7 ms·

When Is A Good Business Model A Scam?

23 points by ironkeith 17y ago

byoung2 17y ago
For the baby gender business idea, why not offer a 100% money back guarantee for all wrong predictions, no questions asked. You would be right half the time, and that should be more than enough profit considering it costs nothing to run.
- RiderOfGiraffes 17y ago
  That is illegal. What would be more interesting would be to offer to return twice the money, less an admin fee of 10%. While on the surface that appears to break even(ish), you can rely on inertia for people not actually to ask for their money back. With the 200% guarantee, that might not even be illegal. EDIT: Finally got to read the actual article and realised that this is already covered. Sorry - /mea culpa./
  - byoung2 17y ago
    What law does that break? It seems the same as any other infomercial product's claims: "If this product isn't the best widget you've ever bought, or you're not completely satisfied for any reason, we'll refund your money" In this case, if the prediction is wrong (not the best widget/customer not satisfied), they can get their money back. Come to think of it, the prediction claim isn't much different from most test prep higher score guarantees.
    - RiderOfGiraffes 17y ago
      In conversation with a UK lawyer it would be deemed illegal as you are misrepresenting the "product" for which you are taking money. It's effectively the same law as covers items sold where they are clearly intended for a particular purpose, but then try to claim no guarantee that they are, in fact, fit for that purpose. UK law is very broad in its protection of consumers against "products" that are presented in a deceptive manner.
      - thetrumanshow 17y ago
        Call the product "I Will Guess Your Baby's Gender". www.iwillguessyourbabysgender.com
      - byoung2 17y ago
        I think the laws are more liberal here (California). I think if you offered a no questions asked moneyback guarantee for wrong predictions, then the only people paying would be people whose predictions were correct (assuming every person with a wrong prediction requested a refund). You would of course put a disclaimer (as psychic hotlines do) that it is for entertainment purposes only, etc.
      - deleted 17y ago
        [deleted]
      - jhancock 17y ago
        "covers items sold where they are clearly intended for a particular purpose, but then try to claim no guarantee that they are, in fact, fit for that purpose." You mean like just about every software license agreement in the world? ;)
        GrandMasterBirt 17y ago
        So basically... If there is no "insurance" so that mail a notarized copy of the birth certificate is enough to get a refund, you will never hit the law because the failure to provide an accurate prediction warrants the full refund. If people get really rowdy, refund anyways. Shoot even if it's late refund. I'd be super lenient with it, you will make plenty of money.
        jhancock 17y ago
        For the U.S., I doubt there are criminal laws to worry about in this case. You can always get sued for "fraud" (not-criminal), but who sues for $50? About the only criminal area you need to worry about is mail fraud. Which would be fraud while using the U.S. postal service. But that's not a real concern either, as your only using mail to process refunds, not to solicit. You also don't need to use the mail, as you can require faxing or email of birth info. btw, IANAL.
  - dablya 17y ago
    That seems even more illegal... You're describing betting on a coinflip with a 10% vig.
    - RiderOfGiraffes 17y ago
      Exactly. The point is that the laws as framed may not cover that situation. Having checked with a UK lawyer friend, though, it would almost certainly still be illegal in the UK, and the only reason I say "almost" is because everywhere, going to law is a lottery with unreliable odds.
thetrumanshow 17y ago
Perhaps its anecdotal, but overall, I am hearing a lot more about these types of ideas. Maybe there is a trend to feel a bit of urgency to make money, so people are trying silly things like this. For me, having a history of never monetizing anything but my time, I can identify with a general sense of urgency. Still, I would probably never do something like this. But, if I did, I would certainly never tell anyone. Edit: I changed my mind. I'll see you at the Kansas State Fair... look for the booth titled "Will your startup ever be profitable? Two questions will tell the answer. 'Free'"
calcnerd256 17y ago
I really like the idea of refining the questions and their mapping to the answers. If the results increase in accuracy, we may find statistical predictors for how the meiosis and sperm-race play out. Macro-level predictors for micro-level behaviors help us come up with new hypotheses to refine our models.
mseebach 17y ago
My attempt at defining scams would be something like "when you're actively using an information/knowledge gap between you and your customer for your advantage". By that definition, casinos aren't scams: they are quite honest with the "house always wins (but we'll make sure you're having fun)" business model. The gender prediction would be, because this guy knows he's as good as flipping a coin, while anyone paying him to do so will be believing that he can actually do something (otherwise they'll just flip the coin themselves and save the $50). The "are you going to heaven" guy might actually, honest to god, believe in what he's saying = no scam. (Although if he was, he'd probably be more likely to be explaining how joining his religion will secure admittance to heaven)
- run4yourlives 17y ago
  when you're actively using an information/knowledge gap between you and your customer for your advantage". Explain to me when you aren't doing that. You've basically described every consultant, lawyer and expert in existence with that statement.
  - mseebach 17y ago
    True. Obviously the definition isn't complete :)
    - run4yourlives 17y ago
      Or it's incorrect. :-)
      - mseebach 17y ago
        No, I still think it makes sense when separating knowledge as the product (consultants) and knowledge of the product (I'm selling you a coin-toss, but you think I actually know stuff). E.g. an IT-consultant who clams he knows everything about computers, but really just finished "PHP and MySQL for Dummies" might be a scammer -- and one I suspect many people here has spend some time cleaning up after at one point or another.
davelightman 17y ago
Nobody else finds it ironic that this is posted on an SEO blog?
- ironkeith 17y ago
  ... it's not really an SEO blog. He's was an affiliate marketer who made a lot of money and is now trying to make more by pimping his own brand. He's actually quite controversial in the SEO/SEM/SEWhatever community because of stuff like this: http://www.shoemoney.com/2008/05/07/seo-has-no-future/ http://www.shoemoney.com/2008/05/07/seo-has-no-future/
redorb 17y ago
if domain name includes _ shoemoney then the business is probably a scam/parasite. Yes I put those in the same category
imgabe 17y ago
I would consider a business a scam when you are knowingly misrepresenting your product. In the baby prediction business, part of the plan involves putting the user through a survey of irrelevant questions, to give the impression that you are somehow using this information to provide an informed prediction about the gender of the baby. If, on the other hand, you simply said "Pay me $50 and I'll guess if your baby is a boy or a girl" It wouldn't be a scam, nor would anyone pay for it. To put it more simply, if the customer handing over money depends on them believing something that isn't true, it's a scam.
- run4yourlives 17y ago
  A prosecutor though would have to prove that the questions were irrelevant, which would be hard to do, unless you blogged about how the questions would be completely irrelevant on your high-traffic website. All you need to do is link the questions to something. As in: How many brothers/sisters do you have? More brothers = +1 girl, and vice versa. There is no requirement to have any sort of science behind the reasoning of whether or not your +1 assertion is correct.
iron_ball 17y ago
I'm surprised the salvation seller is making any money. The most basic tenets of Christianity specify that regardless of the sin, acceptance of Jesus guarantees salvation. How can someone not know this, yet still care enough about the state of their soul to pay $50 for a readout from an explicitly Christian source?
- run4yourlives 17y ago
  I'd just like to point out that at one time, the Roman Catholic church sold "get into heaven bonds".

