Saturday, May 11, 2013

Bad Argument: "It's Free and You Have Nothing to lose"

Free, but you still can be cheated!
Stuart Miles,
In the recent past, there has been several suspect schemes that basically promised that it's free and therefore you have nothing to lose. It's free to join, and it it promises a lot of money if you do what it wants.

While it is true that if a scheme does NOT charge you any money your chances of being cheated is smaller, it is NOT zero. A scam can promise "absolutely free", yet still cheat you, through several ways.
  • Bait and switch
  • Upgrade
  • Partner offers
  • Spam Harvest
  • Forced Upsell / Slamming
  • Identity Theft

Bait and Switch

By promising free benefits, get you to sign up, then changing the terms on you with a good excuse, the schemer can get you to accept the broken promise. This is due to "foot-in-door" technique, where once you agreed to a small change, becomes more amenable to a large change.

If there's a significant effort already invested, such as recruitment, websites created, and such, there's also the "sunk cost fallacy" involved, where you are less reluctant to disengage because you already have so much invested.

Upgrade/Premium Membership

A variation on bait and switch is to offer a "premium" membership which promised more income or more benefits for pay vs. free membership that has very limited earning. Another way is to limit free accounts to credit only (against whatever's being marketed), instead of cash.

Burnlounge did that and was ruled a pyramid scheme.  it offered free membership but free members can only earn credit to music. "Moguls" (those who paid the monthly fee) can earn real cash when they recruited members. Music was rarely sold. Only 2% of revenue came from music.

"Partner Offers"

Buried somewhere in the agreement is something that you signed up for their "partner offers"... i.e. other suspect schemes, and your information will be shared with them, and THOSE offers will cost $$$, since by signing up for this "free" thing you've demonstrated your affinity to such schemes.

This is related to the next one, spam harvest, as this one you "sorta" gave permission. But your name and email probably ended up on some sucker list.

Spam Harvest

Some schemes are just massive email address harvest operations, esp. those who had generated tremendous amount of buzz (500K members have signed up in a month!) without any sort of substance (no website, no app, no service, no nothing).

While normal spam harvest is simply from web crawling, more sophisticated scam syndicates target those vulnerable to get-rick schemes. Here's what The Verge said about it:
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.
By signing up for such buzz floated schemes, you've demonstrated that you are curious for such schemes. Your name's now on a sucker list, and these scammers compare notes and share databases.

Identity Theft

When you give up your name, your email address... social security number, and more you are vulnerable to identity theft. Some unscrupulous companies even had members upload scanned ID to them as "verification". While Twitter do sometimes require ID to do "verified accounts", that's hardly the same thing.

Sure, the company can PROMISE not to distribute your data, but can you trust them? Esp. when their owners are unknown, the company's unknown and a "startup", and they don't even have a product or service?

"Free Trial Offer" / Forced Upsell / Slamming

Did you buy something from them, even the $1 book? Or signed up for the "free trial offer" with a credit card? That means they already have your credit card number. They'll probably start charging you $30 a month for "trial offer" if you didn't cancel within X days... or they probably charged you ANY WAY... Good luck trying to get a refund from them!
Predictably Irrational
Predictably Irrational
(Photo credit: Wikipedia)

An Economist's View on "Free"

You may also want to check out Dan Ariely's take on why "free" is never really free.

If you wish to read more on this subject, here's a book by Dan Ariely:  Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions


While the chances of you getting cheated by a scheme that doesn't charge money outright is less, it is NOT zero. Therefore, people who insist "you have nothing to lose" is not correct. There are many ways a scheme can still scam you even if they don't charge you money initially.

Enhanced by Zemanta

No comments:

Post a Comment