hey dudes - free stuff!

[Will_Couper]

I'll give this wide berth thank you so very, very much.





Will

[Quiz Bhoy]

After a quick check on Google.........

The major difference between the classic pyramid scheme and these “free widget” schemes is the way the money is paid. In these free widget scams you don't see any money directly, but rather each person you enlist (indirectly!) pays the company running the scheme in the form of a referrer fee. If you convince enough people to sign up, you get the payoff in the form of a "free" widget.

The companies running these scams also claim your name and address is worth some amount of money for marketing purposes. That may very well be true... but then what's the difference between sending them money versus sending them your name and address? None at all, at least from their point of view.
A clearer way of looking at this: if you are required to get seven other people signed up, then each person you enlist is paying you in the form of 1⁄7th of the widget. Money isn't changing hands directly, but it most certainly is indirectly. Using middlemen doesn't change the basic nature of the scheme.
Classic pyramid schemes are illegal because they are deceptively fraudulent, not because they don't work. Pyramid schemes work marvelously for early investors even though most people end up losing money—but they're sold to people as a way to make money. Currently the free gadget variants (probably) aren't illegal but are just as deceptive.

But a friend of my friend's friend's sister knows this guy who says he saw a website where someone said they received a free thingy!

Many participants have insisted this isn't a scam because some unspecified number of people have received a free item. [Remember, in any pyramid scheme, some people (early investors) typically receive a substantial profit.]
I'm a little suspicious of these claims, but it doesn't matter either way. Even if the company always does exactly what they say they will do, it's still a scam.

Many pyramid scheme operators do exactly what they claim they'll do, but few people would argue they're not outright scams.

It's a scam in that most (if not all) of the entrants sincerely believe they're eventually going to receive a free gadget—yet the vast majority of them will not. If 5 people are required to sign up before you can get a free widget, at most 20% of the people who join may eventually receive one. Of course, the percentages are even lower for those items requiring more referrers. And, as time goes on the chances of success shrink drastically as the number of potential new members goes down. (There are only so many people in the world.)

This sort of scheme works solely because there are enough people who don't understand what they're getting into. Giving it a fancy name such as “viral marketing” makes it sound legit and trendy, when it's nothing more than a variant of something Charles Ponzi, one of the most famous con men in history, ran multiple times in the early part of the 20th century.

The obvious financial argument

Ask yourself one simple question: how can someone make money by, say, giving away widgets that cost (as an example) $200 each? I mean, it sounds awfully nice of them to do everyone such a great favor, but...
The only way they can keep doing this is by taking in more than £200 per widget they send out. The money has to come from somewhere, otherwise they wouldn't be doing this; few companies are in the business of giving away things at a loss. The nit is, the referral fees and marketing income generated for any single enrollee don't add up to anything like $200. (Hint: does it cost $200 to enroll? No, because then people would just go out and buy the widget themselves, skipping the wacky "marketing technique" in the process. And despite rumors to the contrary, AOL, eBay, et al. aren't in the business of buying free widgets for everyone.)

The only way the company can survive is if most enrollees don't receive a free gadget. And that is indeed the case! Remember, for every entrant who has earned a widget, N other people have paid in but haven't received one yet. So for each widget sent, a minimum of N+1 people have paid for it.
Here's a graphical illustration. Assume each referrer has to enlist five other people before they get their widget. So when the first person gets their widget, the situation looks like this:



The round dude at the top got his widget, but the five below him are still waiting. Obviously, six people have paid in but only one has received anything. Now let's assume each of those entrants signs up five people and gets their free widget:



Six people have been sent widgets, but 25 haven't. A total of 31 people have paid in (1 + 5 + 25). If the game ends now, 25 people have just been screwed. Let's keep going:



31 people have received widgets. 125 haven't. Now it's starting to make sense, isn't it? And you're far more likely to be one of the 125 at the bottom who hasn't received a free widget than one of the 31 who has. (It should be easy to see why these sorts of things are called pyramid schemes— tree resembles a pyramid.)
This all assumes perfect play, of course. In reality a much smaller percentage of people will have been able to enlist five others and receive their widget, making the scheme even more profitable:



At the current level 128 people have enrolled but only 17 people received free widgets (13%). This was based on a 59% probability of each person coercing five others into signing up. (Actually, a 90% chance that each person who is asked will sign up.) Clearly the profitable area for the company is the myriad of folks at the bottom, not the few at the top. And no matter how long we extend the game, there are always at least 5× as many people at the bottom who haven't received anything than people at the top who have.