23 points by ironkeith 17y ago

For the baby gender business idea, why not offer a 100% money back guarantee for all wrong predictions, no questions asked. You would be right half the time, and that should be more than enough profit considering it costs nothing to run.

RiderOfGiraffes 17y ago
That is illegal. What would be more interesting would be to offer to return twice the money, less an admin fee of 10%. While on the surface that appears to break even(ish), you can rely on inertia for people not actually to ask for their money back. With the 200% guarantee, that might not even be illegal. EDIT: Finally got to read the actual article and realised that this is already covered. Sorry - /mea culpa./
- byoung2 17y ago
  What law does that break? It seems the same as any other infomercial product's claims: "If this product isn't the best widget you've ever bought, or you're not completely satisfied for any reason, we'll refund your money" In this case, if the prediction is wrong (not the best widget/customer not satisfied), they can get their money back. Come to think of it, the prediction claim isn't much different from most test prep higher score guarantees.
  - RiderOfGiraffes 17y ago
    In conversation with a UK lawyer it would be deemed illegal as you are misrepresenting the "product" for which you are taking money. It's effectively the same law as covers items sold where they are clearly intended for a particular purpose, but then try to claim no guarantee that they are, in fact, fit for that purpose. UK law is very broad in its protection of consumers against "products" that are presented in a deceptive manner.
    - thetrumanshow 17y ago
      Call the product "I Will Guess Your Baby's Gender". www.iwillguessyourbabysgender.com
    - byoung2 17y ago
      I think the laws are more liberal here (California). I think if you offered a no questions asked moneyback guarantee for wrong predictions, then the only people paying would be people whose predictions were correct (assuming every person with a wrong prediction requested a refund). You would of course put a disclaimer (as psychic hotlines do) that it is for entertainment purposes only, etc.
    - deleted 17y ago
      [deleted]
    - jhancock 17y ago
      "covers items sold where they are clearly intended for a particular purpose, but then try to claim no guarantee that they are, in fact, fit for that purpose." You mean like just about every software license agreement in the world? ;)
      - GrandMasterBirt 17y ago
        So basically... If there is no "insurance" so that mail a notarized copy of the birth certificate is enough to get a refund, you will never hit the law because the failure to provide an accurate prediction warrants the full refund. If people get really rowdy, refund anyways. Shoot even if it's late refund. I'd be super lenient with it, you will make plenty of money.
        jhancock 17y ago
        For the U.S., I doubt there are criminal laws to worry about in this case. You can always get sued for "fraud" (not-criminal), but who sues for $50? About the only criminal area you need to worry about is mail fraud. Which would be fraud while using the U.S. postal service. But that's not a real concern either, as your only using mail to process refunds, not to solicit. You also don't need to use the mail, as you can require faxing or email of birth info. btw, IANAL.
- dablya 17y ago
  That seems even more illegal... You're describing betting on a coinflip with a 10% vig.
  - RiderOfGiraffes 17y ago
    Exactly. The point is that the laws as framed may not cover that situation. Having checked with a UK lawyer friend, though, it would almost certainly still be illegal in the UK, and the only reason I say "almost" is because everywhere, going to law is a lottery with unreliable odds.

