newbies business

Examples of Business Blogs

2011-01-27T07:13:00.000-08:00

Examples of Business Blogs

Gizmodo is a weblog about everything about gadgets and gizmos for those who want to remain on the cutting edge of consumer electronics. As a web magazine, Gizmodo is quickly building a specialized audience in consumer electronics with an advertising business model.

Research Buzz is an excellent resource tool for Internet research. An information provider, Research Buzz provides advertising and a special paid edition of their newsletter.

Joel on Software is a blog that displays Joel Spolsky's knowledge and views on software development. The blog acts as a method for Joel to highlight his expertise and promote his small business, Fog Creek Software.

Jupiter Research, a top business market research company has a blog for each company analyst. The weblog provides analysts with the means to connect with their audience on a regular basis.

MacroMedia the software company provides a customer service blog for users and staff to share solutions in an organized fashion.

Blogs do have a downside. Blogging does not provide the functionality of web pages, has limits for e-commerce solutions and can be time-consuming with regular posts. But with minimal costs, it maybe advantageous to start blogging. Is your small business blog ready?

Business Blogs

Elsewhere on the Web

More Small Business Blog Resources

2010-03-14T07:20:00.001-07:00

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2007-07-10T01:21:00.000-07:00

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Wal-Mart

2007-07-06T22:21:00.000-07:00

Wal-Mart Stores, Inc. (NYSE: WMT) is an American public corporation, currently the world's 2nd largest corporation (behind Exxonmobil Corporation). according to the 2007 Fortune 500. It was founded by Sam Walton in 1962, incorporated on October 31, 1969, and listed on the New York Stock Exchange in 1972. It is the largest private employer in the world and world's fourth largest utility or commercial employer, only to the Chinese Army, the NHS and the Indian Railways . Wal-Mart is the largest grocery retailer in the United States, with an estimated 20% of the retail grocery and consumables business, and the largest toy seller in the U.S., with an estimated 45% of the retail toy business, having surpassed Toys "R" Us in the late 1990s.

Wal-Mart operates in Mexico as Walmex, in the United Kingdom as ASDA, and in Japan as The Seiyu Co., Ltd. Wholly owned operations are located in Argentina, Brazil, Canada, Puerto Rico, and the UK. Wal-Mart's investments outside North America have produced mixed results. In 2006, Wal-Mart sold its retail operations in South Korea and Germany due to sustained losses and a highly competitive market.

Wal-Mart has been the target of criticism from some community groups, women's rights groups, grassroots organizations, and labor unions. Specific criticisms include the company's extensive foreign product sourcing, low rates of employee health insurance, resistance to union representation, and alleged sexism, among other things.

The retailer's mascot is The Rollback Man, a smiley face character who appears in its ads.

History
Sam Walton's original Walton's Five and Dime, now the Wal-Mart Visitor's Center, Bentonville, Arkansas.
Sam Walton's original Walton's Five and Dime, now the Wal-Mart Visitor's Center, Bentonville, Arkansas.

Main article: History of Wal-Mart

Sam Walton's retailing career began when he accepted a job offer at a JCPenney store in Des Moines, Iowa on June 3, 1940 where he remained for 18 months. In 1945, he met with Butler Brothers, a regional retailer that owned a chain of variety stores called Ben Franklin. Butler Brothers offered him a Ben Franklin store in Newport, Arkansas.

Walton could not come to agreement on his lease renewal and could not find a new location in Newport; so he located a new variety store in Bentonville, Arkansas which he would open as another Ben Franklin franchise, but called "Walton's Five and Dime." Walton achieved higher sales volume by selling products with slightly smaller markups than most competitors.[2]

In 1962, Walton opened the first Wal-Mart store, Wal-Mart Discount City and within five years the company expanded to 24 stores across the state of Arkansas and reached $12.6 million in sales. In 1968, it opened its first stores outside Arkansas, in Sikeston, Missouri and Claremore, Oklahoma.[3]

The company was incorporated as Wal-Mart Stores, Inc. on October 31, 1969, and in 1970 opened its home office in Bentonville, Arkansas, and its first distribution center. There were now 38 stores operating with 1,500 employees and sales of $44.2 million. The company began trading stock at this time as a publicly held company on October 1, 1972, and was listed on the New York Stock Exchange shortly thereafter. The first stock split occurred in May 1971 at a market price of $47. By this time, Wal-Mart was operating in five states: Arkansas, Kansas, Louisiana, Missouri and Oklahoma, and entered Tennessee in 1973, and Kentucky and Mississippi in 1974. As it moved into Texas in 1975, there were 125 stores with 7,500 employees, and total sales of $340.3 million.[3]

