On a warm summer day in 2002, in Charlevoix, Michigan, Richard Joseph’s bad luck began. The lawyer, husband, and father of two was walking across the driveway with a bag of garbage when his bare foot slipped in a puddle of water that had collected beneath his car’s air conditioner. His leg gave out and he landed on his back. While nothing was broken, the blow prevented blood from reaching his spinal cord. He laid there for an hour, unable to move, while his daughters watched television in the living room. By the time he was discovered, the damage had been done. He'd never walk again.
Eventually, Joseph would make it back to work at his law firm, although he couldn’t keep up his old pace. By August 2007, complications prevented him from working at all — possibly forever.
Joseph describes his mental state after yet another stint in rehab: “I’m moping, pretty much, and right around Christmas time I decided, you know, I’d better get my butt in gear and find something I can do from home. So, I tried to find work as a lawyer from home, but that was right when Michigan’s economy started to go to hell, and a lot of law firms weren’t outsourcing work.”
So he took to the internet, looking for "work from home" opportunities and requesting information from various websites.
Scamworld: The Movie
Modern snake oil salesmen
In February 2008, "out of the blue," Joseph got a call from a salesman that identified himself as Ron Martino from PushTraffic, with a work from home opportunity.
"I told him what had happened to me, and he said, ‘gee... I have a brother who’s paraplegic. I know what you’re going through, and I will help you out.’"
Martino couldn’t talk him into anything straight away, so he began calling regularly, often just to chat. It was while this was going on that Joseph contracted MRSA, a multidrug-resistant infection he wasn’t expected to survive.
"He called me enough times. Because I knew him well enough I told him what hospital I was in. He called the hospital, got my room number, talked to me in the hospital. I remember this really well, because I was watching CSPAN and how the economy was going, and I’m sitting in this ICU room talking to him on the phone, and he’s talking to me like a good friend. He was being my friend."
The courtship lasted around six months, and eventually Joseph agreed to purchase an e-commerce site from PushTraffic.
According to Joseph, Martino was going to set up the new website while he was in the hospital, and he guaranteed that in thirty days Joseph would be making between $4,000 and $5,000 a month, working from his bed for an hour a day.
Joseph hoped that, if he didn’t survive the infection, this source of income would be a lasting gift to his family.
While relating this all to me, he starts to choke up a little. "And I know all this stuff about ‘too good to be true,’ but he went into great detail about how his brother was a paraplegic, and he helped his brother do this, and that the reason he was going to do it was because of me, he could only have one person under his wing, so to speak."
It was in this vulnerable state, facing death and trying to care for his family, that Richard Joseph charged $20,000 on his credit card, money that he has yet to reclaim after phone calls, a lawsuit, and nearly three lean years.
What Joseph didn't know was that Martino was part of a vast criminal organization run by Los Angeles resident John Paul Raygoza.
Raygoza is an Internet Marketer — a 21st century snake oil salesman.
The term Internet Marketing in this context describes both a particular business model used to sell fraudulent products and services online, and the community or subculture that embraces it. It operates out in the open — with poorly designed websites, tacky infomercials, and outrageous claims designed to scare off the wary and draw in the curious, desperate, and naive. The Internet Marketer positions himself as a marketing "guru" with a product or coaching services guaranteed to generate income.
The path to internet riches begins with an introductory product, such as a book or DVD. This is often a loss leader: the real value for the Internet Marketer is that it allows him to capture your contact information. Once you’re in the system, your inbox will be flooded with offers for software, DVD sets, and coaching programs costing several hundreds or thousands of dollars.
This is what happened to Richard Joseph: after requesting free information online, some unscrupulous Internet Marketer sold his name to Raygoza’s company, PushTraffic, who ripped Joseph off.
Raygoza is an Internet Marketer, the snake oil salesman of the 21st century
There is another, legitimate form of "Internet Marketing" which operates much more closely to a traditional marketing business, but men like Raygoza have co-opted the term and run with it.
In some ways, his kind of Internet Marketing is an evolution of the old "make money from home, stuffing envelopes" ads you used to find in the back of Rolling Stone magazine, alongside those promising to make you a world famous songwriter or a musclehead who no longer has to take crap from bullies on the beach. In the internet, con artists have found a platform that allows them to scale their scams far beyond the penny stocks and worthless real estate deals of the past.
The Salty Droid is the pseudonymous blog of Jason Jones, a 36-year-old lawyer living in Chicago. It catalogs Internet Marketing’s misdeeds, telling the stories of the scammers’ victims with sarcasm and black humor. "This is a really dark topic," says Jones, "and the [victims] feel raped almost, so the sense of outrage [on the site] is appropriate to their level of suffering."
When we met in the high-rise apartment that he shares with his wife, our surroundings belied the image he cultivates on the site: that of the angry, nerdy, loner-cum-robot. According to Jones, The Salty Droid is a satirical character he dreamt up between jobs, while studying the Ruby on Rails open source web framework and blowing off steam on Twitter and Blogger.
"The moment where I had the idea for The Salty Droid [blog] is actually on the site, it's a really early post where I'm talking to this guy on Twitter, he responds to me — his name is Matt Bacak," a well-known Internet Marketer.
Bacak — whom Jones had nicknamed "BallSack" — began promoting a free newsletter on his Facebook page (a "$197 value"). As Jones wrote on his blog at the time, "in the land of The BallSack: FREE! = Automatic credit card charge of $30 per/month."
"I just kind of called him out on a lie," Jones continues, "and he sort of freaked out. He blocked me, on Twitter. I'd been on Twitter as myself, you know. I'm just sort of abrasive and irritating normally. But no one had ever blocked me. That's a weird thing to do.
"This whole project kind of flashed to me in a second. I was like, 'This will work against them. They're using all these open tools, and it's great for their scam, but it's really vulnerable to what I'm about to do.’ And it is really vulnerable to what I'm doing."
Books and DVDs aren’t products,they’re relationship builders, a bridge to a customer’s credit card
In Internet Marketing, there are a few terms you have to know before you get started: leads, lead generation, and product launches.
A "lead" is a prospective customer, and "lead generation" refers to the creation of possible customers and building lists of these people. There are a number of ways to find potential marks: the sale of loss leaders like throwaway books or DVDs, ads on Facebook or The Huffington Post, Google AdWords, infomercials, and even media appearances on news programs — or Oprah. Once an unsuspecting consumer buys a product, they’re trapped: they’ve become a lead.
