. I'm sure some do more than superficial due diligence, sometimes, but honestly I don't really believe them, at least not in the early stages. For companies at those stages I wouldn't be surprised if more than cursory DD had a negative ROI anyways.
- FilterSweep 8y agoYep just look at Clinkle and (in particular) Theranos
- amelius 8y agoGrowth hacks can be fraud. No surprise there.
- foamclutching 8y agoNumber 7 though... :))) "I sell 5 percent of the company to investors for $100 million and spend it on yachts."
- DanielBMarkham 8y agoI don't understand where the "fraud" line is. I suspect many more don't either. It's common knowledge that to get a good network startup going, you need to sock-puppet the hell out of it. It's common knowledge that Amazon is full of scam reviews. It's common knowledge that many Twitter followers are fake, or bots. It's common knowledge that Instagram pics are photoshopped-up. So when you see a picture of an attractive person on Instagram using some product, go to your Twitter to see a famous person recommend it, then click over to Amazon to read raving reviews, is that fraud? Because that's how the web works. It's the same exact game, you just don't give the money directly to your buddy.
- dboreham 8y agoSo a crime isn't a crime if it is commonly perpetrated?
- DanielBMarkham 8y agoI don't know. I'm honestly confused. The best I can tell from the article, if it looks too directly like fraud, it's fraud If you involve a few players and do it indirectly, it's marketing? The danger here, which I guess needs to be explicitly-stated is that if public perception becomes a big part of the decision whether to prosecute or not, we've fallen completely into political crime territory, where the ultimate bad thing to do is look bad. That's not going to work.
- TeMPOraL 8y agoI think I have the opposite view from you. I see how this is not technically fraud, but I don't understand why isn't it. It should be. All the companies that engage in such practices can go to hell; I do my best to never do business with any that I know does that. It's sad that lying to people and exploiting them is not only accepted, but considered a legitimate standard practice.
- DanielBMarkham 8y agoMy view is that I don't understand. It looks like you do. Yay! I will try to explain to you why I don't understand. Maybe you can help. Computers are an extension of our brains. What I think is happening is that people doing a whole bunch of immoral things online: lying, sock-puppeting, and so forth. But there's a not direct person-to-person link where money trades hands and the other person gets screwed. Instead it's much more subtle than that. When you add it all up, yes, we agree, a lot of this looks like fraud to me. But maybe it's fraud in the moral sense and not fraud in the criminal sense? If I tell my Uncle Amit that his new suit looks good on him, even though it doesn't, then goes out and buys a dozen, is that fraud? What if 100 people he doesn't know participate in the same kind of lie only using a lot of different tech? My point is that simple lying is not a crime. So it can't all be a crime. And now I'm back to trying to figure out where the line is. ADD: As I typed this, I noticed that my FB notification went off in one of my browser tabs. I click over -- and FB is notifying me of something it already notified me of. But got me to click! I'm seeing a lot of social sites doing this double-notification stuff. I understand about distributed databases, that there might be a reason for it. But after a while, this starts to look like a whiny, pathetic attempt just to get me back looking at more Facebook. Is that fraud? How about when Facebook both shows more of my stuff and more of the people I interact with to me -- while we're all online together, hoping that we'll start interacting directly -- and staying on FB? There's an enormous amount of this online. FB is only used here as an example. How about when you hellban people and they think they're typing comments into a forum but they're really not? You're directly taking their time and energy away from them by lying. I hate all of this. I'm just not sure it should be a crime.
- imgabe 8y agoI'm with it until "I sell 5 percent of the company to investors for $100 million and spend it on yachts." Aren't investors going to notice that during the bankruptcy proceedings, the $100 million is nowhere represented among any assets of the company and the founder suddenly has 10 yachts? That wouldn't raise any red flags? Wouldn't you have to produce some sort of accounting records showing where the money was spent on salaries, office space, Facebook ads, etc? I know there's a ridiculous amount of money sloshing around Silicon Valley, but I still find it hard to believe that $100 million is going to disappear and nobody is going to bother asking about where it went.
- 4ndr3vv 8y agos/yachts/salaries They're not _actually_ advocating buying company yachts. But a CEO salary? Sure. You can buy your yachts with that.