Wal-Mart continued to grow rapidly during the 1980s, and by its twenty-fifth anniversary in 1987, there were 1,198 stores with sales of $15.9 billion and 200,000 associates.[3] This year also marked the completion of the company's satellite network, a $24 million investment, linking all operating units of the company with their Bentonville Office via two-way voice, data, and one-way video communication. At the time, this was the largest private satellite network, and allowed the corporate office to track inventory, sales, and send instant communication to their stores.[4] Company founder Sam Walton stepped down as CEO the following year, and was replaced by David Glass. [5] Walton remained on as Chairman of the Corporate Board of Directors, and the company also restructured their senior management positions, elevating a cadre of executives to positions of greater responsibility.

Also in 1988, the first Wal-Mart Supercenter opened in Washington, Missouri.[6] Wal-Mart expanded their superstore concept during the 1990s, and shortly thereafter surpassed Toys "R" Us in toy sales.[7] The company also opened overseas stores during this period, entering the South American market in 1995 with stores in Argentina and Brazil, and purchasing ASDA in the United Kingdom for $10 billion in 1999.[8] In 1998, Wal-Mart entered the grocery business, introducing their Neighborhood Market concept with three stores in Arkansas.[9] By 2005, estimates indicate that the company controlled approximately 20% of the retail grocery and consumables business.[10]

By 2000, as H. Lee Scott was named President and CEO of the company, Wal-Mart's sales increased to $165 billion.[11] In 2002, Wal-Mart was listed for the first time on the Fortune 500 list of the world's largest corporations, with revenues of $219.8 billion and profits of $6.7 billion. The company was subsequently listed at #1 for every year after 2002 except for 2006.[12]

In 2005, Wal-Mart had $312.4 billion in sales, more than 6,200 facilities around the world, including 3,800 stores in the United States and 3,800 international units, and employing more than 1.6 million associates worldwide. In fact, their U.S. presence had grown so rapidly that there were only small pockets of the country that remained further than 60 miles away from the nearest Wal-Mart.[13] Also in 2005, focusing on becoming more ecologically-friendly, the company designed two new experimental stores, one in McKinney, Texas and the other in Aurora, Colorado, featuring wind turbines, photovoltaic solar panels, biofuel-capable boilers, water-cooled refrigerators, and xeriscape gardens.[14]

In March 2006, Wal-Mart sought to attempt to appeal to a more affluent demographic, with the opening of a new supercenter in Plano, Texas, and is intended to compete against stores that some view as more upscale and appealing, such as Target.[15] The new store features wooden floors, wider aisles, a sushi bar, a coffee/sandwich shop (with free Wi-Fi Internet access), and higher-end items such as microbrew beer, expensive wines, and high-end electronics. The exterior sports the less-common hunter green background behind the Wal-Mart letters instead of the trademark blue.

Subsidiaries

See also: List of assets owned by Wal-Mart Stores, Inc.

Wal-Mart's operations are comprised primarily in three retailing subsidiaries! Wal-Mart Stores Division U.S., Sam's Club (second biggest to Costco), and Wal-Mart International.[16] Wal-Mart does business under nine different retail formats: supercenters, food and drugs, general merchandise stores, bodegas (small markets), cash and carry stores, membership warehouse clubs, apparel stores, soft discount stores and restaurants.

Sam's Club

Main article: Sam's Club

Wal-Mart operates Sam's Club, a chain of warehouse clubs that sells groceries and general merchandise, often in large quantities or volume. Sam's Club stores are only open to customers who subscribe to a paid, annual membership. Some locations also sell gasoline. The first Sam's Club opened in 1983 in Midwest City, Oklahoma.

According to Wal-Mart's 2006 Annual Report, Sam's Club accounted for approximately 12.7% of fiscal 2006 sales. Competitors of Wal-Mart's Sam's Club division are Costco, and the smaller BJ's Wholesale Club chain operating mainly in the eastern US.

As of May 31, 2007, there were 584 Sam's Clubs in the United States.