The purpose of lead generation is to be able to launch a product. This is what the Internet Marketer is after when they sell you a $20 book. The books and DVDs aren’t products — they’re relationship builders; a bridge to a customer’s credit card. The real "product" will be far more complex, and cost a customer a lot more money.
Unlike mainstream sales, where a product launch is an announcement, in Internet Marketing the product launch is a process. First, information about a new service or product trickles out slowly, among people in the IM community, creating hype and what marketers call social proof — essentially, "proof" that this is a quality product, not through actual evidence, but because the IM community’s echo chamber progressively reinforces the marketers’ claims. The product (again, there’s nothing of value here) is only available for a short period of time, creating a false scarcity that increases its perceived value. Affiliates in the IM community hammer their leads with ads for this "get rich quick" scheme, "magic bullet" business product, or whatever it is, hoping that a small percentage purchases it. The affiliate gets a small cut of the sale; the rest goes to the Internet Marketer selling the product.
An Internet Marketer can go on for years like this, continuously rehashing and re-releasing slight variations of the same product. After the launch, there is usually some sort of self-congratulatory video release, where the frazzled-looking marketer addresses a webcam, talking about the amazing success he's had.
Glen Ledwell is an Australian transplant to the west coast who (along with his wife and their business partner) constitutes a third of Mind Movies, a company specializing in "enhanced visualization tools." That is, they offer software that helps you make video slideshows. (They also offer the Mind Mastery World Summit DVD Package, "the world’s top Mind Masters guide to achieving your goals, manifesting your dreams, and becoming happier and healthier than ever before," for $499.)
It's all based on the psuedoscientific "law of attraction" popularized on Oprah and in the movie The Secret, as Ledwell told me in a hotel lobby in Virginia.
"Visualization, you know the movie, The Secret? We help people to visualize. What Mind Movies is, basically, is like a digital vision board. You put the pictures up and write up your goals? A mind movie is a digital version of that."
The day after his Mind Movies Matrix product launched, Ledwell posted a video on his website. "We’re just about to crack the million dollar markers," he says, before rattling off sales stats. He also assures his affiliates: "every promotion we do, you will get paid on."
Richard Joseph was not the only person who had been nailed by the PushTraffic scam. Douglas Mattern, of Palo Alto, California, lost a total of $30,000 to two of the front companies formed for Raygoza's enterprise. His first purchase, in August 2008, was a $5,000 IM training package that lasted a mere two sessions before the company ceased communication. About six months later, in March of 2009, PushTraffic contacted him again, this time through a salesman who identified himself as Matthew Silver. At this point, according to the criminal complaint, "Silver made many false statements including claiming that a large amount of hits to plaintiff’s website that would be guaranteed to recover his investment in a couple of weeks and then make substantial profits. Silver cited a figure of $40,000 profit and more." This is a common tactic: use the victim's desperation (desperation that is caused by being ripped off in the first place) to bilk him for even more money.
After losing an additional $15,000 to PushTraffic, Mattern would then pay out $10,000 for further training from a company called IncFortune, with the hopes of finally getting into online sales and recovering his losses. As it turned out, IncFortune was another Raygoza front.
Inside the boiler room
"The basic objective of all boiler rooms is the same. Find out how much credit is available on the victim’s credit card [and] take all of it."
PushTraffic was what is known as a boiler room. As Dan Thies, an SEO professional and former employee of an Internet Marketing company called StomperNet, explains, Internet Marketers often "sell super-cheap products so they can get the names and phone numbers, and turn people over" to boiler room companies who try to sell the unsuspecting consumer fraudulent goods.
By way of example, Thies tells me a story about an employer sold a customer list "to some operation in Nevada... you know, it was supposed to be business setup services, but when they called people up on the phone they weren't offering stuff like that, they were pitching this thing that was a guaranteed business grant which, as far as I can tell, it basically involves you take out a second mortgage on your house. To me, that's just indescribably fucking evil."
The Verge obtained a number of these recordings for this story, one in which a salesman places a call to a lead and identifies himself as Brent Austin. He's just checking in with Leigh*, who bought a "make money off the internet" e-book called Power Cash Secret. The book probably cost her around $50, but the purchase got her on a lead list, and soon she received a call from the boiler room.
"Our marketing team is telling me that you're not generating the traffic that you could be to your home-based business," Austin says aggressively.
There is a good reason, explains Leigh*: "I don't know what I'm doing … I'm not very computer savvy."
Over the course of the next forty minutes, Austin spins a tale of once being "in the same boat" as Leigh.
"Running a website myself? That's like a foreign language to me. Well, it was... now I'm actually on top of my game, and I'm an internet guru. There's a lot to the internet that people just don't realize nowadays."
After feeling her out a bit, the questions get more personal — these are the kinds of questions you would never expect a salesperson to ask you.
"Are you in debt?" "Could you ballpark that debt for me?" "And how is that split? Is it a 60-40 split between [credit] cards and car?"
Leigh, in her mid-50s, is a nurse who rents a house. She's not greedy, she's not looking to get rich — she just wants to be able to stash away some money for when she retires.
Incredibly, Austin says, "We've got a pilot program that we do every two years, we have been doing it since the beginning of the company's start. We give twenty people five websites. And with these twenty people we gauge what's been selling the best, because each person has these five websites — so that's five products, there's a hundred products out there that we can test."
Austin asks Leigh to grab a pen and paper so he can give her a little lesson about affiliate marketing, which he calls "the best, first way, and actually the best way, to make money online."
"I'm sorry. What, sir?" She sounds stunned.
"Affiliate marketing," Austin repeats, "is actually the number one way to make money online right now."
It’s clear he has her turned around. "OK. This is ... affiliated marketing?"
Austin describes how the program is supposed to work — hell, he says he has a client generating $12,000 a month "from e-book sales alone." And then, after Leigh expresses some confusion, he goes on to explain that e-book stands for "electronic book."
"You should be bringing in at least $1,200 per week, every week ... that's the minimum that anyone within our coaching program is doing now."
Leigh seems to relax. At one point they talk about her interest in flowers. Austin continues to pitch, but it’s obvious Leigh is still at sea when it comes to his descriptions of internet businesses.
Austin goes on to say that he is "cutting checks for at least $5,000 a week, for each client." The implication being, of course, that soon she'll be getting her own $5,000 checks.