thetrumanshow 17y ago

Perhaps its anecdotal, but overall, I am hearing a lot more about these types of ideas. Maybe there is a trend to feel a bit of urgency to make money, so people are trying silly things like this. For me, having a history of never monetizing anything but my time, I can identify with a general sense of urgency. Still, I would probably never do something like this. But, if I did, I would certainly never tell anyone. Edit: I changed my mind. I'll see you at the Kansas State Fair... look for the booth titled "Will your startup ever be profitable? Two questions will tell the answer. 'Free'"

calcnerd256 17y ago

I really like the idea of refining the questions and their mapping to the answers. If the results increase in accuracy, we may find statistical predictors for how the meiosis and sperm-race play out. Macro-level predictors for micro-level behaviors help us come up with new hypotheses to refine our models.

mseebach 17y ago

My attempt at defining scams would be something like "when you're actively using an information/knowledge gap between you and your customer for your advantage". By that definition, casinos aren't scams: they are quite honest with the "house always wins (but we'll make sure you're having fun)" business model. The gender prediction would be, because this guy knows he's as good as flipping a coin, while anyone paying him to do so will be believing that he can actually do something (otherwise they'll just flip the coin themselves and save the $50). The "are you going to heaven" guy might actually, honest to god, believe in what he's saying = no scam. (Although if he was, he'd probably be more likely to be explaining how joining his religion will secure admittance to heaven)

run4yourlives 17y ago
when you're actively using an information/knowledge gap between you and your customer for your advantage". Explain to me when you aren't doing that. You've basically described every consultant, lawyer and expert in existence with that statement.
- mseebach 17y ago
  True. Obviously the definition isn't complete :)
  - run4yourlives 17y ago
    Or it's incorrect. :-)
    - mseebach 17y ago
      No, I still think it makes sense when separating knowledge as the product (consultants) and knowledge of the product (I'm selling you a coin-toss, but you think I actually know stuff). E.g. an IT-consultant who clams he knows everything about computers, but really just finished "PHP and MySQL for Dummies" might be a scammer -- and one I suspect many people here has spend some time cleaning up after at one point or another.

davelightman 17y ago

Nobody else finds it ironic that this is posted on an SEO blog?

ironkeith 17y ago
... it's not really an SEO blog. He's was an affiliate marketer who made a lot of money and is now trying to make more by pimping his own brand. He's actually quite controversial in the SEO/SEM/SEWhatever community because of stuff like this: http://www.shoemoney.com/2008/05/07/seo-has-no-future/ http://www.shoemoney.com/2008/05/07/seo-has-no-future/

redorb 17y ago

if domain name includes _ shoemoney then the business is probably a scam/parasite. Yes I put those in the same category

imgabe 17y ago

I would consider a business a scam when you are knowingly misrepresenting your product. In the baby prediction business, part of the plan involves putting the user through a survey of irrelevant questions, to give the impression that you are somehow using this information to provide an informed prediction about the gender of the baby. If, on the other hand, you simply said "Pay me $50 and I'll guess if your baby is a boy or a girl" It wouldn't be a scam, nor would anyone pay for it. To put it more simply, if the customer handing over money depends on them believing something that isn't true, it's a scam.

run4yourlives 17y ago
A prosecutor though would have to prove that the questions were irrelevant, which would be hard to do, unless you blogged about how the questions would be completely irrelevant on your high-traffic website. All you need to do is link the questions to something. As in: How many brothers/sisters do you have? More brothers = +1 girl, and vice versa. There is no requirement to have any sort of science behind the reasoning of whether or not your +1 assertion is correct.

iron_ball 17y ago

I'm surprised the salvation seller is making any money. The most basic tenets of Christianity specify that regardless of the sin, acceptance of Jesus guarantees salvation. How can someone not know this, yet still care enough about the state of their soul to pay $50 for a readout from an explicitly Christian source?

run4yourlives 17y ago
I'd just like to point out that at one time, the Roman Catholic church sold "get into heaven bonds".