By Jon Christian Ryter
March 8, 2006
The Securities and Exchange Commission [SEC] issued a blunt warning last week to website owners seeking increased traffic from autosurfers, and to network marketing entrepreneurs looking for a leg up on the latest moneymaking multilevel marketing scheme—autosurfing is high risk. The SEC put the paid autosurf website industry on notice that the government is taking a very close look at them. In issuing its warning, the SEC noted that there are dozens of autosurf websites on the Internet and that while most of them are legitimate, some of them—those, the SEC said, that promise their members astronomical profits—are likely pyramid schemes and, as such, are scams that the government intends to shut down.
What are autosurfers? Autosurfers are e.commerce network marketing companies that recruit members to surf the Internet daily, visiting specific websites in order to create the illusion that the websites they visit have far more interested viewers than they actually have. The website owners who use autosurfers are trying to attract major advertisers—and major advertising dollars—to their websites. For that reason, they are willing to pay autosurfers big bucks to inflate the number of hits to their websites that suggest that thousands more interested shoppers are visiting them than there actually are. Autosurfers generate millions of fictitious page views daily that don't really exist since the member surfer hits the assigned pages, and a second or two later, is visiting another site.
The network marketing groupies that join the autosurf web scams are led to believe autosurfing is a no-fault bonanza that lets everyone win. Isn't America great? Of course, America is great, but not everyone wins. Every time you have a winner, you also have a loser. Websites that hire autosurfers to ratchet up either the unique visits to their sites, or artificially inflate the number of page views to make it appear to potential paying advertisers that thousands of people who are not even remotely interested in that website are reading it in their 30-second visit. While autosurf websites may be legal, they aren't ethical. They are engaged in a legal form of fraud that needs to be stopped because it defrauds advertisers who expect honest value for their advertising buck.
Why? Because hundreds of Internet entrepreneurs who don't generate enough page views to attract them hire autosurfers to drive up the page views so that their websites appear to get more visitors than they actually do. Viewers translate into potential customers for advertisers. Major advertisers will only place their paid advertising on heavily trafficked sites. Top sites like Yahoo, AOL, Google, MSN.com, eBay and MySpace.com attract most of the available revenue since they are among the top ten most viewed websites in the world. The Drudge Report, which is one of the most popular cybernews sites in the country, is the 273rd most active website in the world with slightly over 6 million hits a day. The New York Times, which ranks 50th, gets over 11 million hits per day. WorldNetDaily.com and Newsmax.com are tied at 1.9 million hits a day.
Just as newspaper, magazine radio and TV advertisers use circulation audits to determine how many subscribers, listens, or viewers those media have, Internet advertisers monitor web traffic through companies like Alexa.com, and base their cyberad buys on the number of visitors websites receive monthly. The demand for increased viewers translates into potential customers for advertisers. Everyone chasing advertising revenue is trying to figure out how to increase their page views. As unethical as they are, autosurfers fill a growing niche in the world of cybercommerce. They deliver the page views that don't really exist. But more important, they deliver the advertising dollars to those websites that should not exist.
It was the natural multilevel marketing venture. For multilevel marketers to attract a sufficient number of surfers, the promise of huge rewards must be available. One of the nation's first autosurfer was www.tymglobal.com. Autosurfers began to pop up on the cyber-radar screen in 2002. By 2005 there were only around 40 of them. Then, when cyber-entrepreneurs like Claris F. Johnson created a profitable multilevel marketing scheme to attract more aggressive networking marketing types, autosurfer sites began multiplying like rabbits. Today, according to Jim Polack of Autosurf Central, there are now close to 400 active programs. While the bulk of them realistically offer surfers anywhere from 1% to 4% to visit 100 or more assigned websites in order to drive up their page views, he estimated that half of the autosurfers are now within the "Ponzi" danger zone, offering 5% to 25% daily.
As Polack noted on his website, its hard to find people who will seriously consider autosurfing as a career when they earn 4% or less—unless the autosurfer uses multilevel techniques like bonuses paid for attracting new members, or allowing the existing members to upgrade their own memberships to earn more per click through, or more from the recruiting done by those they recruit—precisely those things that the government construes as the elements of a Ponzi scheme—where the bulk of the autosurfer's income come from the recruiting and not the sale of a product or service.
Even more, the government construes the multilevel marketing venture to be a Ponzi when the revenue used to pay new member comes directly from the contributions from other members and not from the proceeds derived by the company from the sale of its services—revenue paid to the company by website owners attempting to create the illusion that they have far more page views than derived from people genuinely interested in their websites. Also included would be the advertising revenues 12dailyPro received from the sale of online ads sold to major advertisers on its own website—which Alexa statistics show to be the 346th most hit site in the world. (Of course, when you have 300 thousand surfers hitting it five to ten times a day you're adding 45 to 90 million unique visits to the website each month that really don't exist since the surfer doesn't read anything in the 30 seconds they spend on the site as they click on the next URL they are scheduled to visit.)