Wal-Mart International

Wal-Mart's international operations comprise 2,701 stores in 14 countries outside the United States.[20] According to Wal-Mart's 2006 Annual Report, International accounted for approximately 20.1% of fiscal 2006 sales.[16] Wholly owned operations are located in Argentina, Brazil, Canada, Puerto Rico and the United Kingdom (UK). With 1.8 million employees worldwide, the company is the largest private employer in the US and Mexico, and one of the largest private employers in Canada.[21]
Wal Mart store in Mexico City
Wal Mart store in Mexico City

Wal-Mart has operated in Canada since their acquisition of the Woolco division of Woolworth Canada, Inc.[22] Today, they operate 278 locations employing 70,000 Canadians, with a local home office in Mississauga, Ontario. On November 8, 2006, Wal-Mart Canada's first three Supercentres opened in Ancaster, London, and Stouffville, Ontario. As of January 31, 2007, there were six Wal-Mart Supercenters in Canada.[19] As of November 30, 2006, there were six Sam's Clubs Canada (all in Ontario: London, Richmond Hill, Vaughan, Cambridge, Pickering, and Toronto).[19] In December 2006, conversion of a Wal-Mart Discount Store into a Wal-Mart Supercentre has begun in Lethbridge, Alberta, making it the 7th in Canada and the first in Western Canada.

Sales in the fiscal year 2006 for Wal-Mart's UK subsidiary, ASDA (an abbreviation of ASquith and DAiries), were 42.7% of the International segment sales. In contrast to Wal-Mart's US operations, ASDA was originally and remains primarily a grocery chain, but it has a stronger focus on non-foods than most UK supermarket chains (a notable exception is Tesco, UK's largest grocery & Non-food retailer). At the end of fiscal year 2006, there were 236 ASDA stores, 10 George stores, 5 ASDA Living and 43 ASDA small stores.

In addition to its wholly owned international operations, Wal-Mart has joint ventures in China and several majority owned subsidiaries. Wal-Mart's majority owned subsidiary in Mexico is Walmex. In Japan, Wal-Mart owns approximately 53% of The Seiyu Co., Ltd.[23] Additionally, Wal-Mart owns 51% of the Central American Retail Holding Company (CARHCO) formed from more than 360 supermarkets and other store formats, operating in 5 Central American countries: Guatemala, El Salvador, Honduras, Nicaragua and Costa Rica.[24]

In 2004, Wal-Mart bought the Bompreço supermarket chain, composed of 116 stores. Bompreço is the major supermarket chain in Northeastern Brazil. In late 2005, Wal-Mart took control of the Brazilian operations of Sonae Distribution Group through its new subsidiary, WMS Supermercados do Brasil, thus acquiring control of the Nacional and Mercadorama supermarket chains, the leaders in Rio Grande do Sul and Paraná states. None of those operations were rebranded. As of August 2006, Wal-Mart operates 71 Bompreço stores, 27 Hiper-Bompreço stores, 15 Balaio stores and 3 Hiper-Magazines (all originally part of Bompreço). It also runs 19 Wal-Mart Supercenters, 13 Sam's Club stores and 2 Todo Dia stores. With the acquisition of Bompreço and Sonae, Wal-Mart is currently the third largest supermarket chain in Brazil, behind Carrefour and Pão de Açúcar.

In July 2006, Wal-Mart announced its withdrawal of operations from Germany because of sustained losses in the highly-competitive German market. The stores were sold to the German company METRO AG.[25] The sale was completed in Wal-Mart's fiscal third quarter.

In November 2006, Wal-Mart announced a joint venture with Bharti Enterprises to open "hundreds" of retail stores in India. Since foreign corporations are not allowed to enter the retail sector in India directly, Wal-Mart is expected to operate through franchises and handle the wholesale end of the venture.[26] The partnership will involve two joint ventures. While Bharti would be managing the front-end that involves opening retail outlets, Wal-Mart would take care of the back-end such as cold chains and logistics.

Private label brands

Main article: List of Wal-Mart brands

Today, approximately 40% of products sold in Wal-Mart are private label store brands, or products offered by Wal-Mart and produced through subsidized contracts awarded to the lowest bidder.[27] Wal-Mart began offering private label brands in 1991 with the launch of Sam's Choice, a brand of drinks produced by Cott Beverages exclusively for Wal-Mart. Sam's Choice quickly became popular, and by 1993, was cited as #3 on the list of top beverage brands in the United States.[28] Other Wal-Mart brands include Great Value and Equate in the US and Smart Price in the United Kingdom. A 2006 study recently found that, "While clearly other results in this study point to the success of other retailers, we are struck by the magnitude of mind-share Wal-Mart appears to hold in shoppers' minds when it comes to awareness of private label brands and retailers.

