Blogrush isn’t a Pyramid Scheme it’s a Ponzi Scheme

In General Marketing, The Digital Marketing Blog by Kelvin20 Comments

The last couple of days the SEO blogosphere has gone a bit Blogrush crazy, while some people seem to be getting real results from the blog widget, which promises you traffic if you share traffic, others have decried it as a obvious Pyramid scheme.

Now that gives me an idea – via flickr

I disagree with both; it’s actually a Ponzi scheme, which while quite similar is actually a bit different.

Pyramid schemes usually require an upfront payment – there’s no real cost to joining blog rush, and it is possible to attract traffic with out any payment. Admittedly if you are sustained by ad revenues you might be missing by installing the widget, but I imagine most people aren’t that naive to use prime screen real-estate for the widget.

Ponzi rewards early adopters to create more buzz – I’m not surprised early adopters like Shoe are seeing lots of traffic; the buzz this reward creates encourages even more people to get involved. It’s self perpetuating, especially in the blogosphere, people love sharing their success and even more people pile in.

Ponzi schemes rely on high profile personalities – I’ve seen a few really high profile Blogger experimenting with blog rush which encouraged me to take the idea a bit more seriously. Another classic Ponzi tactic, if you can encourage high profile investors (or this case bloggers) to get involved more will join, especially when the referral system encourages them to tell more people about the widget.

In a Ponzi you can benefit even with out recruiting others – this is the main difference between a [tag]Ponzi[/tag] and a [tag]Pyramid scheme[/tag]; it is actually possible to benefit with out recruiting others.

The problem is any Ponzi is ultimately unsustainable, as it will require an ever increasing number of page impressions and widget users to deliver the traffic they promise. Plus it won’t be long before people realise not only is the other sites appearing in the widget they might not normally endorse and that the value of the traffic [tag]blogrush[/tag] sends is worth less than the advertising for other they provide.

As an aside though I don’t think anyone is actually out to con anyone with Blogrush, but I think those behind it know that it won’t last for long before it collapses under it’s own weight.

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Comments

  1. Thanks for clearing that up. 🙂

    “as it will require an ever increasing number of page impressions and widget users to deliver the traffic they promise.”

    Actually I don’t think this is the case. I think they have enough ‘headline slots’ to fulfil their promises even in the incredibly unlikely event that 10 tiers of referrals become common. In the far more likely situation where referrals don’t routinely reach 10 tiers they’ll have plenty of slots available in every widget to sell advertising.

    With click trough rates of 0.05% (prelim results from problogger) neither the average user nor the advertiser is going to see much benefit.

  2. Thanks for clearing that up. 🙂

    “as it will require an ever increasing number of page impressions and widget users to deliver the traffic they promise.”

    Actually I don’t think this is the case. I think they have enough ‘headline slots’ to fulfil their promises even in the incredibly unlikely event that 10 tiers of referrals become common. In the far more likely situation where referrals don’t routinely reach 10 tiers they’ll have plenty of slots available in every widget to sell advertising.

    With click trough rates of 0.05% (prelim results from problogger) neither the average user nor the advertiser is going to see much benefit.

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  5. Thanks for explanation of the scheme. I think the lower ‘crowd’ of bloggers in this scheme doesn’t even know that “…value of the traffic blogrush sends is worth less than the advertising for other they provide”. So it is possible that BlogRush will survive.

  6. Thanks for explanation of the scheme. I think the lower ‘crowd’ of bloggers in this scheme doesn’t even know that “…value of the traffic blogrush sends is worth less than the advertising for other they provide”. So it is possible that BlogRush will survive.

  7. I agree Symbian, it’ll stagger on for a while but once the good people jump ship it’ll just be a banner exchange for second rate blogs.

    Plus they’ll know exactly how many page impression’s you’ve got. From what I understand the owner of BlogRush has his own network of niche sites. Interesting coincidence.

  8. I agree Symbian, it’ll stagger on for a while but once the good people jump ship it’ll just be a banner exchange for second rate blogs.

    Plus they’ll know exactly how many page impression’s you’ve got. From what I understand the owner of BlogRush has his own network of niche sites. Interesting coincidence.

