I have started examining the industry since Dec 24th 2011. The system abounds with here today, gone tomorrow scams. It is said that 9 out of 10 network marketers lose money. Major scams include ponzis, Illegal pyramids, doublers, some HYIPs (High Yield Investment Programmes). As I have studied them, even trying out a few with small sums, I began to see a pattern.
The major red flags, in no particular order, of online (or even offline) businesses are:
1. Owner. Many scams do not have an identifiable owner, as they 'hide' from litigation. This is one of the first things I look for. Other things are more glaring, but this is the first big sign for me as once this is not known, everything else normally falls down.
2. Product. Many of them do not have a substantive product. Just a promise that if you put money in, you get more back ... eventually.
3. Customers. Non-members have nothing to get from the program. You have to pay and also refer many others to join before you receive anything substantial. Some pay you purely for referring others. This is an illegal Ponzi.
4. Longevity and recyclability. They do not last longer than a few months. I actually saw one startup and shutdown in about 3 weeks. Many of these that do pop back up under a different name later on. And the gullible still jump on.
5. Location. Many do not put up their base of operations on the home page. This leaves the diligent researcher to do more digging. Searches via whois and other tracking tools come up with domain names that may not match with the purported opp, or even if it is, the address is faked. The people do not want to be found.
6. Contact Info. There is no support line, help desk or even an email address for several of them.
7. Compliance. Many do not seek any compliance with legal processes for running a company. The Federal Trade Commission (FTC) have published guidelines for online businesses, including affiliate marketing and network marketing companies operating in the US. This was revised just earlier this year and is available online.
8. Taxes. It's quite obvious that scammers are operating outside the law, so they don't charge or pay taxes either. If a business is operating in a country/state, and does trade with another member of that country/or state if US, taxes are usually charged for registered businesses.
9. Financial. Major financial companies want nothing to do with scammers. Thus the process for registering with them is rather lengthy, involved and detailed. So you would not see many scammers providing you with a payment card from MasterCard, for instance.
10. Withdrawal. Many may show you an accumulation of money in your online business account, ewallet or wherever your earnings are stored for distribution. However, when you attempt to withdraw it to your bank, you get nothing.
While there are more categories to look for, these are the major ones. with all these red flags appearing on so many programs, it is amazing to see so many people still pushing money into them. It's absolutely incredible! I have asked many I meet online to do their due diligence and many don't care to do so. Some even say that knowing who the business leaders is not important. Scary!
So, before you join any program, ensure that you do your due diligence on the above points. My other reviews in future posts would include the above areas. In this way, you would learn how you can make technology work for you - for online income!
Michael Amann
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