Crazy Fraud

Daniel Malmedahl tried to impress his fellow 17-year olds with a convincing impression of a moped. He was a bit surprised that they found it funny, but quickly came to enjoy making people laugh. At some point someone recorded the sound and emailed it to a friend, who sent it to 10 friends, who sent it to 100 friends etc.

Soon it arrived on the desktop of Erik Wernquist who was inspired to create The Annoying Thing (as you see it here, or click for the original short video).

Then Jamster bought the rights, everyone saw it, millions downloaded it and it became top of the UK music charts making Jamster multiple millions.

So if you have something people want, how do you turn it into income?

"Paris Hilton" is currently the most popular search on Google. If you have a set of nude pictures of Paris Hilton, or the address list from her mobile phone, or a video, then the formula is easy. Millions of surfers will pay to see this material so the Pay-per-View model will work. Of course there is the small problem of controlling access - you have to show that the pictures exist without giving it all away. The movie industry has perfected the art with the trailer, a short exerpt that showcases the content without spoiling the story. Like the trailer: buy a ticket to the movie. Like the pictures, pay to see the rest.

There are other approaches. ADVFN.com offers stock price tracking and even lets you create and track a personal portfolio. This basic service is free, but very useful if you want this information. Also, just by signing on you have declared your interest in financial investment. The free service allows you to test the service and build up trust. That way ADVFN would be your natural first choice when you want to trade stocks, exchange currencies, buy into hedge funds or any of a host of other financial services.

Perhaps the simplest model comes from PackingList.info. This site has only one piece of content: a generic packing list downloadable in pdf and MS Word. Although the site is clearly intended as a tutorial example, the author hopes that anyone who wants a packing list might also want to buy holiday reading or a travel guide. He has signed up as an Amazon affiliate, so if you click on the link and buy from Amazon they will pay a commission.

You might ask why he doesn't also add links to travel bookings, insurance, clothes and equipment. I think it's because it was never really intended to be a commercial proposition and it probably doesn't attract a lot of traffic. Nevertheless PackingList.info is instructive and worth a visit.

So that's three models so far:
a) Pay-per-view (porn or business reports),
b) Tiered membership (ADVFN) and
c) Affiliate (Packinglist.info).

But what of the Crazy frog?

Well you have probably seen the TV advertisements. Just text the number and you will be sent the ringtone - at least that's what most people seem to think. In fact by ringing that number you have signed a contract or "joined a club". Apparently it does say that on the ad but it goes so quickly and in such small print I couldn't see the details.

Once you've joined (£1.50) you are sent the ringtone. And another one, and another. And these new ringtones cost £2.50 and come in once a week. If you don't complain then they start to come in twice a week, and eventually daily. My son has a dormant account with no phone and no calls - but it still came to about £50 for a month.

Apparently the consumer watch dogs have been inundated with complaints. You can see how many people have been duped by the "free" service if you do a google search for "Jamster fraud" or "Jamster scam" and follow the discussion on blogs and bulletin boards.

Meanwhile Jamster continue to advertise, pulling in mainly children and then charging as much as they can get away with. So far they are said to have made over £10m on the Crazy Frog.

Good business or just plain fraud?

eBay, Ready to do Your Bidding?

eBay was born 10 years ago. The story goes that Pierre Omidyar spent a few days off work in 1995 building the original auction website so his girlfriend could trade Pez dispensers with other collectors. The story may not be accurate, but is a true insight into the ethos of the company.

Since then eBay's volumes have grown each year, and so have its profits.

	1999	2000	2001	2002	2003	2004
Profit (after tax) ($m)	10	48	90	250	442	778
Revenues ($m)	225	431	749	1214	2165	3271
Value of Sales ($b)	2.8	5.4	9.3	14.9	23.8	34.2
No. of Items Sold (m)	130	265	423	638	971	1400
Registered Users (m)	10	22.5	42.4	61.7	94.9	135

The process is very simple.
1. Would-be buyers or sellers sign up as eBay members, although anyone can watch the progress of each auction.
2. Post your auction item with a time to run.
3. Wait for the auction to run its course. The software will keep track of the highest bid.
4. Buyer and seller sort out the payment and delivery details between them.

eBay is more than just a market place for casual traders. Over 1m people derive their main income from trading online and there are 100,000 shops set up on the site. You can set fixed prices for items which makes life easier for bulk vendors.

eBay has no physical shops of its own, no stock and does not suffer from price competition. Adam Cohen describes eBay as "The Perfect Store". But being perfect is hard work.

This week a woman was convicted in the UK for £42,000 of fraud on eBay. What does eBay do to make it safe to trade? Issues of trust mean that membership may be levelling out in the US.

And what about competition? Well there isn't that much. Yahoo and Overstock offer auctions, but their combined volumes are less than 5% of eBay's. Amazon sells second hand, and it won't be long before Google wants a slice of the auctions market. More threatening is the fact that it costs so little to set up an e-commerce site: most of eBay's biggest sellers have eBay stores, but they could set up online shops and avoid all commission. If an independent could find a way to attract sufficient attention from buyers there'd be a mass exodus.

www.eBid.tv is one of many auction sites charging absolutely no commission - but if you are selling then it's still worth paying to get in front of all eBay's bargain hunters.

eBay can't rest on its laurels, but it continues to grow by 50% a year, and for the moment the opportunities (for example, in China) seem greater than the threats.

Viral Messages (tell a friend)

This viral thing is really catching on.

Folk tales and fairy tales are examples of stories that were passed on from person to person and generation to generation.

If you hear a really good joke, then you can be sure you'll hear it again several times over the next few weeks. I used to "improve" jokes by changing the details or adding something, and that way I knew when I heard it again that it was "my" version. And if you heard my version then you were, either directly or indirectly, part of my community.

10 years ago Budweiser tried to create a sense of community with its "Wassup" series of advertisements. Annoying though the ad was, people started to greet each other in the street with cries of "wassup". Every time that happened both parties shared the joke, and it reinforced the place of Bud in their community.

Budweiser promoted a particular behaviour. Smirnoff produced a much-imitated catch phrase "... until I discovered Smirnoff" which became the basis of a series of jokes. The Beastie Boys wore VW signs and soon signs were being stolen from the front of VWs everywhere (including my Golf).

Anything that's funny, weird, interesting, useful or shocking enough will be passed on. Now we do it by email or text message. Staff Sgt Roger Parr starred in a spoof version of Peter Kaye's video of "Is this the way to Amarillo". They emailed it to a group of friends, and soon the British Army's email system collapsed under the strain of 40,000 copies of the video. The sheer good humour and exuberance of the video made people want to share it. Follow the "Armadillo" link and see what you think of it.

Every day office workers send jokes, documents, picture, links and short video clips to each other. If they aren't interesting enough they just die. The good ones keep being passed on.

Ford tried to take advantage of this by producing a very short and mildly shocking video of its smallest model, the Ka. The video was completely successful. Shortly afterwards, a much more shocking (cat) video appeared which Ford angrily denounced. But the cat video's bad taste made it fascinating and even more successful, and it transformed the mild image of Ford's Ka.

Viral messages are immensely powerful as a way of manipulating perceptions and behaviour. If you still need convincing follow the Estrada link to see how a cascaded text message led to the resignation of the president of the Philippines.