Taking these simulations to an extreme, and assuming the same (I suspect inflated) success rate, after 10 levels over 2 million people have been asked to enroll, 1.1 million people signed up but only 13% of them received a free widget. Those are pretty low odds for the entrants, but I'm sure it's very profitable for the company running it. (Sorry, I can't include a picture.)
There are other potential problems. The companies running these schemes add several disclaimers to the agreement; in essence, if they don't take in enough money to pay for the widgets they don't have to send them out. So there's no guarantee whatsoever that, even if you meet all the requirements, you'll get a free gadget. (Unfortunately, the snopes.com discussion which went into this is gone.)

Furthermore, the referrer fees may eventually dry up when the companies paying them realize they aren't getting more customers. Instead it appears most people sign up, wait a few days, then cancel their subscription and request a refund... defeating the whole point of the referrer fee in the first place. Why would these companies want to continue paying out money for something they aren't actually getting? (Or, eventually, you'll lose the option of cancelling out of the subscription in the first place; some of the companies running these scams have already done this.)

Also keep in mind that you would be competing against an exponentially-growing list of members who are also trying to find new suckers to fleece people to enroll. That's what the companies running these scams are counting on; this helps them earn more money, and increased competition amongst enrollees makes it ever less likely anyone will be able to earn a gadget.

Most people sincerely believe they will be one of the small percentage of people who will succeed. As you can see, most people will inevitably fail. This is an integral part of human nature which marketers love to take advantage of.

[PapaZeb]

Or the shorter version - signing up for shit like this works out for a small percentage of people. The rest get screwed into long-term subscription commitments.

By screwed, I mean they may enjoy the service they've purchased, but getting 3 or 4 services at a tenner a month each easily pays off for the free toy you get at the end of the day.

[Fenntastic]

Originally Posted by PapaZeb

Or the shorter version - signing up for shit like this works out for a small percentage of people. The rest get screwed into long-term subscription commitments.

By screwed, I mean they may enjoy the service they've purchased, but getting 3 or 4 services at a tenner a month each easily pays off for the free toy you get at the end of the day.

you dont need to buy anything though. the blockbuster one is free and i read through the T&C twice and you can cancel it at anytime without penalties. which is what im going to do once the 2 week free trial is up. worst comes to worst i get a few free DVD rentals (got 3 in this morning)....

[fallen_nemesis]

nyargh! pyramid schemes are EVIL!

I get enough junk mail as it is without signing my soul away for things i don't need, getting hastle when I try cancel them and about 50 new spam emails a day

[Fenntastic]

the only emails ive had since i signed up have been from blockbuster telling me what DVDs are on the way....

[Exit_W0unds]

Did you ever get the thingy? Not that I'd sign up to something like this myself, I was just searching the forum for threads about spam.

[Quiz Bhoy]

Originally Posted by Exit_W0unds

Did you ever get the thingy? Not that I'd sign up to something like this myself, I was just searching the forum for threads about spam.

Why? You hungry?

[Exit_W0unds]

Bored and hungry, yes.

[Hammer]

Originally Posted by Exit_W0unds

Bored and hungry, yes.

Solution to both problems:

YouTube - Spam Spam Spam Spam Spammity spam

[Exit_W0unds]

I remember I was at my friends house after school and her parents were making dinner, of fried spam and chips. I nearly choaked to death whilst chewing said spam, I wonder if it was natures way of trying to prevent me from tasting and digesting it.

[Eve Bulloch]

I just signed up for this, am I in trouble?

[Will_Couper]

Is that the complete flower of life I see? Is Andymonk part of a pyramid scheme?


Will

[MarkMono]

It constantly amazes me that people are actually dumb/greedy enough for these things to actually work.

Meh, its natural selection I guess.

[Will_Couper]

It will be different with this one. This one will make you rich, rich, RICH!

All you need to do is click the link.


Will