Lazy Man and Money

Let’s Discuss the Dr. Oz Scam

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A friend sent me this CNN article about Dr. Oz getting grilled by the senate. There’s also one on Fox News. When CNN and Fox News agree with each other, you know there’s a huge problem.

Update: Dr. Oz got eviscerated by comedian John Oliver. This should be required watching. I’m putting it at the top of the article, so you can set it up while you read:

Let me recap what’s going on for those who don’t want to click over to read the articles.

Senator Claire McCaskill, chairwoman of the Subcommittee on Consumer Protection, Product Safety and Insurance is looking at false advertising for weight-loss products. The committee found that there is a “Dr. Oz Effect” that when he mentions a supplement being healthy online scammers jump on it and illegally promote the supplement with claims that have little or zero credible scientific evidence behind them.

McCaskill went straight at Dr. Oz, “The scientific community is almost monolithic against you in terms of the efficacy of the three products you called ‘miracles’… I don’t get why you need to say this stuff when you know it’s not true. When you have this amazing megaphone, why would you cheapen your show? … With power comes a great deal of responsibility.”

I added a emphasis on an important part.

His response is that he passionately believes in these products and would recommend them to his family. In psychological terms, I think this line of thinking would be called cognitive dissonance. I describe cognitive dissonance as creating your reality to settle inner conflict. The Wikipedia page gives an example where the snake oil salesman will believe in his products, because he has to. If he doesn’t he has to confront the possibility that he’s simply a bad person defrauding people out of their money. Few people are comfortable with thinking of themselves in that way.

Dr. Oz painted himself as a victim, saying that it isn’t his fault that the scammers use his words and image to promote the products. He goes further to say that he hasn’t endorsed the products or receive money from them. In fact, I wrote years ago how Oprah and Dr. Oz sued MonaVie, because their distributors were taking Oz’s words about the acai berry and using it to promote the juice.

Specifically Dr. Oz admitted that he used “flowery” language which was “not helpful but incendiary providing fodder for unscrupulous advertisers.”

Playing the victim is a good plan, but it isn’t altogether accurate. Clips of the Dr. Oz show have him saying that he has “the #1 miracle in a bottle to burn your fat.” This goes beyond “flowery” language in my book.

As Sen. Claire McCaskill responded, “I know you feel that you’re a victim. If you would be more careful, maybe you wouldn’t be victimized as frequently.”

He also said, “I concede to my colleagues at the FTC that I am making their job more difficult.”

Pressed further on the topic, he admitted that his show is about providing hope:

“My job, I feel, on the show is to be a cheerleader for the audience, and when they don’t think they have hope, when they don’t think they can make it happen, I want to look, and I do look everywhere, including in alternative healing traditions, for any evidence that might be supportive to them.”

This is really the problem. There are millions of studies done on millions of products… and many of them have conflicting results. This NY Times article explains it well. If you only show the results that bring hope, you aren’t giving an accurate view of the science.

The old “selling hope” is a trademark of scammers. Forbes has an article on MLM scammer Orrin Woodward saying that he’s selling hope. Yes it’s the same Orrin Woodward that I busted not once, but twice.

I have no problem with providing people with hope, just don’t use it to sell snake oil and pyramid schemes that harm consumers. Isn’t that reasonable enough for me to ask?

I think Dr. Manny Alverez in that Fox News article put it best:

“Dr. Oz’s predicament is quite understandable. He wants to be a doctor, but at the same time, he wants to be a talk show host and entertain people.

But the truth of the matter is that sometimes, medical information is boring. And over the years, I’m sure that mounting pressures from his producers to increase ratings have transformed Dr. Oz into less of an educator, and more of an entertainer.

…

Yet throughout the years, he has forgotten what made him a great doctor: truthful medical information.

Over time on his show, he’s included fewer genuine medical professionals, who spend countless days healing the most detrimental medical conditions in this country. Instead, he replaced them with snake oil salespeople – vitamin gurus, nutritional experts, beauty consultants and more – and all of this razzle dazzle has ultimately led to Congress’ stern criticism.

Dr. Oz knows perfectly well that there’s no miracle pill for anything. He knows perfectly well that the only miracle ‘pill’ for weight loss is modifying one’s lifestyle habits, whether it’s through diet, exercise or meditation. And to his credit, Dr. Oz does talk about taking these measures. But as I said before, he has to entertain and create sensationalism in his show in order to compete in the same timeslot as Judge Judy, a very tough hour for daytime TV.”

I want to finish up with one more thing that was mentioned in this CNN video:

The end of the video makes note that the government simply doesn’t have the funding to go after all the scammers who pop-up. You may have heard this before, but we have a big deficit issue here in the United States. It’s up to us to protect ourselves from these scams.

How do you do that? You have to develop critical thinking skills. You have to know that Dr. Oz is an entertainer and as part of that he has to give the audience what they are looking for, hope that there’s a quick fix… even if it doesn’t exist.

Some might say that this isn’t a scam. However, I’ve seen “scam” defined in many places (such as Wikipedia) as a “confidence trick.”

When multiple people cite that the medical profession doesn’t back him up and that he knows better and his response is that he’s a cheerleader instead of taking responsibility as a doctor… well… I call that a “confidence trick.”