On their website, 12dailyPro insisted they were not a Ponzi, and most multilevel marketing people that found them—and the big paychecks—agreed. One 12dailyPro member told me in an email "...12DP is not a true ponzi. Only 20% of their revenue was from new members money. To be a true ponzi," she continued, "it must be 70% or more." In point of fact—according to their own website—95% of 12dailyPro's revenue stream came from new members. While the 12dailyPro website has been suspended and only the home page is visible on www.internetarchive.com, Johnson's anti-ponzi defense was that 12dailyPro was in business to increase the page views of its clients' websites and that the company generated revenues from those click-throughs and, also, from the sale of advertising on its own site.
Like most hot multilevel marketing ventures, autosurfing is fairly new. The "industry" appears to have begun around 2002. One of the first entrepreneurs into the "page view scam" was Tymglobal.com. Tymglobal.com is the parent company not only of StormPay, but also a new autosurfer website, StormClix. StormClix, like the first generation autosurfers, is a "pay-per-click" website. Tymglobal popped up on the Internet's master archive (www.internetarchive.com) for the first time on March 29, 2002. A couple months later, the company was offering cybersurfers a new laptop for $25 under a program called Laptop Matrix in exchange for autosurfing services.
Like most multilevel deals, those who got in when the program began, profited. Those who came in at the end, lost their money. The matrix programs, which were largely scams, made a low price offer as a come-on. But there was a catch: those signing off did not receive the low-price offer until a certain number—usually 10—others joined after him. Like all network marketing cons, those who join the multilevel pyramid early-on profit. Those who invest in the pyramid at the end of the brief life cycle of any multilevel scheme, lose most or all of their investment. Yet, in get-rich-America where the working class invests more on lottery tickets than in mutual funds, those attracted to get-rich-quick schemes believe getting burned once or twice is the price you pay for success. That's why regardless how many multilevel schemes are shut down by the government as ponzis, the same people who lost money on the last one will flock hungrily to the next one in search of the bonanza they know is waiting for them.
Claris Johnson launched 12dailyPro on May 13, 2005. By the time the SEC shut it down on Feb. 27, 2006, Randall Lee, the regional director of the SEC's Pacific coast branch, claimed that her companies, 12dailyPro and LifeClicks bilked 300 thousand "investors" out of more than $50 million—and funneled over $1.9 million of "investor" money into Johnson's personal bank account. The SEC claims that her cyberworld began to collapse around the first of February, 2006 when thousands of 12dailyPro multilevel marketing reps discovered that money deposited in their escrow accounts at StormPay (a credit card payment processor like PayPal) was sudden frozen. Johnson also discovered that all of her personal assets were frozen as well.
The SEC knew what was going to happen before it did because they used their power to freeze the assets of Johnson's companies. According to Lee, "...[p]aid autosurf programs have become an enormous industry on the Internet. When these schemes depend on attracting new members in order to pay returns to current members, they are destined to collapse. We urge the public...to exercise extreme caution before investing in any get rich scheme." In SEC Civil Action CV 06-0108 NM (PAx)(C.D. Cal), the government complaint reiterates "...To receive the promised payment, a member purportedly must view at least 12 web pages per day during a 12-day period.
The amount of returns that 12dailyPro would pay its members, however, was not on the amount of website-viewing or any other services rendered...The defendants falsely represented that upgraded members' earnings are financed not only [by] incoming member fees, but also with multiple income streams including advertising and offsite investments. In fact, at least 95% of 12daily Pro's revenues have come from new investments in the form of membership fees from new or existing members. The other multiple income streams from advertising revenues or offsite investments touted by the defendants were either negligible or nonexistent. In addition, undisclosed to investors, Johnson transferred more than $1.9 million in investor funds to her personal bank account..."
There is absolutely no doubt that the program Claris Johnson created was a classic Ponzi scheme that violated Section 17[a] of the Securities Act of 1933 and Section 10[b] of the Securities Exchange Act of 1934. In fact, Johnson's scheme replicated Charles Ponzi's get rich scheme. Ponzi sold investors on the notion that he could increase their returns on the exchange rates on European postage stamps by as much as 50% in 45 days. Johnson promised her members a 45% increase in 30 days. For part 2 click below.
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© 2006 Jon C. Ryter - All Rights
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Jon Christian Ryter is the pseudonym of a former newspaper reporter with the Parkersburg, WV Sentinel. He authored a syndicated newspaper column, Answers From The Bible, from the mid-1970s until 1985. Answers From The Bible was read weekly in many suburban markets in the United States.
Today, Jon is an advertising executive with the Washington Times. His website, www.jonchristianryter.com has helped him establish a network of mid-to senior-level Washington insiders who now provide him with a steady stream of material for use both in his books and in the investigative reports that are found on his website.