This part sounds good, but he's talking pretty fast and with all the terminology he uses — landing pages, proven success method, earn while you learn — Leigh's obviously confused.
When asked if she has any questions, Leigh responds: "I don't have any questions, because I don't know what to ask you, you know. You'll have to tell me what I'm doing here, and how I do it."
"I'm trying to get a gauge. How long have you been trying to make money online?"
"Oh, I haven't. Like I said, I joined on your site... and that's been three months ago? And I just haven't done a thing with it... I actually tried to get out of it and, I don't know, I received your call and I thought, well, maybe I should at least talk with you, because I don't know what I'm doing at all."
"Have you even looked at the e-book that we sent you?"
"No, I don't know how."
She doesn't know how to read a PDF, she doesn't want to be an internet marketer, she doesn't understand what Austin's saying — but she needs something like this — and this makes her vulnerable.
Leigh asks how much all of this will cost.
"It's not a thing of you paying us," says Austin, reframing the question. "We want you to prove to us that you're actually willing to participate and willing to learn, and you actually invest into your marketing."
"Well, what is that going to cost me to invest?"
"That depends on your level, uh , let's — we're contracted with big names, such as Visa and Mastercard."
He is implying some sort of endorsement by these two well-known and trusted companies, when in reality all this means is that he can accept payments from either major credit card.
"So it kinda depends on your level of investment," he continues. "What we like to do here is OPM: Other People's Money. Before you actually see a bill for your credit card, you're on the way by paying that back before your 45 days is up on that credit card statement [sic] is actually coming to you. So we actually let our clients tell us what they can bring to the table and invest into their own market."
OK, so again: "What kind of money are we talking about?"
"We've got three different platforms, Leigh, that we actually bring people in on. Now, I'm going to give you a breakdown, tell me what platform you might be able to come in on, and I'll work with you to get you through this platform, or get you up to the next platform. Because what I can do is, as a senior principal here, I can go down to my financial department, and if you can bring ‘so much’ to the table I'll tell them to invest the rest into you, because you sound like someone I want to work with..."
He rambles on in this way for a while, which is calculated to put Leigh further off-balance. Then he gets around to the cost of the program, which "depends on what I can get you approved for."
In other words, the product costs whatever she can get her hands on.
In other words, he's going to bleed her only credit card dry.
"Leigh," he asks. "Do you work better with Visa or with Mastercard? Because what we're going to do is try and get you approved on some type of level and see what we can, what level I can bring you in on. OK?"
This is always the point in the sales call where people start to freak out, when strangers start asking for credit card info. And Leigh is no different.
"Well, what I have is a Visa card," she says, sounding wary.
"If you can cough up $5,000," Austin explains, "it's gonna be a return after a full year of one website, it will get you to that $70,000 that I had you give me your goals and dreams about. Because of our proven success method, we actually have to analyze each client that comes through at what level they bring in, so we can make sure that if you come in on the $5,000 level you will make this amount of money, which is the $70K a year."
"Well, to tell you the honest truth, I cannot do $5,000. I don't have any money laying around."
Eventually, he talks her into a $500 investment, and when she agrees to that he tells her he's going to "try to put you on that platform of at least $1,000." He just talked her up to a grand without her realizing it: "Now, we have to bring you in on at least $1,000. That way, it's a secure tool into your investment, and we invested more into you also. We went ahead and invested the $4,000 into your marketing."
"Do I need to pay that back to you?"
"No. What I need you to do is prove to me that you're actually gonna be a loyal [sic], a client, and willing to learn."
After this, all Brent Austin needs is for Leigh to print out a form, sign it, and fax it to him. Then she will be well on her way to earning big money as an internet guru.
The recording winds up after ten more minutes, with Brent trying to teach Leigh how to use a printer.
*This name has been changed
"What we like to do here is OPM: Other People's Money."
Over the years, there have been a number of Federal Trade Commission lawsuits aimed at Internet Marketing.
In November 2011, the FTC dismantled an operation called Grant Connect with a $29.8 million judgement. Kyle Kimoto and Juliette Kimoto, his ex-wife and former Mrs. Nevada, were among a large group implicated in a wide range of scams, including fake government grants, credit offers, and acai berry dietary supplements. The group had a number of front companies and websites, and used a call center based in the Philippines. Kyle is currently serving 29 years in a federal prison on a separate fraud conviction.
In another case, the FTC issued a $247,000 judgement against Frank Kern and Instant Internet Empires for selling a $47.77 collection of web templates that "promised that buyers could make more than $115,000 a year using the product."
The rumor is that Frank Kern was selling leads generated by sales of Instant Internet Empires to a boiler room called I Works, owned by a man named Jeremy Johnson. Johnson, or "the millionaire adventurer," as he is known in Utah, became a national news story in 2010 when he organized a trip to Haiti to deliver medical supplies in the wake of the earthquake. As the Mormon Times gushed, Johnson lives in a six million dollar home that "looks like a European palace... only a little smaller," with porticos, balconies, a turret, and the one accessory that no European palace could be without: a rock-climbing wall.
Johnson is currently being pursued by the Federal Trade Commission to the tune of $275 million. According to the complaint, I Works is "a far-reaching Internet enterprise" using all the scams from the Internet Marketers’ playbook, including generating leads by selling cheap entry-level products, and "forced upsells," which is IM-speak for tricking customers into purchasing more expensive products or simply charging their credit cards for products they didn’t order.
According to Roberto Anguizola of the FTC’s Bureau of Consumer Protection, who worked to take down Grant Connect, "savvy internet fraudsters use fake information, they use a host of shell companies [and they] use internet registrations that are private or themselves are fraudulent" to cover up their tracks. "If it’s a hydra of an internet scam, and you just chop off one tentacle, you may be missing the rest of it, and it will regenerate in a form that will not be recognizable — if you’re not careful how you do it. One of the things we do is, we follow the money trail. To make sure that we’re really getting to the bottom of it. A lot of the time, a lot of these fraudsters have front people, so you’ve completely failed in a fraud investigation if all you do is get the front men that the real scamsters want you to get."
The unconnected masses making up most of the IM community definitely don't make money buying Internet Marketing materials
My first true look inside the world of Internet Marketing came courtesy of a 37-year-old businessman named Bedros Keuilian. The Chino Hills-based Californian specializes in fitness and personal training marketing, and he is also something of a would-be auteur. I discovered him through Add To Cart, a still-unreleased documentary that he made with a fellow fitness marketer named Chris McCombs. Keuilian and McCombs undertook the project as a way to ingratiate themselves with the luminaries of the IM community.