Update: I usually don’t update an article on the same day, but I’ll make an exception this time for further reading. This is far from the first time that Dr. Oz has been called out for promoting quackery.

More than three years ago he was called out by Science Based Medicine for promoting Joseph Mercola, known for supporting quackery himself.

Some 15 months ago, the New Yorker asked if he’s “doing more harm than good”.

Just last month, the Slate slammed Dr. Oz for the irony of him attacking scammers for using his name to sell questionable products. The article cited about a half dozen articles of cases where Dr. Oz himself selling questionable products. In particular that article referenced an earlier Slate article that covered many of his claims in detail.

It seems like everyone knows that Dr. Oz is a scammer himself except for the most important people… his audience.

Update 2: Canadian researchers have reviewed the claims on the Dr. Oz show and the results aren’t pretty in the LA Times’ words. In particular the article wrote that based on the research: “Only one-third of claims made on ‘The Dr. Oz Show’ can be backed by medical evidence” and “11% of the recommendations made by Dr. Oz or his guests contradict medical facts.” This leads to a conclusion of “Viewers of ‘The Dr. Oz Show’ should be skeptical about advice given on the program.”

Is Vemma a Scam?

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When I wrote about the MonaVie Scam more than 5 years ago, I was amazed to get over 6,500 comments. Over time, the indisputable information from dozens of researchers lead me to make the easy conclusion, “MonaVie is a grossly overpriced product, with little nutritional value, wrapped in a poor business opportunity that appears to be illegal pyramid scheme, fraudulently supported by nonsensical ‘scientific’ studies, and illegal medical claims from its paid salesforce.”

To make a long story slightly shorter, these articles brought in MLM distributors to defend their industry. One challenged me to come up with something bad about ViSalus. It was pretty easy to show ViSalus was a scam as well with the terrible product, terrible marketing, and the founder running what the FTC guidelines quite clearly state is a pyramid scheme.

What does all this have to do with Vemma? In the past couple of months, I’ve been getting comments about Vemma being the next big MLM scam. In particular, commenter Jeff in that ViSalus article has been giving updates of his friend adventures in ViSalus, from when he got a BMW to when he lost his business because the people under him quit when they couldn’t recruit others. Jeff explains that his friend left ViSalus and joined Vemma and how MLM has managed to destroy just about everything important in his life. Jeff also tells of how his friend has been three other MLMs and lost $10,000 in them, but what caught my attention is that the latest, Vemma, is “specializ[ing] in recruiting college and high school students to sell their energy drink” and “train[ing] their distributors how to sign up high school students without their parents knowing.” I share his conclusion: “That’s a special level of MLM scumminess.”

It’s interesting MLMers are going back to Vemma. It’s essentially the same juice scam that MonaVie was, but with Mangosteen as its “special ingredient” instead of acai berries. It’s still an obscenely expensive product that is a dollar an ounce or more… . I’m sure Vemma distributors are going to hate this comparison. However, these posts have a way of getting very long and spending a lot of words on the topic isn’t worth it. Most importantly, it’s worth noting that juice, in general, is not healthy. There’s really no need to split hairs with Xango, Xowii, Nopalea, Jusuru, MonaVie, Zrii, and Vemma distributors about the merits of their particular juice scam. If you don’t believe me, Dr. Johnny Bowden debunked them all years ago. File this article away in your memory, because we’ll be coming back to it later.

Sorry for the lengthy introduction about why I am writing the article. MLM distributors always claim that I pick on companies to personally profit from them and it couldn’t be further from the truth. It doesn’t take a rocket scientist to figure out that spending nearly $40 on a small bottle of juice and getting tricked into a scheme that costs nearly everyone thousands of dollars is exactly the kind of topic that attracts consumer advocates like me. If you are a distributor and don’t want your company picked on, grab your pitch fork and run to Vemma’s headquarters for fueling the fire.

Vemma’s Product and Marketing Scam

Remember that article from Dr. Johnny Bowden that I mentioned above? If you haven’t read it, give it a read now, I’ll wait. Done? Good. Now you are prepared to understand why Vemma’s marketing of ORAC scores is complete bunk. Vemma brags about 4800 units of ORAC per 2 ounce serving, but a small amount of cinnamon, oregano, or cloves can do the same job. They brag that “Vemma boasts superior antioxidant protection…”, but fail to mention that research is showing that antioxidants are simply not helpful as science has hoped. However, it’s a big industry, and companies like Vemma need to sell their $37 bottle of juice.

It gets worse as Vemma uses what I call the Total cereal advertising scam. Remember those funny commercials in the 80’s that it would take X bowls of Brand X cereal to equal the nutrition in one bowl in Total? If not here’s one example starting George Jefferson (okay it was the actor who played George). The logic is that brand X may only have 25% of the RDA of Riboflavin, so you’d have to eat 4 bowls to get the 100% in Total. Lost in the marketing is that you might end up getting 20 times the vitamin C, 5 times the fiber, 3 times the protein and a bunch of other good things in those 4 bowls of another brand. Raisin Bran could have pulled the same marketing trick on Total saying that you need to eat 3 bowls of Total to equal the fiber in a bowl of Raisin Bran.