Competition

In North America, Wal-Mart's primary competition includes department stores like Kmart, Target, ShopKo, Meijer, or Canada's Zellers, Winners, or Giant Tiger. Wal-Mart's move into the grocery business in the late 1990s has also positioned it against major supermarket chains in both the United States and Canada. Several smaller retailers, primarily dollar stores, such as Family Dollar and Dollar General, have been able to find a small niche market and compete successfully against Wal-Mart for home consumer sales.[39] In 2004, Wal-Mart responded by testing their own dollar store concept, a subsection of some stores known as "Pennies-n-Cents."[40]

Wal-Mart has struggled in other foreign markets. For example, in Germany, it had captured just 2% of German food sales following its entry into the market in 1997 and had remained "a secondary player" compared to competitor Aldi which boasts 19% share of the German market.[41] In July 2006, Wal-Mart announced its withdrawal of operations from Germany because of sustained losses. Its stores are to be sold to German company METRO AG[25] In China, Wal-Mart is "a small fish" as its strategy of "everyday low prices" has not been successful against "Chinese mom-and-pop shops that are used to cutthroat pricing."[42] In May 2006, Wal-Mart withdrew from the South Korean market when it agreed to sell all 16 of its South Korean outlets to Shinsegae, a local retailer, for $882 million who are as of late 2006 re-branding the country's Wal-Marts as E-mart. Wal-Mart had originally entered the South Korea market in 1998.[43] In the UK, Wal-Mart's ASDA subsidiary is the second largest chain after Tesco.[44] Specifically, ASDA is a distant second to Tesco in the UK grocery market, and as of 2006 the gap is widening, based on market share figures published by TNS Worldpanel.

Customer base

Each week, approximately 100 million customers, or one-third of the US population, visits Wal-Mart's US stores.[45] Wal-Mart customers place low prices as the most important reason for shopping at Wal-Mart, reflecting a, "Low prices, always," message that Wal-Mart had had from 1962 until 2006.[46] Wal-Mart's average US customer's income is below the national average, and analysts have recently estimated that more than one-fifth do not have a bank account, twice the national rate.[47] A Wal-Mart financial report in 2006 also indicated that Wal-Mart customers are sensitive to higher utility costs and gas prices.[48] A poll prior to the 2004 US Presidential Election indicated that 76% of voters who shopped at Wal-Mart once per week planned to vote for George W. Bush, while only 23% planned to vote for John Kerry.[49] When measured against other similar retailers in the US, frequent Wal-Mart shoppers were rated the most politically conservative.[50]

In 2006, Wal-Mart made steps to expand its US customer base, announcing a modification in its US stores from a, "one-size-fits-all," merchandising strategy to a custom-fitting merchandise assortment designed to, "reflect each of six demographic groups – African-Americans, the affluent, empty-nesters, Hispanics, suburbanites and rural residents."[51] About six months later, the company went public with a variation on their customer profile: "Saving people money so they can live better lives."[46] This reflects what Wal-Mart identifies as the three main groups that its 200 million customers are organized into: "brand aspirationals" (people with low incomes who are obsessed with names like KitchenAid), "price-sensitive affluents" (wealthier shoppers who love deals), and "value-price shoppers" (who like low prices and cannot afford much more).[46] Wal-Mart has also made steps to appeal to more liberal customers, for example, by rejecting the American Family Association's recommendations and carrying the DVD Brokeback Mountain, a love story about two gay cowboys in Wyoming.

Employee and labor relations

See also: Criticism of Wal-Mart

Wal-Mart has been criticized with regard to many of its policies and/or business practices, primarily by community groups, grassroots organizations, labor unions,[53] religious organizations,[54][55] and environmental groups. In particular, several labor unions have specific concerns regarding the company's anti-union stance, as well as several employee relations issues. Other areas of concern include the corporation's extensive foreign product sourcing, treatment of employees and product suppliers, environmental practices, the use of public subsidies, and the impact of stores on the local economies of towns in which they operate.[56][57][58]

In 2005, labor unions created several organizations to confront these issues, including Wake Up Wal-Mart (United Food and Commercial Workers) and Wal-Mart Watch (Service Employees International Union). By the end of 2005, Wal-Mart launched Working Families for Wal-Mart, an astroturf operation, to counter the criticisms of the other two groups. Additional efforts to counter criticism include launching a public relations campaign in 2005 through their public relations website,[59] as well as several television commercials. The company retained the public relations firm Edelman to respond to negative media attention,[60] and has started interacting directly with bloggers by sending them news, suggesting topics for postings, and even inviting them to visit their corporate headquarters.[61]

Wal-Mart also faces several significant issues with regards to its employee and workforce relations. These issues involve low wages, poor working conditions, inadequate health care, as well as issues involving the company's strong anti-union policies. One of Wal-Mart's biggest issues is their high turnover rate – approximately 70% of its employees leave within the first year, primarily due to lack of recognition and inadequate pay. However, Managers and executives of Wal-Mart are paid very well and are part of a generous bonus program..

