Advertising or Investment? Part II

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Welcome to all new subscribers. Today's newsletter will focus upon the complaint that the Securites Exchange Commission filed against 12DailyPro back in late February/early March. I will also give some brief thoughts on the morality of this business. All back issues are posted on the home page of Autosurf Central. If you are no longer interested in receiving newsletters and updates from me, there is an unsubscribe link near the bottom of this email. Let's get to it:

Advertising or Investment? Part II
Near the end of February the Securites Exchange Commission filed a complaint against the 12DailyPro autosurf program for running a ponzi scheme and for violations of the Securities Act of 1933 and the Securities Exchange Act of 1934. Within the complaint the SEC builds their case against 12DailyPro by outlining the reasons membership fees(upgrades) were actually the sale of unregistered securities.

While the complaint targets just 12DailyPro, I like to look at a bigger picture. To me the SEC is telling us what is flawed about our business. They are telling us why we have to put up with so much fraud. They are telling us why our business is all about the money and nothing about the advertising(which is the product that is supposed to make this business legit). In my opinion the SEC makes some excellent points. Let's go over them one by one:

This is taken directly from the complaint filed by the SEC:

The Investment Nature of the 12DailyPro Membership Units
28. The membership fee paid by an upgraded member of 12DailyPro constitutes an investment contract because the receipt of payment from 12DailyPro is dependent upon a member's payment of the membership fee, and not on his or her provision of services.

29. Under the terms of the 12DailyPro program, the Defendants pay the purported 12% daily return only to upgraded(i.e., paying) members who agree to view 12 web pages per day, but pay nothing to regular(i.e., non-paying) members regardless of how many web pages they view.

30. The amount of returns that 12DailyPro pays an upgraded member is dependent solely upon how much money he or she has put into the program, not on the amount of service he or she renders to 12DailyPro. For instance, an upgraded member receiving the purported 12% daily return on a $6000 investment($720 per day) is not required to view any more web pages than an upgraded member receiving the purported 12% daily return on a $6 investment($0.72 per day).

31. The funds purportedly used to pay the upgraded members result principally from the efforts of the Defendants, and not from the efforts of the upgraded members. The 12DailyPro website states that upgraded members' earnings "are financed by multiple income streams, including advertising, and off-site investments." Upgraded members have no role, however, in negotiating advertising agreements, making off-site investments, or collecting revenue from any of the purported income sources.

32. The so-called "services" purportedly rendered by the upgraded members are minimal or non-existent. The Defendants estimate that upgraded members' web page surfing requirement will take five minutes per day. There is no requirement that members must evaluate, comment on, or otherwise respond to the web pages viewed. It is unclear whether 12DailyPro is even able to determine whether an upgraded member has actually viewed the web pages or simply turned his or her computer on and left the room.

Defendants' Operation of a Ponzi Scheme
37. Defendants, however, fail to disclose that...... other income streams are not sufficient to pay the promised returns to upgraded members...... Defendants will have to obtain an ever-increasing number of upgraded members, or investors, to continue to pay the returns promised to current investors.


In 28 through 32 the SEC is basically saying that in order to make money at 12DailyPro you had to give them money first. They are also saying that the amount you received was dependant upon the amount you spent in the first place. The amount you received was not dependant upon the quantity or quality of services you provided to 12DailyPro. In other words members with $6000 account levels were earning 1000 times more than members with $6 account levels even though they all performed the same amount of work. The SEC goes on to point out that the services(viewing 12 web pages) provided by 12DailyPro members were basically non-existent and had no bearing on the finances of the program.

Item 37 explains the ponzi elements of the 12DailyPro program.

So there it is all laid out for us. The SEC is telling us some of the things that are wrong with the paid to surf business. Is anybody listening to the SEC? It appears not. There have been some weak attempts to comply with the above guidelines. But no paid to surf program has come close to satisfying all six of the issues at the same time. Here is just an off the top of my head idea to satisfy all of the above issues:

1. Charge a monthly membership fee(subscription) separate from the purchase of upgrades and separate from the purchase of any additional advertising. The membership fee allows members to participate in the traffic exchange which generates hits and potentially visitors to members' websites. You pay the fee when you join. If you don't pay the fee you can't even get through the sign-up process. As a member you will also receive access to free marketing material/information to help you go out and bring in referrals.