Now that we’ve established the ridiculousness and deceptiveness of this type of advertising here are some examples from Vemma’s marketing page:

  1. “55 eggs to equal the amount of Vitamin D”
  2. “62 oz of cheddar cheese to equal the amount of Vitamin B-12”
  3. “61 cups of tomatoes to equal the amount of Folate”

That sounds impressive, right? Let’s take the first one, the 55 eggs for the vitamin D in Vemma. If you look up Vemma’s Supplement Facts (note that they aren’t Nutritional Facts, because it’s marketed as a supplement, not a food or juice), you’ll find that Vemma has 1,000 IU of Vitamin D per 2 ounce serving (16,000 IUs per 32 ounce bottle). Sounds incredible until you realize that this Liquid Vitamin D has 2,000 IU per drop and is $20 for 900 servings. That’s 2.2 cents per serving for double of what’s in Vemma. Vemma is effectively putting 8 drops, or less than 18 cents worth of Vitamin D supplement in every bottle. You can bet that Vemma is getting better bulk pricing than we are on Amazon.

Vemma has 15 mcg of Vitamin B-12, per 2 ounce serving (that’s the 62 ounces of cheddar cheese). Amazon has 100 lozenges, with each having 2,000 mcg of B-12 for $8. One lozenge alone would be enough to supplement 133 servings (8 and a third bottles) of Vemma.

I shouldn’t need to go further into these examples. The bottom line is that a good multivitamin could supply all this for a fraction of the cost. Notonly that, but you shouldn’t be buying vitamins and supplements anyway.

One final product thought , in all the food mentioned there, there’s a lot of calcium (cheese, spinach, etc.) and I couldn’t find any on the Vemma label (though Vemma does list that there’s calcium in their FAQ). Score one for the food.

Vemma’s “Paid at Home” Scam

One (or more) Vemma distributor(s) has copied the Income at Home Scam that was covered by PT Money (and of course the previous link in extensive detail). These people created a 85% for example (PDF).)

Here I’ll take a break an address a big problem with this disclosure. It uses the words “generate a profit”, when it should say, “earns an income.” The numbers used are clearly from Vemma’s Income Disclosure Statement (PDF). No MLM even attempts to track distributor profit, because they don’t care about these expenses… they vary from distributor to distributor. So those people earning an income between $667 and $1326 will likely end up spending more than that in juice, conferences (fees for the conference, hotel, flight, food, etc.), training materials for themselves and their downline, samples, and other associated costs. That’s not a profit, but a loss.

So to put this in perspective, let’s imagine 100,000 people in at a football stadium and they all decide to become Vemma distributors. If we apply the MonaVie’s 85% inactive number, since Vemma doesn’t seem to give their own, only 15,000 would make the income disclosure statement at all. From there some 75% would earn an income between $667 and $1326, which likely isn’t profitable after expenses. Of the original 100,000 you are now left with 3750 people or 3.75% that might be actually generating a profit for their time spent. I would classify the other 96.25% as people who are wasting their time not generating a profit – a minimum wage employee at McDonalds would be more profitable.

And if you are looking to replace your own income, your odds are much, much lower – obviously depending on your income. The Paid at Home site mentions that this “require[s] hard work, desire, diligence, leadership and talent.” So why anyone would want to take such an incredibly risky gamble to hopefully get to where they already are while still working hard is beyond me.

Finally don’t get me started on how the website displays a “Positive SSL Secure” logo on its website without actually using SSL. Can you say positive fraud? I thought so.

Vemma’s Business Opportunity

I went into this in more detail than I originally intended in the Paid at Home section above. That example should give you a good idea of what to expect. However, I suggest you read this article on the business of MLM to truly understand how bad of a business opportunity Vemma, an MLM, is.

Vemma’s Young People Revolution Scam

As mentioned in the beginning, Vemma is now purposely targeting high school and college kids. The idea is that these minds are easy to mold and they likely haven’t been subjected to MLM scams before. As MLMs churn through millions of people each year, the older generations have already been burnt, they need fresh blood and the next generation or expanding to a new country is the only place to get it.

The aforementioned ViSalus really went after the youth market with it’s The Pyramid Thing video essentially flaunting their scheme. However, in the past year (as I write this in August 2013), ViSalus has lost half it’s distributors from a year ago and haven’t been able to replace the churned people.

You don’t have to do any real research to figure out that Vemma’s Young People Revolution is an illegal pyramid scheme. The first 30 seconds of this video makes it quite clear:

“The person who invited you today… is not trying to sell you two cases of anything. I can guarantee you that. They are just trying to present you with an opportunity to get you out whatever financial situation you are in into the one you want.”

Why does that make it clear it is an illegal pyramid scheme? Here’s the FTC words:

“Not all multilevel marketing plans are legitimate. If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is based on the number of people you recruit and your sales to them, it’s not. It’s a pyramid scheme. Pyramid schemes are illegal, and the vast majority of participants lose money.”