"It’s really critical," Keuilian says, "that you either go to these seminars or somehow find a way to penetrate their knowledge base because each of them are good at one thing. This is a pretty small community, Internet Marketing, a pretty weird subculture. Everybody knows each other, they all lean on each other’s strength to better their business, and we found that the common denominator amongst all these guys is they’re unemployable."
That sounds pretty bad, but I know what he means. If I wasn't getting paid to write, I would be pretty damn unemployable, too.
"It’s the same learning disability," he continues. "They lose interest in things quickly. It was interesting to interview them and talk to them and say... you all have the same profile here. And as I see new, up-and-coming internet marketers coming into the industry, no matter what their niche is, they kind of fit into that."
Whether or not he meant to, Keuilian hit upon a basic truth about how Scamworld operates. It's by accessing the inner circle, and by working with them on your product launches, that you make money. The unconnected masses making up most of the IM community, those outsiders who create the social proof enabling the big players to rake in the profits — they don't make a ton of money. And they definitely don't make money through buying Internet Marketing materials.
Frank Kern, of Instant Internet Empires fame, divides IM into two groups, which he calls the A-Team and the B-Team. According to Kern, in one of his product launches, 90 percent of his sales came from seven of his affiliates: his top-tier A-Team. The rest of his 400-odd affiliates, or his B-Team, sold the leftover ten percent.
The A-Team are the power players. They’re the only ones making any money, and they’re what everybody in IM wants to become. Graduating to the A-Team means more than buying a few DVDs or attending a seminar.
The Verge has been known to make a movie or two in its time, so I took a page from the Bedros Keuilian playbook and headed to the Crystal City Marriott just outside Washington, D.C. for an event called Underground Online 8. I wanted to talk to these people, even if it meant enduring three days of sessions by an "ultra-secretive group of underground internet millionaires," according to the promotional material.
Joseph Flatley with Anthony Morrison in Las Vegas
The plan was pretty simple, actually. I would arrive the day before the conference and plant myself at the hotel bar. Simply through charm and wit, and by waving around my new Verge business cards, I would find myself among the inner circle of the true Internet Marketing underground. Unfortunately, I had vastly overestimated my wit, my charm, and the impressiveness of my business cards to this group of would-be entrepreneurs. So I tried my backup plan: standing around awkwardly and wondering what, exactly, I had gotten myself into.
The first night in Virginia I spotted another loner who was also sort of standing around awkwardly. Dillon Miles is currently employed by Anthony Morrison, a self-described internet mogul whose infomercials were once a late-night TV staple.
Ironically, Anthony Morrison is the man who kicked off my interest in the world of Internet Marketing, his 3:00 AM commercials promising riches through an undefined "internet business" simply too good and too confusing to be true.
"I'm in the business of selling information. It's a business model... just like a journalist sells a subscription to a magazine."
Miles tells me he assembles "information products." These are a staple of the Internet Marketing business, easy to manufacture and cheap to distribute data files (generally e-books, audio, video, or a combination) that can cover topics as diverse as affiliate marketing, training your parrot to talk, and how to start raking in all that "hot dog cash."
Miles recently graduated from college, and is in the unenviable position of finding himself saddled with debt, yet only qualified for a "$10 an hour job at McDonald’s," as he put it.
So, I asked him, what's it like working for the world-famous Anthony Morrison?
"It's pretty cool. I'm learning a lot about Internet Marketing, and marketing in general."
I have to ask: is Morrison a "hidden millionaire?" Is he a millionaire at all?
"Yeah. I mean, I think. I don't know. He does all right."
"He doesn't have a butler or anything?" I joked.
"No, he's a pretty down to earth guy. He's a pretty cool guy. I like him."
Every Internet Marketer has an origin story, and a "major success" that he can tout as evidence of his financial acumen. In his book, The Hidden Millionaire, Morrison talks about Cool Blue Performance, the business he started in college after his father lost his retirement savings in the WorldCom collapse. Of course, this all could have been avoided if he’d heeded young Anthony’s advice: "I had always told Dad not to hold stocks overnight because you have no control over the information released once the stock market is closed."
As far as I can tell, Cool Blue Performance purchased auto parts from vendors who would ship the parts directly to the customer, acting as a middle man. Drop shipping, as it’s called, lets someone start a business without having to worry about inventory. This lowers overhead as well as profit margin. Despite a company that was "dominating the industry," as Morrison puts it in his bio, he sure seemed to abandon the scheme quickly. In July, 2002, WorldCom filed for Chapter 11 bankruptcy protection, and by July, 2004, Morrison was trying to unload Cool Blue Performance (which he claimed at the time was making $6,000 a month profit) for $144,000. Not bad, but hardly "dominating" the auto parts industry. As of this writing, coolblueperformance.com and coolblueperformance.net are Go Daddy placeholder pages.
In the Internet Marketing world, more often than not this is the type of person who’s teaching you to embrace your hidden millionaire.
The morning after I met Miles, I experienced my first Internet Marketing seminar. The ballroom could probably hold 500 people, and the stage looked like a Mixed Martial Arts ring designed by Playskool. Three tripod cameras, an additional camera on a boom, and a couple folks running around with DSLRs captured the proceedings, while the PA played stuff like Lady Gaga on a short loop. In the lobby, some vendors set up tables. There was a strange sort of muted excitement in the air, as if everyone were relieved to escape their weekday lives and connect with people they only really knew from Facebook and d-lists.
The proceedings began with a video by Yanik Silver, the event organizer and the man behind a product called Instant Sales Letters ("In Only 2½ Minutes You Can Quickly and Easily Create A Sales Letter Guaranteed To Sell Your Product or Service... Without Writing").
The "slick" professional video starts playing on the big screens that swamp the stage, showing typical action movie footage — people skiing, then shooting guns, then dodging bullets, and so on. Keep in mind, this isn't "Hollywood slick," more like Left Behind-slick. It's aspiring to be slick. If anything, the production recalls something you’d see down south, in a megachurch.
As I chew on that one, Yanik appears on the screen. He is dressed in a trenchcoat and fedora, escaping his pursuers, and then running into the hotel, and eventually into the ballroom. Then a series of fake Yaniks enter the room, in overcoat and sunglasses, to the delight of the over-caffeinated conference attendees. After killing this joke, the real Yanik runs into the room and takes the stage.