- imgabe 8y agoSure, but nobody is going to be suspicious that you paid yourself $10 million/year while the company was losing money?
- baddox 8y agoI’m sure they’ll be furious, and your punishment will be a $200m severance.
- fenwick67 8y agoHow much was Bezos making while Amazon was in the red? Or Jack Dorsey?
- imgabe 8y agoAmazon and Twitter eventually went public and made their investors umpteen billions of dollars, so I'm sure they don't care now. If they had gone bankrupt instead, and Amazon was nothing but a static HTML page while Bezos was building his own marina I imagine someone would have been asking some questions.
- lesss365 8y agoSomewhat related, it seemed like Netflix (and many others) was carrying out a similar strategy to inflate their number of subscribers to show investors, by allowing users to sign up for endless free trials through creating new email addresses. Only recently did they announce their banning of this come January, in an earnings call, IIRC, which I'm assuming is due to investors catching on and potentially being more skeptical following the recent drops in the NASDAQ. Not to say that they don't offer a solid service of value, just that it seemed like they enabled this as a means of inflating their numbers for investors. Random side note, people used to be able to do this with Seamless to get their sign up discount with any order, using a combination of creating a new email address, adding the new email address to a single PayPal account, generating a new Google Voice number associated with the new email address, and providing a random name. It appears they've picked up on it and have taken measures to prevent people from doing this. Might've previously allowed it for inflation reasons, but likely stopped due to their gain in momentum and it being too costly to allow with little to gain
- throwawaylolx 8y agoSounds like most ICOs: the founders can buy their own supply at no cost, making all cryptocurrencies that ICO'd (Ethereum, EOS, etc.) inherently insecure and centralized. This is why blockchains that distributed their supply via PoW work: you cannot buy your supply without proving you put in the work. The founder cannot fake hash power, so the distribution is "fair." Despite everyone trying to "improve Bitcoin," I can count on one hand coins that didn't have a significantly worse distribution than Bitcoin, which makes them dead-on-arrival. This applies to coins such as Cardano and Nano as well whose distribution was insecure, making them inherently unsafe.
- TeMPOraL 8y agoTrue. And because I haven't seen any proof that cryptocurrencies based on something else than PoW can work, I believe they all need to be burned to the ground. PoW cryptocurrencies are an environmental hazard.
- throwawaylolx 8y agoThat doesn't necessarily follow from what I said: my comment was strictly about the distribution of incentives. A PoS-based cryptocurrency can bootstrap a fair distribution through airdrops over PoW-distributed cryptocurrencies, sidestepping both the shortcomings of ICO distribution and the environmental impact of PoW coins.
- SonicSoul 8y agoHeh I live near the Supreme store in nyc and every weekend without fail people start to queue up around the corner in the morning. Everything about this brand (down to its Logo which was “appropriated” from Barbara Kruger “I shop therefore I am”) is about appropriating other designs. So they’re essentially selling hype at huge markup via tiny store and line round the whole block. I see people stand in this line all day in the winter! Although some of them are enterprising individuals who re-sell these items at 500% profit
- neom 8y agoSupreme is one of the original new york streetwear lines, it's practically an institution. I used to work in that exact building for years and I couldn't disagree with you more. I think there is something really cool about the kids lining up to get a drop, if you go chat with them for a while, they know every supreme, who inspired it, and given the massive lines are usually always collaborations - why the collab is special. Given Supreme has been operating in the city for 25 years and not much has changed outside of the collabs they do, I don't think you're correct about them being "about appropriating other design". Even the Barbara Kruger comment is a huge stretch, inspiration and appropriation are not the same things.
- cyberpunk0 8y ago... it's a stupid t-shirt brand. don't be blinded by some consumerist religious cult
- rhcom2 8y agoThe founder "acknowledged the Supreme logo was based directly on Kruger's work." https://www.complex.com/style/2013/05/supreme-court-the-12-greatest-moments-of-supremes-legal-battle-with-leah-mcsweeney/128 https://www.complex.com/style/2013/05/supreme-court-the-12-g...
- deleted 8y ago[deleted]
- dawhizkid 8y ago