So yeah, the Young People Revolution isn’t going to bother you by being legal and selling a product. Instead they are going to focus on recruiting you into an “opportunity” where the money you make is based on the number of people you recruit and your sales to them. Boom illegal pyramid scheme.

You’d think that the FTC would shut down Vemma, but they simply don’t have the federal funding to fight these companies as the New York Post points out. The FTC can’t even fight Free Credit Report due to financial constraints.

Because of this, there’s a big chicken vs. egg problem that allows these schemes to continue. The FTC only acts when a number of people complain they’ve been defrauded by these schemes. People believe that if the schemes were fraudulent they would have been shut down by the FTC long ago and don’t waste their time complaining about it.

Pyramid Scheme?

A Vemma distributor in the comments wanted to make the point that the products are a good value. Specifically Doug Boyd wrote:

“Its easy to toss the word pyramid around and I can tell you the real reason why all these companies are NOT pyramid schemes; they have a real product and in the case of Vemma’s Verve there is a demand for it.”

MLMers tell themselves that a company with a product can’t be a pyramid scheme. They are wrong and simply lying to themselves. The FTC has an educational page about MLMs and pyramid schemes, which says:

“Not all multilevel marketing plans are legitimate. If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is based on the number of people you recruit and your sales to them, it’s not. It’s a pyramid scheme. Pyramid schemes are illegal, and the vast majority of participants lose money.”

Note that there is no mention about whether the product is real. The question of demand is important though. Are the people making money from recruiting people who sell to those recruits (i.e. making money from the downline) or are they selling the product to the average person not involved in Vemma? It’s not likely you’ll get that data from Vemma. If you see them tout someone making a million dollars, they must really be hustling to do those sales outside of Vemma or it would seem to be a pyramid scheme according to the FTC.

Vemma’s Excessive Product Prices

To understand why pricing is important it helps to read: The $100 Pen Pyramid Scheme. I’ll wait. Back? Good.

So now that we understand why overpriced products can lead to pyramid schemes, it’s worth looking at Vemma’s pricing of the Verve product. I did a little math using the publicly available and well-known Amazon.com website (pricing as of 2/3/2014):

The price for Vemma is almost twice as much as the most expensive energy drink I typically can find in the store. If you read my article Save Money on Energy Drinks (and Caffeine), you’ll know how you can energy drinks, such as the popular brand Amp, with twice the serving size for only a dollar. That’s ~6 cents a ounce vs. ~33 cents an ounce for Verve. One can certainly see why the FTC suggests, “Many companies that market their products through distributors sell quality items at competitive prices. But some offer goods that are overpriced… Find out what will you be selling. Are similar products on the market? Is the product priced competitively?”

Is the Vemma Verve, like the $100 Pen Pyramid Scheme? Let’s put it to a challenge and see if Verve sells in stores at 33 cents an ounce. Let’s see if there is natural demand for the product when purchasing product isn’t a de facto requirement for entry into a “business opportunity.”

Some History on the Vemma’s Founder, BK Boreyko

This isn’t the first time that BK Boreyko has scammed people. The FTC has caught him defrauding people in the past. That time it was New Vision International (sounds like Young People’s Revolution, right?) and the product was God’s Recipe. In that case Boreyko was caught pitching the product as treating ADD and ADHD without the necessarily scientific evidence.

Given all the above, is this really the kind of person you think will make you rich, legally?

Vemma Declared a Pyramid Scheme in Italy

Consumer website, Truth In Advertising, has reported that Vemma Was Deemed Pyramid Scheme in Italy. They’ve also noted that Vemma Affiliates’ Health Claims Violate FTC Order.

It is a great article and a must read for anyone considering it in any country. Here are some interesting statistics from the article:

  • Only 27% of associates were eligible for bonuses by regularly ordering products from Vemma.
  • Fewer than 100 individuals on average generated six-month sales commissions higher than €1,000 (about $1,300 in June 2013), while nearly all the other associates received quite low or even paltry compensation.
  • A significant portion of the orders consisted of purchases made by associates themselves, presumably for their own consumption, which in the network are known as “autoship” sales.
  • Approximately 20% of the total income generated from product sales was obtained from the sale of expensive Vemma packages called “Builder Packs” that cost €599 or €999 (about $700 to $1,300 in June 2013), and over 60% was generated from autoship sales.
  • Only about 16% of the income was generated from the sale of products to third parties.
  • Only 24% of associates had a VAT number, which would enable them to sell products to third parties.

Remember that FTC quote above? With only 16% of sales coming from third parties it is clear that the money people make is not based on such sales. Instead it seems to come from the 80% of “Builder Packs” and monthly autoship to distributors. Using those guidelines, it is easy to why Italy would declare it a pyramid scheme.

Truth in Advertising further reports that the watchdog organization found, “A synergistic role in enhancing the effectiveness of Vemma’s pyramid scheme is generally the misleading representation of the supplements, so as to make them more attractive by attributing to them properties they do not possess…”

These claims are so common in the world of MLM health products, that I wrote an article about it, No, Your MLM Health Product Doesn’t “Work”, which was republished by the doctors at AITSE.org.

