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Bing Cashback can cost you money

Imagine you are an owner of a small antique shop on Main street of a tourist town called ‘Bing’. You are doing your business just fine, the sales are not great but enough to make ends meet. Now imagine the township announces new initiative targeted to bring more visitors to the town, they call it ‘Cashback’. Should you accept, you will get your front door remodeled for free and the village will advertise your business. However there is a catch - you are required to pay back each customer who buys something at your store a percentage of the sale. The idea is that as customers see the cash flowing back to their wallets they will tell about ‘Bing Cashback’ to their friends who will want to take a tour of the town as well. ‘Bing’ of course has more than antique shops on Main street, but this is besides the point.

Now imagine that your shop has a backdoor which wasn’t remodeled, and by the way, this was the door that all your regulars have used all the time before you got on ‘Bing Cashback’, and they still do.

Two things can happen in this imaginary world:

  • If you keep your prices low (at the level before you joined ‘Bing Cashback’) you will hurt your bottom line
  • If you raise your prices to compensate for the lost revenue, you will hurt your regulars, who still use the backdoor and don’t get cash back

It sure feels like your business is doomed either way, that is unless you have a magician friend, ‘Marketer’, who comes up with a ‘genius’ solution. He invents special glasses that when used will make the price on all your merchandise look higher, and he then suggests to give out the glasses to everyone who comes in the store through the ‘Bing’ remodeled frontdoor. You take on the advice, your business is booming until one day an ‘unforeseeable disaster’ happens - one of your customers takes off the glasses and sees the lower prices!

This is what in essence happened today with a New Jersey based electronics seller Butterfly Photo when Meghani, a blogger at search engine startup Bountii, exposed their ‘magic glasses’ practices to the world.

Butterfly Photo set a three month cookie on my computer to indicate that I came from Bing. Any product I look at for the next three months may show a different price than Id get by going there directly.

Meghani claims he knows ‘more than a few instances’ of this kind of ‘magic marketing’, but he unfortunately doesn’t name the specific stores.

On one hand, the online world has opened new unimaginable before marketing opportunities as well as new ‘creative’ ways for businesses to scam their customers. On the other hand, thanks to social media, ‘business failures’ like this have become more costly for business owners which to some extend counter balances the situation. Overall I feel excited to live at the time I do and be a part of this ‘online revolution’.

What is your experience with Bing? Have you ever been a target of the dual price ‘magic marketing’? Do you think Bing Cashback will bring Microsoft success in a similar way the banks have benefited by hooking their customers to the cash back rewards credit cards?

Pump-and-Dump, Money Mules, and Penis Pills

I hate unsolicited phone calls and email offers I have not signed to. This blog receives over 200 comment submissions daily and some of my email accounts receive even more emails. Thanks to effective spam filtering software I don’t have to read most of them but that doesn’t make me hate spammers less.

All three terms above relate to spam which has become inevitable part of our daily life. I am not going to tell you about Penis Enlargement Pills. I hope you are smart enough to not engage into this type of ripoff. But who are the other two animals?

Pump-and-Dump

You have probably received emails with an embedded image inside selling a penny stock of some small company. That company is real and to make the sale pitch look convincing, the text inside that image often points to real events or a news release.

The economics of this scam is pretty simple. Spammers invest into a penny stock of a small company. Small companies have few outstanding shares and their stock price is relatively easy to sway. People receive email spam, buy the stock, and by doing so raise the stock price short term. Meanwhile the spammers sell the stock profiting from the higher price.

The important part here is “short term”. There is a very good chance the stock will go down the next day or even later the same day. But don’t take my word for it, look at this website that monitors daily stock spam activity. You can see from the charts that buying these stocks is a guaranteed way to lose money!

Money Mules

Another popular type of email spam is aimed at stealing your banking or credit card credentials. This is called phishing. The email sender attempts to obtain your sensitive financial information by impersonating a bank, credit card agency, IRS, or another financial institution. What happens after spammers obtain this data? This is where a Money Mule gets involved.

Have you ever seen ads offering stay-at-home jobs titled “shipping manager” or “regional assistant” and offering lucrative salaries with high commissions? Some of these are attempts to enlist people to transfer illegal funds obtained via above mentioned phishing scam. Many of the spammers operate out of third world countries and don’t have US banking accounts.

Money Mules are spammers’ helpers who represent the last link in the phishing chain. Without a Money Mule, spammers can’t really do anything with the stolen credit card credentials.

You can find a great deal of information about the technology behind spam and other malicious activities from this book: Botnets: The Killer Web Applications

How do scam shops survive?

I have been looking for a decent digital camcorder to replace my old crap and today I sat down and ran a few searches through a series of price comparison engines. I was mainly trying out the alternative group since they are the most fun to play with. You either find new features every time you come back (JellyFish), or get some unusual, unexpected results (theFind).

So here I am searching for Sony DCR-SR100 and stumble upon a very attractive offer from a company called Infinity Cameras. The price looks very low, so low that I can’t believe my eyes. I quickly look up the website rating and here is what I see: the company has a 6 month rank of 0 out of 10. Yes, that is ZERO! Every single review is marked “Very Dissatisfied”. Here is a few recent gems:

After ordering a camera it took them 13 days to inform me it was backordered and then the price was raised over $100. I had to contact them before they even let me know I wouldn’t be receiving my order and I am positive it was not backordered at the time I ordered because I placed my order minutes after they updated their site. Very unprofessional and dishonest.

I agree with the prior posters. To say that this company’s business practices are underhanded, is an understatement. They sent me the wrong order, I returned it….and they still kept a 10% restocking fee. On a $2500 order, this is significant money. They will not return phone calls. DO NOT ORDER FROM THIS COMPANY!

How do scam shops like this survive in our time of open source, collaboration, and social networking? Some of them are even making a front page story on Digg. Isn’t it ridiculous?

At times like this I think the Texas based startup PriceFight that attempts to integrate product and merchant reviews into search results has a very good chance to be successful. After all bargain hunting is not just about finding the lowest price!




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