AdultNet

[JLP]

BabeNet’s Cone of Silence

Recently I wrote about “Malicious Affiliates.” They are affiliates that send “bad” traffic to their program sponsors or competitors, causing them to run over their chargeback limits. As I predicted, interest in this topic has increased as payment processors have finally begun enforcing chargeback rules with a vengeance.

I am continuing to investigate bad traffic this month, but from a more orthogonal perspective. This article pertains to a gigantic traffic scandal and the failure of our trade press to investigate and report on it.

Trade publications, both online and offline, exist to serve their readers. Readers deserve information that will help them make money and avoid losing money. Of course publications also need to make money. But in order to best serve their readers, trade publications need to commit to relationships with a healthy collection of honest advertisers. Thousands of trade publications deliver on this seemingly simple mission. However, I strongly believe that our industry trade press completely failed in its commitment to readers by neglecting to report on BabeNet and other scams.

By some estimates, BabeNet perpetrators may have stolen more than $80 million from adult webmasters, payment processing companies, and others in the industry. $80 million is a huge amount of money, and a number that dwarfs the amount of money involved in the well-publicized Acacia scandal! If the actual size of our industry is $10 Billion in revenue, and Acacia might receive 0.5% of that, Acacia over time will not earn $80 million cumulative for over ten years. So why is there not one story, one paragraph, or even one reference to BabeNet--potentially the biggest Ponzi scam (or scam in general) to hit our industry.

What is a Ponzi scam? It is a swindle in which early participants (webmasters in this case) are paid off by later participants in order to encourage more frequent participants. Promising multi-percent-per-month returns puts huge pressure on such a scam. The early webmasters are "guaranteed" a good reward. Now that you, the runner of the scam, are receiving several percent a month, webmasters are lining up at your door asking to participate in the venture (the right to send traffic to the Babenet sites).

Another definition of a Ponzi scam, also known as a pyramid scheme, is a financial-based crime where the webmasters (especially the early webmasters) are promised an unreasonably high return, usually above market, on their money. Those early webmasters give money to the scammers at the top of the pyramid, and lure new webmasters with stories of their financial success. This game continues until the scammers run out of new webmasters to lure, or simply run away with the remaining money in the pyramid.

There are so many interesting facets of the BabeNet case that they are difficult to describe in the limited amount of space I have been allocated. I could write about how for a short time (one month or so) prices on my site http://www.sex.com were up an average of 15% because BabeNet could pay more than other sites because of their lack of scrubbing and their intent never to pay the bottom people in the pyramid. I personally know five people who got ripped off to the combined tune of over $1 million. I could write about those who lost their life savings, those who left the industry, and those who suffered great mental anguish.

In a typical trade publication (such as XBIZ), advertisers are treated well, but are also subject to honest reviews and bake-offs (i.e. “KaylaKam’s site is great, but needs to be updated.” “In a test between Epoch, ccBill, IBill and NetPayment – we found Epoch to be the best.” “KeyBoardCash does not pay their bills on-time according their according to several webmasters so we signed up under 10 affiliates accounts, testing them and found they do pay on time.”).

Instead, we receive bad advice, waffling on what to do about Acacia (useless to anyone who does not have a spare $500,000 to fight), and endless pictures and canned stories about advertisers. The goal and mission of trade publications should be to promote the truth, irregardless of whether the truth is good or bad. In no case should the trade magazines over or under praise advertisers. If trade publications are to maintain their editorial integrity, they should treat advertisers like everyone else.

I think much of the avoidance of controversy comes from those not wanting to put a bright light on their own operations. Additionally there are friendships and relationships where people don’t want to be considered outcasts by normal society. Also no one wants to be a rat.

One would think that our industry’s trade publications (both online and offline) would serve as advocates of the webmaster. I find it shameful that our industry has failed to report on or launch a full investigation into the BabeNet matter. Instead, the complete radio silence leaves us with more questions than answers.



©Gary Kremen. 2004. Gary Kremen runs Grant Media, LLC, the licensee of Sex.Com. He was the first to register the domain name in 1994. The name was stolen in 1995 and returned after years of litigation to him in 2001. For more information on Gary Kremen, see http://www.Kremen.Com. For more information on Sex.Com visit http://press.sex.com. To reach Gary Kremen and for comments on this article email gary@sex.com.