"Are you ready to learn how to build massive lists and bullet-proof launches?" he bellows at the crowd. Not interested? How about "super-targeted, geo-local pay-per-click?"
I hope they aren't charging by the hyphen.
If every person here really does represent a $3,000 ticket (I have my doubts about that one), that means that, after the B-movie lighting and special effects, the speaker's fees and other expenses, Yanik is still making some money — that's before the livestream and cash bar sales from the closing night party are counted. Additionally, I am pretty sure that, had I booked my hotel room through the link he emailed me, he would have received a cut of that, too. If that weren’t enough money-making angles, Yanik offered to make The Verge an affiliate partner in his livestream of the event: the site "would get 40% on any sale that came through [the] link. Right now the livestream is selling for $995." Maybe we should have taken him up on it.
As Silver pointed out in his intro speech, he personally spends up to $100,000 a year on coaching, seminars, and other tools that give him "a slight edge in business." You have to be in the game to win it, right?
And thus began a series of panels, interminable panels that took the content from the first few chapters of your basic business book and stretched it out for days.
Rather than develop something useful, Internet Marketers create something out of thin air
When you first discover Internet Marketing, whether online or at an event like this, it’s tempting to overthink things. Internet Marketers like to make their industry appear complicated to the point of obfuscation. In reality, things are pretty simple.
"The product is really irrelevant," Frank Kern tells an audience of Internet Marketers on one of his many videos floating around the web. "Now, that’s not to say that you can’t, or don’t need to, or should not make an absolutely kick-ass product. That is not what I am trying to tell you at all. But we should never put the cart before the horse."
Later in the same video, he explains that "the market" (what people are willing to buy) is the most important factor when developing an information product, and not whether you’re actually qualified to teach someone about a subject.
If anything, Internet Marketing is a form of "pure marketing" that exists often without the complication of an actual product. Rather than develop something useful, Internet Marketers create something out of thin air: likely a worthless e-book, or some sort of coaching session that consists of a semi-regular phone consultation.
"Well, yeah," Dillon Miles said, a little uncomfortably, when asked about this. "I think there's a lot of that going around. There's a lot of people that will teach you how to make money. It's just, the thing is, like, an information product in that niche, is, I mean, how tangible is that information? What is someone going to do with what you tell them. Most people won't do anything with it. You know, 90% of the people who get that information product, really aren't going to do anything with it. It's no different than when our country tells people to go to college for, you know, eight years, four years, like I did and expect a job when they come out. And then there's no job.
It was hard to get him to stay focused. I couldn't tell if he was talented at deflecting this kind of criticism, or if he just couldn't follow a train of thought. Or maybe he felt bad about the whole thing and refused to think about it. When pressed, he would either offer a variation of the "it only works if you work it" language of Alcoholics Anonymous, or express his frustration at not being able to get a job. He repeatedly positioned his Internet Marketing materials as a replacement for college, or said that college is the real scam.
"I just want to make sure we're clear," I said towards the end of our conversation. "You said that this was no different than going to college, but then you said college was a rip-off. Is this [Internet Marketing info-products] a rip-off? Is that what you meant?
"Well, it could be. I mean, that depends on what the person thinks. I mean, the products we sell, you get a sixty-day, money-back guarantee. I don't remember the last college that gave me a money back guarantee. But I mean, it's all relative. Like, I try to put projects together that people find valuable, but information is such an intangible asset that it's hard to qualify."
Are you going to try putting this information to use for yourself?
"I'm in the business of selling information. It's a business model, you're selling information. Just like a journalist sells a subscription to a magazine."
Besides conferences and email lists, the Internet Marketing underground is held together by a weird fascination with video. It's as if you're not really an Internet Marketer until you've inundated the web with hundreds of hours of shouting, gesticulating, boasting, and mugging for the camera — preferably delivered through a third-party Flash player with the transport bar disabled, meaning viewers can't fast-forward through the boring parts or even see how much more of the thing there is to sit through.
I’ve heard a few explanations for this phenomenon: it’s easier to control your message through video; video is more subtle than print; claims made on video don't leave a paper trail for the FTC; web video isn't archived; the claim that, after Google, YouTube is the second largest driver of traffic. These are all possible, but vanity seems to play a large part as well. How else can you explain Anik Singal’s feature-length Bollywood Internet Marketing masterpiece, Lethal Commission?
"In order to really dominate a market and make lots of money fast, I'm advising you to form a syndicate."
On the other side of the fence, Jason Jones has used video to great effect. I am tempted to say that détournement (the old Letterist International technique of remixing media and using it to express a counter-argument) is alive and well in his video work, but I am not sure this is strictly accurate. The truth is that the videos of Internet Marketing often do the marketers themselves no favors.
Videos on The Salty Droid generally consist of lectures, marketing material, images, audio, and other media edited in ways that underscore the criminality (or just plain creepiness) of the source material.
Probably the most infamous video to appear on Jones’ site is called Frank Kern's Criminal Confession. In this three minute clip, Frank Kern advises his students to form what he calls a "syndicate," just like he and his cronies have.
To a spooky audio bed with superimposed titles in a garish font, Kern appears in front of a whiteboard to inform the viewer that, "in order to really dominate a market and make lots of money fast, I'm advising you to form a syndicate." Then he dials it back a bit, or tries to, by explaining that syndicate "is a fancy way of saying 'trade union.'" (Here he is confusing syndicate with the French word syndicat, which he must have read on Wikipedia or something.) As you may have guessed, this fancy French "trade union" of his is not actually a trade union at all. In this case, Kern is talking about organizing those Internet Marketers selling the same or similar products, "your peers, who some would call your competitors." This borrows a page, not from the trade unions, but from cartels: you’re "meeting with your competitors, you're sharing information, you're helping each other." You're setting the price for your goods, instead of the "market." And you're collaborating on release schedules that emphasize a false scarcity ("we only have two weeks left and then our product will disappear forever").
Kern practices what he preaches. He is part of a syndicate that is infamous in Internet Marketing circles. Its name, as appropriate as it is unoriginal? The Syndicate.
"I've been bitten by a rattlesnake… stung by a scorpion, and attacked by an asp."