Truth in Advertising also quotes the Vemma saying two contradictory statements:

“If your goal is to become a household brand, it only makes sense to make a few more necessary operational and compensation plan changes to complete the move. To be more like Amazon.com and less like Amway.”

followed by:

“Vemma’s Compensation Plan won’t change; we’ll just describe it differently in updated terms to better explain how we do business.”

Truth in Advertising’s final conclusion was:

“Truth be told, as a practical matter Vemma’s new compensation plan still suffers from many of the multiple faults that Italy’s AGCM found with the old pyramid plan.”

Final Thoughts on Vemma

Typically when I write about MLM, I’ll get a distributor who tries to find one area where the article isn’t 100% accurate, points it out, and then suggests that I shouldn’t write about things that I don’t know about or haven’t researched. Typically, the article is accurate and the distributor is the one mistaken about his/her own business. Secondly if one minor piece of information is incorrect, it doesn’t mean the article as a whole is incorrect. Third Vemma, like all MLMs seems to purposely make its compensation difficult to understand with its own terminology not used in other businesses. Finally, this space is intended as a place where we can all learn more about Vemma. As you can tell, I’ve put a ton of research into Vemma. I shouldn’t even have to write this, but I’ve found that people who get tricked into being MLM distributors often lack the critical thinking skills to understand this.

I could go on and on, but anyone with an IQ over 80 should have known more than a thousand words ago that this is a huge scam and to stay away from it. I took the expression beating a dead horse to the ultimate level with this one.

Update: There’s a great article on Vemma on Cincinnati.com.

Update: Now NBC News is writing about Vemma: Controversial energy drink company targets students as sellers. Interestingly the person the news team interviewed told a typical story of recruitment and got immediately suspended by the company. That’s what happens if your claims are high profile to an undercover news team. If it had been to you or me, Vemma would never have known or suspended him.

Is Rippln a Scam?

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A couple of days ago, I got an email from my friend Evan who runs My Journey to Millions asking if I’ve heard about Rippln. I hadn’t. Turns out it’s super-new… as in the company seems to have been putting out their main promotional videos this week (though there were some going back to middle of April). Specifically this promotional video from the company caught my attention:

I was going to pick this video apart, but it seems like the nice people at TechCrunch have already done it for me. Their reaction was similar to mine, when I read it: “Thanks to my job, I get to see a lot of stupid bulls**t. Most gets filtered out, but every now and then something just rises up that is so ridiculously stupid, it’s just begging to be called out.” The article breaks down 17 ridiculously stupid points in the video, explaining what not to do in a start-up video. Here are a few samples:

  • “Don’t tell us that your app is going to be viral before it’s even friggin’ released.”
  • “Don’t expect the press to cover your stupid app before it’s even friggin’ been released. Except for maybe in posts parodying it.”
  • “Don’t say your stupid app is going to change the way we communicate, or call it ‘The biggest breakthrough since email.'”
  • “Don’t promise (again) that your stupid app is going to go viral. Don’t compare its growth to Facebook, or Twitter.”
  • “Don’t make your stupid app sound like some sort of exclusive club with an ‘inner circle’ and talk about how lucky we were to be invited and s**t.”
  • “Don’t say that there’s just a brief window for me to join!”

TechCrunch called out the video for including Adam D’Angelo of Facebook fame, but it missed the most obvious scam in this video. The video shows how Mr. D’Angelo’s 0.8% of Facebook is worth hundreds of millions of dollars. Well, that’s nice. Is Rippln giving you 0.8% ownership of the company? No. They aren’t give you any ownership. You would be a user of the app the same as if you were a user of Facebook’s app. Putting that aside, if Rippln was really going to give you the cut that D’Angelo got, 0.8%, they could only have 125 people getting it, before they’ve given away 100% of the company. Is the media and news really going to cover something with 125 users? Nope.

When Evan told me about Rippln he also included this promotional video from the company.

The video has adds a few more red flags. Specifically, the marketing in it is just plain slimy. First they say that we are in “hand-chosen few” that are behind the “velvet ropes”, but then make a big point that they can’t say too much about what they are doing. It sends a clear message: We are going to say that you are important to get you to sign up, but you aren’t important enough to know what you are really signing up for.

The other part of this video that got to me is that they push the “you are making Facebook and Twitter rich, but you get nothing for your efforts.” This is a common pitch in the MLM world. It sounds good on the surface, but let’s remember two things: 1) users get to use these companies great products and technology for free and 2) if Twitter and/or Facebook were to share their billions with its users, each person wouldn’t get a lot of money, just a few dollars.

If a company honestly thinks that they are going to share more than with you they aren’t a very smart company. So either Rippln isn’t very smart or they are trying to scam you with misleading marketing. I think it’s clear that both are true.

Rippln’s Founders and Company Information

Let’s dig a little deeper into this mysterious company. Here are the major players:

Brian Underwood – CEO – Underwood was a Master Distributor at Burnlounge, which the the FTC has shut-down and sued for being a pyramid scheme. He then went on to co-found iZigg, an MLM company that promised wealth based on text message advertising. In this video from June of 2010, he claims that iZigg is “launching the biggest brand name in mobile media history.” Have you heard of iZigg? Is it talked about in the news or blogs? Nope. Looks like iZigg failed to attract attention, and all those people who bought in were essentially kicked to the curb with Underwood starting Rippln, an extremely similar MLM, mobile company to try to create buzz from scratch.