2. Once you are a subscribed member, you may earn referral commissions whether you purchase additional ad packs or not. Residual commissions are paid on the monthly subscriptions. One time commissions are paid on the purchase of additional ad packs.

3. Also once you are a subscribed member, you may purchase additional advertising packages that include surf credits, sponsorship in emails sent to the membership, site of the week placement, banner impressions, pay-per-click placement, and any other creative advertising ideas. The purchase of additional ad packs also gives you the opportunity to get paid for viewing set quantities of websites each day. The number of websites required increases with the size of the ad pack purchased. So we have the amount of advertising received in line with the amount of the purchase. We also have the amount payed out in line with the amount of work performed by each member.

4. The program is a manual surf to increase the possibility of member sites being viewed. It's too easy to turn on an autosurf and do other work or go watch TV or whatever. Manual surf will keep the majority of surfers at their computer and cause the majority of surfers to at least peek at your ad each time it pops up on their screens. I am also in favor of voting for your favorite ad during each viewing session and having the admin provide that feedback to the members in the form of a weekly report. There is one program that currently does this to some extent. I would also like to see data on which programs get opened by surfing members(which sites gets the most "Open This Site" clicks).

5. This is the kicker and it goes back to number 3 above. The daily earning percentage for each individual member is directly related to the number of referrals he/she brings into the program. A member with zero referrals will only be able to earn back the amount they paid for additional ad packs. So perhaps an ad pack lasts 100 days. A member with zero referrals all the way through the length of the upgrade will earn 1% each day giving them the opportunity to earn their $$ back. Perhaps a member with 10 referrals earns 1.1% per day for 100 days plus gets the residual income from the membership fees explained in number 1 above. A member with 20 referrals earns 1.2 % per day and so on. Obviously there would be a maximum percentage limit and I'm just throwing rough numbers out there without doing any formal calculations.

You can see what I'm doing here. I'm putting more focus upon the product which is advertising. I'm putting the amount of advertising received by a member in line with what they pay. I'm putting the surf earnings in line with how much work is performed by each member(via number of sites viewed and via number of referrals brought in).

Now there is more involved that what I layed out above(more revenue streams, technical costs, etc). The final key is going to be to satisfy issue number 37 layed out by the SEC. Ponzi finance is illegal. So I would have to work the numbers such that all of my revenue streams(not including ad pack purchases) are greater than the profits paid out to members on a monthly basis. In essence create a closed loop system where it is possible for members to earn a nice income by viewing websites and referring other members but where it is also possible for members to take a slight loss if a minimum number of referrals is not met(keep in mind you still receive traffic to your site and you still receive marketing material/info at no extra cost).

So there's one idea that perhaps somebody can build off of. That's why I'm including it in this newsletter going out to over 7200 people. That's why I will post the idea in the forum once I refine it a bit. We need ideas like this to critique and possibly test market. Ultimately we need serious businesspeople to run legitimate surf programs. Closed loop systems. No reliance upon new members upgrading. No reliance upon crazy autosurf/HYIP investments.

To wrap this up, the current paid to surf models are badly flawed. Not much is being done about it. We need to start doing something. If you have ideas or input or the desire to run a surf program, then come over to the Autosurf Central Cafe and get in the mix. Ask questions, post comments, kick around ideas.

Morality
I don't want to say much about this except that I believe it is important to ensure that anybody who signs up under one of your links knows what they are getting into. I'm talking in terms of the high risks involved with this business, the questionable legal aspects of the current business, and the security measures required to safely move funds into and out of processors. I say this because they are a lot of newbies still coming into the picture and they need proper direction and information before shelling out their hard-earned money. Make sure people don't go out and blow all of their funds on a scam program. Teach your referrals how you choose programs. Point them in the right direction. If you're just rolling in referrals and have no idea on their experience level and are not teaching them the truth about this business, then you are doing your referrals an injustice. That's just my opinion.

Thanks once again for reading. I plan on kicking another newsletter out either Friday or Monday.

Wishing You Success,

Jim Polak