When I spoke to Andy "Video Boss" Jenkins via Skype, he was working on a movie in Austin, Texas. He described the project, Exists, as "Blair Witch-meets-Bigfoot." He seems more eager to talk about his work as an editor, assistant director, or producer on horror films with titles like Lovely Molly and Killer Instinct than to discuss Internet Marketing.
"I've been bitten by a rattlesnake since i've been [on location]," he tells me, "stung by a scorpion, and attacked by an asp."
Eventually, Jenkins and I discuss The Syndicate. It began in late 2006, he says, as a mastermind, or peer support group. A mastermind is a concept that mostly exists in the business world, and it derives from a depression-era book called Think And Grow Rich by Napoleon Hill. In the book, Hill describes "a coordination of knowledge and effort, in a spirit of harmony between two or more people, for the attainment of a definite purpose."
According to Jenkins, a bunch of Internet Marketers decided to start this mastermind, "so we wrote down The Syndicate, firstname.lastname@example.org, and it just sort of stuck. But at the time in 2006, it was me and Brad Fallon, and then Frank [Kern] came along... and we all just sort of rose in the marketplace."
"The name stuck, and then Jason Jones, The Salty Droid, got a hold of it, and thought it was this massive conspiracy of price fixing and illegal offshore money laundering," Jenkins laughs. "Then, that was sort of 'beware of the boogie man, The Syndicate. They're out there going to strip clubs and taking your money’ and that kind of thing."
He describes the list of "about fourteen" members as a blend of technical discussion, entrepreneurship, product launches, "and about twenty percent dick jokes."
As you’d imagine, Jones has a different take on this. "The Syndicate, as they call themselves," he says, "is a group of twelve or so Internet Marketers who early on decided that they would all band together, work together against the interest of the customers, to maximize the amount of money they can make [and] to really game social proof" by flooding the internet with fake reviews and testimonials.
"The only reason that Frank Kern is a 'big guy' or he's described like a 'genius' in Internet Marketing is because all these other, non-geniuses have agreed to call him a genius," Jones says. "And he's not a genius: he doesn't have any interesting insights into marketing, [his products are] just a bunch of rehashed garbage."
Fake social proof and syndicates are the real drivers of sales in Internet Marketing, according to Jones, and the Syndicate are representative of a much bigger problem.
"Fortunately," says Jones, "for the sake of illustrating my point one group decided to call themselves 'The Syndicate,' to make it really clear what's going on. Most of these niches have a group like that. The top group in Internet Marketing, The Syndicate, they teach other people to form these groups. Frank Kern says, 'You got to run your business like a Mafia-like organization.' He just straight out says it, and he's right, too. That's his one great insight: if you're not part of the insider cartel in the scam niche you're in, you're going to fail. You're going to fail."
"Just to really drive that home," Kern says in the Criminal Confession video, "it's probably very obvious to you, that all the top people in the Internet Marketing space promote each other, right? What you might not know is that a lot of the top people are in a 'trade union.' Because now I view my former competitors as partners."
Why you? Why now? Why the internet?
Historian James Truslow Adams, in The Epic of America (1931), writes that the American Dream is "that dream of a land in which life should be better and richer and fuller for everyone... a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable," rather than a dream of material goods. There is something very American about the idea that social class shouldn't limit you from achieving your fullest potential.
There is also something very American, if lazier and not quite as smart, in the notion that everyone who wants Success, deserves Success — with a capital "s." This sort of Bastard American Dream is the underlying message of Internet Marketing and "self-help," IM's older cousin. Success, vaguely defined in this context, would seem to mean "being your own boss" or "working your own hours," or "doing whatever you damn well please." This must be a very attractive idea to anyone — not just those of us who Bedros Keuilian describes as "unemployable." But is it realistic?
In a conversation with Steve Salerno, the journalist and author of SHAM: How the Self-Help Movement Made America Helpless told me recently, "There's a couple of things that guys like Tony Robbins and, you know, the early fathers of the guru movement, have done. First of all, they have established this climate where they have persuaded people of things that we used to institutionalize for, or at least put them on Thorazine. They have actually persuaded people to believe that the physical laws of reality don't apply to them, and anything that you think of — if you think of it passionately enough — you can get."
A lot of damage has been done over the years by people who think that the world owes them success
This lays the groundwork for the main theme of Internet Marketing: "make money fast."
Salerno also blames the self-help movement in general (and figures like Robbins and Oprah Winfrey in particular) for an emphasis on the individual that leads to narcissism. "I really think [this] has completely undercut the notion of conscience, so now it's just about, 'can I make a buck with this [product]?' You know, it doesn't matter if it actually does anything."
Anthony "Tony" Robbins is the American motivational speaker and self-help guru that specializes in infomercials, TV appearances, walking on hot coals, and standing almost seven feet tall. He is generally considered either a genuine inspiration or, at worst, an oddball personality, an "only in America" success story.
Robbins’ message finds its perfect distillation in a quote from his Unlimited Power: The New Science of Personal Achievement. "Happiness and success in life are not the result of what we have," he writes, "but rather of how we live. What we do with the things we have makes the biggest difference in the quality of life." This vaguely inspirational message powers a wide range of self-help products, things like Love and Passion: The Ultimate Relationship Program, The Path to Permanent Weight Loss, The Ultimate Edge: A 3-Part System for Creating an Extraordinary Life in Any Environment, and The New Money Masters: Meetings with the Masters of Marketing.
And who are those "New Money Masters?" You guessed it. The Syndicate, essentially — guys like Frank Kern, Eben Pagan, and Jeff Walker, the man who first devised the IM launch process.
Of course, cutting a deal with Tony Robbins isn't the only way to get your message into the mainstream. You can always go the infomercial route or, you can hire a publicist and get yourself placed on the news. At the Underground Online seminar, a bargoer remarked to me one night that "for $5,000 you can get on any news station." This was my first exposure to what’s called pay-for-placement public relations.
One eighteen year veteran of the PR industry told me that, in addition to traditional, retainer-based services, publicists increasingly offer individual placements on media outlets on a sliding scale basis. With this model, the bigger the media outlet, the more you pay. "A top-tier media hit," he says, "for my business, I would charge $2,500 for that type of placement," but he’s seen firms ask double that amount. Moving down the scale, "If you want an ABC affiliate in, say, Philadelphia, a network affiliate TV show, that would range, depending on the size of the market, anywhere from $100 - $1,000."
