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Is AdverWorld a Pyramid Scheme?
Is this a pyramid scheme?
The following question came in from a visitor
to the Cagey Consumer web site:
I was approached about selling WEB SITES for Adverworld.
It looks like it may be a pyramid scheme, or a very
elaborate multi-level marketing outfit. They sell web
pages for $99/month; each salesperson gets a commission
from that fee every month.
One of my goals in setting up this web site was to help
identify various types of scams, so I am gratified to receive
I generally prefer to identify problematic
or abusive aspects of a particular plan rather than
to simply label it as a pyramid scheme.
I believe this is advantageous for several reasons:
It is more defensible, legally speaking,
to identify specific attributes of a plan which can
be supported by facts, than to call something a pyramid
scheme, which might be interpreted to be a claim about
the legality of that plan (though when I am aware that a particular
attribute violates specific state laws, I do not hesitate to say so).
It avoids certain kinds of nonsensical responses from mlm advocates
that frequently occur when one mlm or another is called a pyramid,
- The shape of the organization isn't anything like a pyramid...
- General Motors has the same pyramid structure...
- Pyramid schemes don't offer a product or service...
In the long run, it is more useful for readers to understand
what things to look out for than to just be told that a
particular mlm plan is or is not a pyramid scheme.
You can check out Cagey Consumer's opinion
for two simple questions to help you determine if an mlm
opportunity is worth considering, but here is what I have
observed about AdverWorld:
One of the standard ways to identify a pyramid scheme
masquerading as a multi-level marketing plan used to
be that the distributor was required to pay money
(beyond a modest amount required for a sales kit, from
which there was neither a commission to any distributors
nor a profit to the company) to be eligible to participate
in the business opportunity.
AdverWorld's plan, as described, does not fit neatly
into this category, although even allowing credit for
personal purchases may violate the law in some states.
AdverWorld's web site describes their web page hosting
services and their Independent Representative offer,
but provides very limited details of these offerings.
The price for a web page, apparently including the cost
of creating the page, is $79 per month.
Independent Representatives are not required
to purchase their own web page, but they must have at
least one active customer to be eligible for commissions
from their downline; purchasing their own web page will
meet this requirement, however.
Are qualifying purchase requirements okay?
It has become almost a standard practice
among start-up mlm's to have some sort of qualifying level
of purchases (typically on a monthly basis) to be eligible
for bonus commissions from your downline.
Most state Attorney Generals don't see a big
problem with this, and some AG offices even seem to provide
encouragement for the practice, apparently in a delusion that
such purchase requirements would prevent these plans from operating
in the absence of an actual retail market for the product or service.
Cagey Consumer's opinion is that such qualifying purchases are
an abusive practice, that has the primary effect of
creating an inducement for the distributor to buy
(either in the distributor's own name or in the guise
of a retail sale to a friend or relative)
the product or service offered just to be eligible to
participate in the business opportunity, a requirement
which would be illegal in almost all states but for the
fact that it is permissible to meet this requirement
through bona fide retail sales.
Is AdverWorld a good value?
As to AdverWorld, the question is whether there is a bona fide
market for developing and hosting the web pages they offer
for $79 per month.
I have looked at a few of the web pages.
All the ones I have looked are simply individual pages
with very limited content.
$79 a month is a lot of money to pay for what they provide,
and I am hard-pressed to believe that many of these customers are
receiving satisfactory results.
A lot of people would gladly put together
such web pages for ten or fifteen bucks, and most of the pages
on AdverWorld would
meet the content requirements for free hosting on GeoCities.
I do not feel that their other added-value features are of any
signficant value, but in any case, the value of these extra features
does not warrant the amount of money they are asking.
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