Terry LaCore – Co-Founder – LaCore is the founder of b:hip, an MLM company that sells “lotions and potions” like many of the other MLMs that I’ve covered here in the past. Their products include a bunch that promise to repair your DNA and other outlandish claims that they can’t and don’t prove.

Jonathan Budd – Co-Founder – Jonathan is perhaps best known for his information product Online MLM Secrets and The 7-Figure Networker System. These are typical MLM Tool Scams. The idea is that people gullible enough to get involved in MLM are gullible enough to pay for these products. Of course, it’s little surprise that there are complaints about bad credit card charges from Jonathan Budd.

If you are going to compare yourself to Twitter, Facebook, or Instagram, you should have extensive background in technology start-ups. None of these people have that. There is no venture capital from the founders of Paypal (or similar) like you see with Facebook and Twitter.

All that matters is that people sign up?

Jonathan Budd has been commenting on critics websites, which is something I give him credit for. Most of the MLMers know better than to make themselves look that foolish like Jusuru’s VP did on my article. Budd commented on the aforementioned TechCrunch’s article saying (amongst other things): “It’s difficult to deny the effectiveness of our opening marketing at this point, judging by how we are having this conversation on techcrunch’s blog… so say whatever you will about that.” and “However unlike most companies, we believe the user deserves to share in the rewards of their word of mouth marketing. A concept that our users believe in too, as we’ve just crossed 200,000 people in our first 10 days.” and “If you dislike our marketing… that’s your opinion. But we’re proud of the buzz we’ve created in the marketplace, and will continue to test new direct response concepts, ideas, & media as we roll out more of our company in the future. Hopefully there will be something other technology companies seeking to get buzz might be able to learn.”

He also commented on the great site BehindMLM saying, “When someone criticizes how you market… that’s not a fact, it’s an opinion.” Update: he’s actually left a few comments on the site. One of them claimed: “If you think you could do a better job getting 210,000+ users in 11 days, by all means… I encourage you to leave the world of commenting & go become an entrepreneur.” (I shouldn’t nitpick, because there are so many big problems with Rippln, but they haven’t released a product and thus have zero users.)

Call it opinion if you want, but the FTC has clear opinions on what legal marketing is. As they’ve written in the past, endorsers have to “Clearly and conspicuously disclose the generally expected performance in the depicted circumstances.” Rippln is clearly misrepresenting the opportunity that they are presenting when they cite Adam D’Angelo Facebook stock money.

There’s a term for this Mr. Budd. It’s called “fraud.” It’s not my opinion, you can look it up: “…fraud is intentional deception made for personal gain…”

In that Behind MLM article, Budd also quotes the following frequently passed MLM clichés, “One of my favorite lines I’ve heard recently is: ‘There’s no statue built for a critic.’ And it’s quite true.” Who needs a statue when Gene Siskel has a Film Center. And let’s not forget that Hollywood stopped to honor Roger Ebert too.

I could go on for a week about Budd’s comment in the Behind MLM article. It switches from: “We believe that the world’s social graph is missing transparency” to “The criticism so far for our model, is frankly something we cannot fathom to us because no one knows any details yet. After the model is fully released…” to “Have actual information to base your opinions from” to “Give us a little time, and we will gladly take care of you, and answer any question you might have” to “If anyone has true critical analysis of our model, products, plan, or has questions… please post them here and as soon as time permits, I or someone from my team will address them.”

So they are trying to be transparent, but they can’t release their model. Yet we are supposed to have actual information (which they haven’t released) to base our opinions on? They want a little more time, yet they continue to take sign-ups and release misleading videos. Budd invites us to post “true critical analysis of the model”, but remember what he said previously, “no one knows any details of the model.”

Doublespeak much, Budd?

The rest of his comment is pretty much generated from the bad MLM argument generator. In this case the generator must have produced, “you’re just out to get hits for your blog”, “You’re just negative”, and “You just don’t understand it.” May be there are some others that I missed.

But Really, What About the Model

As Budd made clear, they are still working on it. That should give you a lot of confidence, right? That aside, we know a lot of things that they’ve worked on and even released, so it is worth discussing those as it gives valuable insight as to where the company is going with this.

There are numerous reports that people can pay $300 to be a Domestic affiliate and $600 ($900 total) to be a Global Affiliate. In addition, it seems that comes with a $49/mo. fee for the right to distribute the mobile application. If true, and again, I’ve seen multiple reports so it seems credible, it’s going to be a slam dunk to show that Rippln is an illegal pyramid scheme. It doesn’t seem like Rippln intends to sell anything other than the business opportunity to recruit more people to Rippln. It’s not like the product is the app, because that’s supposed to be free. Update: it looks like Rippln is going to try sell in-app purchases and tracking of them.

That’s very interesting because in this 11 minute video from Rippln explaining the compensation plan, it definitely seems like the money comes from recruiting people who pay to become “players.” It surely doesn’t look that Rippln is interested in focusing on the in-app purchases from the video, which is a major red flag for it being a pyramid scheme.