Another firm sent me a price guide that reads like a menu, with items like:
- Cost of National Print Campaign: $5,695
- Cost of Talk Radio Campaign: 15 Interviews @ $350 per: $5,250
- Cost of Local Media Campaign: Estimated $3,000 per city
- Shows on Cable TV: $3,500 (CNBC, MSNBC, FOX News, Oxygen, Lifetime, HGTV, etc.)
- Shows on Network TV: $5,000 (ABC, NBC, CBS)
When asked if a PR agency has an ethical obligation to not work with someone they feel is misleading or criminal, the publicist (who asked to remain anonymous) told me he’s turned away potential clients over ethical qualms. "If anyone comes to me claiming they are a so-called guru," he said, "that is my first red flag toward rejecting them as a prospective client."
Anthony Morrison must have passed some publicist’s "guru" filter in 2008, when he appeared on CNN to plug his book The Hidden Millionaire. Morrison looked chipper with his large, toothy smile and signature five o’clock shadow, while a visibly distracted Don Lemon killed time between segments about college football and a "life-changing" diet.
Morrison touts The Hidden Millionaire as the sage business advice of a wunderkind, but it reads like a children's book. One can only speculate about the business lesson on page forty, where Morrison gets into his supercharged Ford Mustang and drives around the block to confront "four or five" bullies intent on beating up his younger brother: "Martial arts will not only teach you self-defense, but also how to build your confidence by increasing your ability to remain fearless in situations that may otherwise be troubling. Knowing I was outnumbered didn't bother me in the least... Once I was out of the car, I had no trouble dispatching several of them in just a few minutes."
As we’ve seen, after leads get sold to boiler rooms, bad things happen. Debbie* is a single nurse living in the Dallas-Fort Worth area. She became interested in Internet Marketing not through a CNN appearance, but through a late-night infomercial.
It was not long after she purchased her first Anthony Morrison product that someone from a company called PMI contacted her. Generally a high-pressure sales call comes in two parts. First, a salesperson initiates the call, and then a "closer" will, well, close the sale.
Chris Bartold, the salesman, begins: "You're single, a secretary, 56 years old, making $24,000 a year, looking to make a change, where at 56 years old we want to put you in a position where you can take the next 20, 30 years of your life and be able to enjoy things without having to worry about money."
Our lead, Debbie*, responds on the other end: "That would be great."
The specific product he's selling is affiliate marketing training. He tells her about his family, and what a great team member she'd make. Then he asks:
"How do you feel about this? Are you scared? Nervous? Excited? Motivated? Ready to make a change? How do you feel about it all?"
"Oh, I'm very nervous about it, but I'm also excited at the same time. I have a lot of confidence in Anthony and I just, I hope and pray that this all pays off."
He reassures her, and tells her that the only thing that would keep her from succeeding is if she doesn't put in the work.
He frames it as if she is competing for the opportunity to join his "team."
"If I interview a dozen people for the position on the team, what would separate you from them, Debbie? The question is, ‘why you, why now, why the internet?’"
Why you? Why now? Why the internet? That would be a great t-shirt.
"I don't know, I have… I just have a good feeling about [Anthony Morrison]," she says as the salesperson gets her to open up a bit about the fact that she is searching, searching for a way to improve her situation. "I've had people try to get me on board with their companies and businesses, with the same technique and approach that y'all are using and I've backed out of it because I was just too scared… I don't know why, but I don't have the same fears…"
"It's a sign. Fear does a crazy thing to you, it can motivate you or hold you back."
"Exactly. It has held me back, and you know, it seems crazy for me to even want to think about, investing this kind of money in something like this because of the place that I'm at right now, because I've got a lot of debt, that's one of my big concerns right now, and an even bigger concern is retirement. At my age, I should have something set aside, but I don't. I've recently gone through, I'm hoping it's my last divorce."
At this point, Debbie is opening up and telling this salesperson everything he needs to exploit her.
"I think I'm getting to the place where I just don't care, it just doesn't matter as much as it did in the past. I don't know if it's because I'm getting older, or what. I also know that my time is running out, and I just don't have a lot of time to get myself prepared and get ready for my future…"
Jesus Christ, this is depressing.
Bartold then explains to Debbie that "affiliate marketing" is how she will get rich, if she follows the Anthony Morrison system.
Affiliate marketing, says Bartold, is "just like eBay was ten years ago, twelve years ago." (Except that it isn't.) "For the next ten years," he maintains, "you're going to be successful." And later, "affiliate marketing is brand new." (Except, of course, it isn't.)
"Nine out of ten millionaires are self-made. So if it takes money to make money, where do they get their money from, where do they start their business? They have to borrow. There's four ways you can obtain money. You can earn it, inherit it, steal it, or borrow it. We basically want to borrow from the bank, we want to beat the bank at their own game…"
This is getting her primed to hand over her credit card.
"Now you've been fortunate enough to have some decent credit here, from when I was talking to Matt and Mitch, you have some decent credit. Let this credit perpetuate yourself towards financial independence and making this change. . . on the success team, we don't call them credit cards, we call them investment cards."
These "investment cards," claims Bartold, will pay for "all the tools, all the training" necessary to build a business that runs essentially on autopilot. While Debbie sleeps, travels, lives her life, the story goes, this will generate an income.
"What I've laid out for you, I assume that is something that you do want to do. Is that right?"
"Yes. It is."
"Why is it something that you want to do?"
"Well, because it's something that I'm interested in. First of all, I always wanted to learn more about the internet, about doing business on the internet, and so, this will give me the opportunity to do that. I just don't know enough about it.
Later, we learn that Debbie doesn't "have a computer at home yet, but [is] in the process of getting one." Which is fine, according to Bartold: "We can get you through the first monetary goal of $25,000 right now without you having to have one."
*This name has been changed
Boiler rooms are a contentious topic in the Internet Marketing subculture, and Syndicate member Mike Filsaime is one of the few people that publicly attempts to justify the practice.
In an interview on The Salty Droid, Filsaime claims Internet Marketing companies were operating legitimately in their own happy world when reps from boiler room call centers starting popping up at marketing events with these sweet deals that his fellow marketers couldn't refuse. "Hey," Filsaime recites their pitch, "if you send us your leads, we'll offer these people coaching programs, and they sell for anywhere between $2,000 to $8,000 dollars and we'll pay you twenty percent to twenty-five percent or thirty percent. And we'll just send you checks, all you got to do is send us an Excel file."