  9. I’m gonna have to disagree with this based on what a Ponzi scheme actually is. Just like a pyramid scheme, a Ponzi scheme requires a monetary investment. A Ponzi, by definition, is a fraudulent investment operation that involves paying returns to investors out of the money raised from subsequent investors, rather than from the profits generated by any “real” business.

    A Ponzi offers high short-term returns in order to entice new investors whose “money” is needed to fund payouts to earlier investors and to lure its victims into even bigger risks. Since there’s no money exchanging hands, BR cannot be classified as a Ponzi or a as pyramid scheme. Both require monetary investment up front. Yes, BR is pyramidical in structure, but it is not a pyramid “scheme”.

    What essentially differentiates a Ponzi from a pyramid is that in a Ponzi, the schemer acts as a “hub” for the victims and interacts with them directly. In a pyramid scheme, those who recruit additional participants benefit directly, and failure to recruit typically means no investment return at all.

    Anyway, really nice blog here. I’m glad I happened across it.

    Shine on,
    Aaron

  10. I’m gonna have to disagree with this based on what a Ponzi scheme actually is. Just like a pyramid scheme, a Ponzi scheme requires a monetary investment. A Ponzi, by definition, is a fraudulent investment operation that involves paying returns to investors out of the money raised from subsequent investors, rather than from the profits generated by any “real” business.

    A Ponzi offers high short-term returns in order to entice new investors whose “money” is needed to fund payouts to earlier investors and to lure its victims into even bigger risks. Since there’s no money exchanging hands, BR cannot be classified as a Ponzi or a as pyramid scheme. Both require monetary investment up front. Yes, BR is pyramidical in structure, but it is not a pyramid “scheme”.

    What essentially differentiates a Ponzi from a pyramid is that in a Ponzi, the schemer acts as a “hub” for the victims and interacts with them directly. In a pyramid scheme, those who recruit additional participants benefit directly, and failure to recruit typically means no investment return at all.

    Anyway, really nice blog here. I’m glad I happened across it.

    Shine on,
    Aaron

  11. I think it depends on whether you think the real estate on your site has a value

    Could you make money from adsense in the area used by blogrush?
    If it featured details of your RSS would it increase the number of subscribers?

    You are right it isn’t a true Ponzi scheme but I think it relies on the hub

  12. I think it depends on whether you think the real estate on your site has a value

    Could you make money from adsense in the area used by blogrush?
    If it featured details of your RSS would it increase the number of subscribers?

    You are right it isn’t a true Ponzi scheme but I think it relies on the hub

  13. That’s an excellent point Kelvin. And I most certainly agree with that. I just wanted to clarify what a Ponzi truly is since there’s so much confusion on the Web about them and pyramids. 😉

    Shine on,
    Aaron

  14. That’s an excellent point Kelvin. And I most certainly agree with that. I just wanted to clarify what a Ponzi truly is since there’s so much confusion on the Web about them and pyramids. 😉

    Shine on,
    Aaron

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  17. Like all good things on the internet… This may well be a passing fad. However, since it does not involve a monetary commitment what’s the harm. If all it ever become is a market source for second tier blogs… Is that a bad thing.

    I am putting it on my blog to increase traffic. This blog is in a niche catagory, house cleaning tips… Now, it is #1 ranked with Google for six related searches, but the blog only gets around 1500 hits a month. I work to increase traffic daily… So for me this seems like a viable option…

    If it is only temporary…. That’s ok, because the information is useful many visitor place the blog in favorites. Thus ensuring steady traffic.

    Since Google has no opinion yet, I am moving forward.

  18. Like all good things on the internet… This may well be a passing fad. However, since it does not involve a monetary commitment what’s the harm. If all it ever become is a market source for second tier blogs… Is that a bad thing.

    I am putting it on my blog to increase traffic. This blog is in a niche catagory, house cleaning tips… Now, it is #1 ranked with Google for six related searches, but the blog only gets around 1500 hits a month. I work to increase traffic daily… So for me this seems like a viable option…

    If it is only temporary…. That’s ok, because the information is useful many visitor place the blog in favorites. Thus ensuring steady traffic.

    Since Google has no opinion yet, I am moving forward.

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