At around the 9:40 point they explain the All-Star Bonus. It seems like this person collects any bonuses that weren’t collected by new people. The example they give is a person joins last month and only qualifies for payment on 4 Ripples. You’d get the money he would have made if he had 10 Ripples. It’s complex and their explanation is clear as mud, but it seems like the All-Stars will pick up a majority of the money. This also sounds like the way that they give the hand-picked early adopters big cash, since at some point, mathematically there will be many, many people who won’t be able to fill up their Ripples. It’s the nature of any kind of pyramid recruiting scheme that there is simply no one left to recruit at some point.

One my favorite parts of the video is at 10:40 when after a ridiculously confusing explanation of where all the money is being sent through this system, it adds, “there’s a more complete explanation about the comp. plan inside the ‘inner circle’.” Wait, it gets even more complicated requiring further explanation?!?!

Again, don’t quote me on these statements being entirely accurate, because as Rippln’s co-founder Budd said, it hasn’t put out the details of the compensation plan (even though there’s a video) . So either the company is A) not transparent enough to disclose the true compensation or B) has their priorities messed up to the point where marketing an app without a business model or C) is lying about not having put out a compensation plan. It’s probably a little of all three.

About this Mobile App

Apple has been pretty strict in what apps it allows. If there’s a compensation plan behind it where people are making money from recruiting others, you can be very certain, it won’t get approval. Google Play is a little more loose with it’s restrictions, but it too probably wouldn’t approve such an app. I’m not as familiar with Windows Phone and Blackberry 10 apps, maybe Rippln plans to take on Facebook and Twitter with the less than 5% market share those smart platforms have? With a plan like that, how can it fail?

Conclusion

In the end, when I look at Rippln, I see the following:

  • Laughably-bad marketing. Worse marketing designed to misleading its potential users
  • A compensation plan that appears to be a clear pyramid scheme…
  • A product that doesn’t exist and probably can never exist the way they hope (due to app store policies)

Rippln is already on defensive about the past of CEO Brian Underwood. Jonathan Budd commented in the aforementioned TechCrunch article and was quick to throw the defamation word out there from well-meaning commenters. In addition Rippln’s lawyer took to their Facebook page saying, “The allegations of Brian Underwood being sued or investigated by the SEC or in another lawsuit are false.” Given how MLM lawyers have threatened me with legal action in my other articles (such as One24), it probably won’t be too long before they come after me with a Strategic lawsuit against public participation (SLAPP).

In which case, I really invite them to do their worst. I would be happy to sit in a court room and discuss the FTC’s guidelines on endorsements.

I’m going to close with this, a video from another person who smells a rat with Rippln, Chris Voss. On his show, he dug up a lot of dirt on Rippln, including information that they don’t seem to be doing business from real office space. There’s a good deal more and I don’t want to spoil the fun.

Looking at “Lifetime Guarantees”

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I’m in the market for a fence. It be so very nice to be able to let my dog out into the back yard instead of walking him on a leash. So we looked up a fence contractor, picked out a fence, and had our pen out to sign on the dotted line, when my wife asked a great question:

What’s the warranty on this fence?

The answer was: There is a lifetime warranty. That’s pretty sweet, right? Hard to go wrong with that. The natural question I had was, “Whose lifetime and how does it work?” These are the things that I’m curious about. Could I have my 6-month old put his hand print on the contract and funnel the payment through his bank account?

Turns out that the warranty is for the owner of the house, so that won’t work. As our home, is co-owned, I assume that it’s the lifetime of whoever lives longer, but maybe I should read the details on that.

The thing that really struck me as odd though, is that the warranty is void if we sell the house to someone else. This just didn’t seem right to me. The fence company shouldn’t care who lives in the house. They shouldn’t get out easy if I’m house flipper. Furthermore, if we do sell the house, the fence is an asset, and it would nice if that asset some time left on the warranty.

In the end, it probably doesn’t matter too much. The warranty only covers defects and I think those would be evident relatively quickly. The thing that’s mostly likely to be a problem is the weather, and acts of God aren’t covered in the warranty.

Readers, should I look for a different fence company or just suck it up and deal?

Exposing the MLM Tool ScamWorld (With Bonus: Neucopia Scam Analysis)

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I got an email recently suggesting that I expose a dark underbelly of the dark underbelly known as MLM. When it comes to MLM, it’s probably more appropriate to call it an onion of evil. You pull off one layer and there’s another one underneath. I’ve written before about The Business of MLM (or What Gives Freddy Krueger Nightmares). What I forgot to mention in that article is the MLM tool scams… which is like inviting Jason Voorhees and Michael Myers to the party.

[Side Note: I’ve borrowed the “ScamWorld” in the title from this excellent, but very long, article on get rich quick Internet schemes from The Verge.