Filsaime claims that once most of his colleagues realized the moral and legal dubiousness of the boiler room industry, they ended their relationships. Except for Filsaime himself, who even tried to start his own, Higher Level Strategies. Eventually, he decided it was easier for him to work with Prosper, one of the bigger names in the Utah call center industry.
He sends leads to Prosper, which uses them to push coaching programs starting at $2,500. At some point down the road after ordering a Filsaime product, customers receive a call from Utah offering training through one of his "coaches." For $2,500. Except the organization doesn’t have anything to do with Filsaime (beyond the fact that he’s the source of the leads). Instead, some guy who makes as little as $10 an hour (according to Jones) coaches customers from material developed by Prosper. Filsaime gets about a quarter of the take, another quarter goes to whoever fulfills the order, and half goes to Prosper. And $10 per hour goes to some kid in Utah.
Salty Droid: And the curriculum is about Internet Marketing?
Mike Filsaime: Yes.
SD: But it was developed by Prosper, not by you.
SD: So the only part you really play is the lead gen part.
There's a long pause on Mike's end of the line.
MF: That's correct...
"Just about every English speaking country was hit by those guys, except maybe India."
As we’ve seen, the basic premise of Internet Marketing is straightforward: find customers, sell them useless products, and then send the leads on to industrial strength "boiler rooms" that separate them from what little money they have left. A simple con, it still requires a massive infrastructure to maintain: mainstream media outlets like CNN and the major broadcast networks, and websites like The Huffington Post and Facebook, all play a part in getting the message of Internet Marketers out to a wider audience, either through paid advertising or programming. Google sells AdWords for phrases like "make money fast," and when unsuspecting consumers use their credit cards to give boiler rooms money, the payment has to be processed through a merchant account.
"The kind of people that they were preying upon were other people like me," says Richard Joseph, looking back, "who I think were naive enough, and new enough to this way of life, and desperate enough, that we were pretty easy targets." Internet Marketers, he says, are "kind of like carnival guys." It was only when he got back home and started to recover, and "started thinking like a person again" that Joseph realized that Rob Martino, the salesman from Raygoza's operation, the one who claimed his brother was also a paraplegic, had ripped him off. "And I was never able to speak to [Martino] again," Joseph says. "And I could never find him anywhere... I don’t think he exists. He’s not on any social network or anything." Joseph would wheel himself out of earshot of his family and work the phone. Many hours were spent in vain, trying to hold the voices on the other end of the line accountable. Ultimately, that’s all they were — voices. Apparitions, almost.
"I remember being out in my driveway on many occasions going, ‘Look, you guys. I am going to lose my house. I’ve got American Express [that’s] going to foreclose on me. They are gonna sue me. I’ve given you $20,000, I can’t make the payment on my credit card, you haven’t done the website, you won’t talk to me, you won’t let me talk to Rob. How is it not possible for me to get my money back? I don’t understand.’"
Searching online, Joseph started finding others throughout the world that had been ripped off by PushTraffic. At first, he appealed to the U.S. Attorney General and the California state Attorney General. According to Joseph, the response was that these agencies simply didn’t know what to make of a case like this. "We don’t have a department for it," they explained, "and it’s too complicated, we’re not doing those kinds of prosecutions."
"The civil process gave them time to hide everything."
Eventually, he teamed up with two fellow attorneys, Dr. Jon Levy and Thomas Easton, with experience in international law and money laundering. A class action complaint was filed in California in May of 2011. "The clients were really diverse," says Levy. "This was amazing. We had people in England, South Africa, Malaysia... Canada, Australia; just about every English speaking country was hit by those guys except maybe India, and the only reason India wasn’t hit is because I think they have currency transfer restrictions. This thing was amazing in its scope."
Once filed, the case lingered on for six months or so. Raygoza, for his part, barely acknowledged it, effectively stalling until September 2011, when the court ordered a default judgment in the amount of $941,790 to the plaintiffs — just a handful of people. A tiny percentage of Raygoza’s actual victims.
But they’ll never see that money. Raygoza says he doesn’t have it.
"The process took way too long," Levy concludes. "The government could have frozen their assets until the litigation was settled. Then, if we won, we would’ve had something to recover. But the civil process gave them [time] to hide everything."
For victims of the PushTraffic scam, John Paul Raygoza isn’t much more than a crudely designed web page, johnraygoza.com — complete with buttons that don’t work and an offer for sales floor training that starts at $500 a day (which, for some reason is rated "M for mature," like Grand Theft Auto IV). And this is the case for the whole of Internet Marketing. While some marketers made themselves available to me by phone, they only existed to tell me what they thought I wanted to hear: namely, that they were nothing more than successful businessmen, and that any of the darker stories about their industry were not to be believed. As for Raygoza, he was never anything more to me than an overflowing voicemail box, and a series of tweets from Los Angeles fine dining establishments.
Scamworld is in many ways a primitive, naive place. It’s populated on one side by mock-businessmen with a cartoonish view of their own existence. On the other side are their victims, people for whom the internet is a mystery, people who are inclined to believe that with the right software, or by purchasing a website, they can get rich.
Many, like Richard Joseph — just a regular guy who’d had awful luck — aren’t trying to get rich. He wasn’t interested in the most bizarre claims of the Internet Marketers. He wasn’t looking for a Philosopher’s Stone, a way to create great wealth out of zeros and ones. And he wasn’t trying to turn the universe into his personal mail order catalog, to borrow a phrase from The Secret. He just wanted to keep working, to help support his family. He thought he had found a way to do that through the internet, and he thought he had found someone to help him do it.
Instead of being a conduit for help, the internet was just one more part of a complicated trap — a trap which perverts intimacy and turns it into money. The disembodied voice that identified itself as Ron Martino was able to single out Joseph, fabricate a bond, and then exploit that trust for financial gain. And after he had Joseph’s money, Martino simply vanished. Almost like he never really existed.
Ron Martino and PushTraffic are both phantoms of a sort, part of a culture that thrums on the edge of the real world, a culture that only really works in the dark. When you shine the light on them, they disappear.
In time, they’ll return in another form — reintroduce themselves with some new name or new scam — looking for new victims but feeling remarkably familiar. And they’ll likely find people like Richard Joseph, people who should know better, but find themselves desperate, at their wit's end, just waiting for a phone call. An understanding voice on the other end of the line, ready to offer them a way out.
Scamworld is available on the Kindle Store. You can download it right here.