Back in the 1980s and 90s when Amway was a popular MLM, there was a side-business that many at the top say was bigger than the Amway itself. It was the selling of motivational tools, brochures and tapes to distributors. Essentially these distributors, desperate for an opportunity to get rich, were a captive audience, to sell this stuff to. Anyone could make a good for buying it: You are investing in yourself, investing in your education. The margins on tapes, brochures, and books were incredible. Someone high in Amway could give a talk, drop a few buzzwords, and sell it for $10 or so to thousands,maybe even tens of thousands of MLM distributors. Companies like TEAM who were lead by Orrin Woodward jumped in and built multi-million dollar businesses just selling hope to those in pyramid schemes as this Forbes article points out. (Side Note: Great article from my friend Amthrax on how the FTC shut down a company for multiple accounts of fraud that awarded Orrin a “leadership” award.)

Back to the email I received. The person mentioned an old “friend”, Chris Blair. Mr. Blair introduced me to LifeVantage Protandim, just weeks after spamming me to join his coin MLM. (I didn’t realize until recently that he was in MonaVie, which is another company I covered also.) The person mentioned that Mr. Blair is on a full-fledged MLM marketing mission leaving no stone unturned. He’s now putting videos up about the Empower Network, Neucopia, and Network Marketing VT… three MLMs whose “product” are “tools” that are used by other MLMers.

Let’s take a look at the last one, Network Marketing VT, as pitched by Chris Blair. It offers a few conference calls and training webinars, a “huge” library on business building and lead generation, “enormous” product suite of software, etc., but most importantly it includes a pyramid scheme where if you recruit 200 people to buy the same course you can make nearly $20,000 a month. And of course Chris Blair calls it “the greatest thing I have ever seen”, but if you read the other two, he says similar things about them as well.

Exposing the Neucopia Scam

Let’s expose the Neucopia scam becuase it is fun. Also, since I’m Lazy, I love things that are easier than shooting fish in a barrel. And exposing Neucopia is a whole lot easier than that.

Here’s Chris Blair’s video showing the basic level products that are in Neucopia:

Two of the first tools are Internet Marketing Articles and Copywriting Automater. Internet Marketing Articles is a way to clog the Internet with a bunch of what Google calls “thin-content” or essentially spam webpages designed to fool search engines into thinking you are popular. The Copywriting Automater creates these articles quickly. Who cares if they read like they’ve been translated from Russian to English back and forth a few times? It’s not for humans to read anyway. You’ll so others like payment button creator, iframe generator, and audio player generator. Paypal has very simple and free tools to generate a payment integrated in their site. Enter iframes in your favorite search engine and the first result is going to show you the one line of code to generate an iframe. I used a YouTube’s embed feature to generate a video player, so I’ve already one-upped the audio player generator.

Of course many of the tools have pictures of fake software boxes beside them, so you may be confused into thinking that people actually pay for this stuff. Access to these basic level tools is going to cost you $50 a month with Neucopia.

Also with the basic level of Neucopia membership, you’ll learn Real Estate Training (cue Tom Vu), Stock Market and Forex Trading (because there’s no quicker way to lose money than trading stocks and currency from the advice of non-financial company), debt consolidation (where they’ll likely spin you to company to turn your unsecured debt to secured debt where you could potentially lose your home), and tax avoidance tips (because its always wise to mess with the IRS).

However if you want to plunk down $270 to start and $170 a month ($2000+ a year) you’ll get access to the premier level of Neucopia. What does that give you? The key thing they pitch is “top level guru” videos. The first thing I notice is that they didn’t give you one for the month of November or December, so that was 100% waste of your Neucopia premium dollar.

In October they had Mia Davies. According to the Neucopia:

“Mia is absolutely DOMINATING right now on the internet with video and social media marketing! As a result she has been featured in Forbes, USA Today, Yahoo News…..just to name a few….AND shared the stage with T Harv Eker!”

Interestingly, I’ve never heard of Mia. So I decided to search Forbes site for Mia Davies and USA Today’s site for Mia Davies and came up with no results. It was time to dig deeper and Mia Davies’ own website gives us the proof. There we see a number of screenshots. If you look carefully at each of these, they are syndicated press releases from PR Web. Essentially Mia Davies put out this press release about herself.

Getting “featured” in those websites is not a result of “DOMINATING”, but paying PRWeb $369. So woe be the person who spent money on Neucopia to get access to Mia’s ability to fabricate misleading credentials. Then again, what would expect from MLM when it is largely a game of “find a few bigger fool than yourself.”

At least you get someone who shared a stage with “T Harv Eker” whoever that is.

Final Thought: Do these tools really help people make money?

I’ve shown that well over 99% of people lose money in MonaVie and the the stats are similar for just about every MLM that makes the data available. As one reader, Jim, pointed out, in MLM It’s Not a Matter of Effort, Failure is a Mathematical Certainty. Like a game of poker, if you play long enough, there’s going to be one winner and the rest losers. It doesn’t matter how good the poker players are since they are all in competition with each other. In MLM, it is the same way, since they are all trying to recruit people, and there’s a limited set of people who would fall for the scams.

In some ways, I almost buy the sales pitch that MLMers need these tools. The success rate in MLM is very close to zero because the competition is literally millions of people looking to recruit the few people left who are susceptible to the scams. One could say that an MLMer needs every advantage they can get, but paying thousands of dollars a year pushed the success rate that much further out of reach. It’s a game where they realize they’ve got a distributor brainwashed, so might as well soak them out of as much money as possible.