A jury in Massachusetts Superior Court awarded nearly 2 millions dollars to a ex Wal-Mart employee due to the store underpaying her and then firing her for discrimination. In the suit, she claimed that she demanded from Wal-Mart that she be paid wage differential and bonuses and also was reprimanded for reporting missing drugs to law enforcement.

Diversity

With regard to equal opportunities for women, in 1999, Wal-Mart ranked well below its retailing peers, which had an average of 56% female managers (only 11% difference from the ratio of women in the workforce, which is 45%), according to data from the Equal Employment Opportunity Commission.[65][66]In 2001, Wal-Mart's EEOC filings showed that female employees made up 72% of Wal-Mart's workforce, but only 30% of its management (a 15% difference from the population ratio, 4% higher than the rest of the industry). This ratio was typical in 1975. On April 3, 2007, Wal-Mart reported that female employees were now 61% of its workforce and 40% of its management.

Wal-Mart has received improving scores on the Corporate Equality Index, a measure of how companies treat homosexual employees and consumers, published by the Human Rights Campaign. The rating was 65% in the 2006 edition, 57% in 2005, 43% in 2003 and 2004, and 14% in 2002.[69][70] Wal-Mart's 2003 score accompanied an expanded antidiscrimination policy to protect gay and lesbian employees, The 2005 score accompanied a new definition of family that included same-sex partners.

In January 2006, Wal-Mart announced that, "diversity efforts include new groups of minority, female and gay employees that have started meeting at Wal-Mart headquarters in Bentonville to advise the company on marketing and internal promotion. There are seven so-called Business Resource Groups: women, African-Americans, Hispanics, Asians, Native Americans, Gays and Lesbians, and a disabled group."

Wal-Mart is currently facing a gender discrimination lawsuit, Dukes v. Wal-Mart Stores, Inc., alleging female employees were discriminated against in pay and promotions. In February 2007, the United States Court of Appeals for the Ninth Circuit issued a 2-1 ruling that affirmed a lower court ruling to certify the case as a class-action lawsuit that plaintiffs estimate could include approximately 1.6 million women. A similar lawsuit, EEOC (Janice Smith) v. Wal-Mart Stores, Inc., was filed on August 24, 2001, accuses the retailer of discriminating hiring practices at their London, Kentucky Distribution Center dating back to 1995. Mauldin v. Wal-Mart Stores, Inc., charges that the company's denial of health insurance coverage for birth control is unfair to female employees. In 2002, the lawsuit was granted class action status, allowing all female employees after March, 2001, to file claims if they were using contraceptives.

Technorati and Pings

2007-07-02T05:24:00.000-07:00

Technorati and Pings

Technorati is an Internet search engine for searching blogs, competing with Google, Yahoo and IceRocket. As of April 2007, Technorati indexes over 75 million weblogs. The name Technorati is a portmanteau, pointing to the technological version of literati or intellectuals.

Technorati was founded by Dave Sifry and its headquarters are in San Francisco, California, USA. Tantek Çelik is the site's Chief Technologist.

Technorati uses and contributes to open source software. Technorati has an active software developer community, many of them from open-source culture. Sifry is a major open-source advocate, and was a founder of LinuxCare and later of Wi-Fi access point software developer Sputnik. Technorati includes a public developer's wiki, where developers and contributors collaborate, as well as various open APIs.

The site won the SXSW 2006 awards for Best Technical Achievement and also Best of Show.[1] It was also nominated for a 2006 Webby award for Best Practices, but lost to Flickr and Google Maps.[2]

Criticism

In February 2006, Debi Jones pointed out that Technorati's "State of the Blogosphere" postings, which claimed that they track 27.7 million blogs, failed to take into account MySpace blogs, of which she says there are 56 million. As a result, she says the utility of Technorati as a gauge for blog popularity is questionable.[3] However by March 2006, Aaron Brazell pointed out that Technorati had started tracking MySpace "blogs".[4]

In May 2007, Andrew Orlowski writing for the tech tabloid TheRegister criticized Technorati's May 2007 redesign. He suggests that Technorati has decided to focus more on returning image thumbnails instead of blog results. He also claims that Technorati never worked in the past and the alleged refocus is "a tacit admission that it's given up on its original mission".

Ping

Ping is a computer network tool used to test whether a particular host is reachable across an IP network. Ping works by sending ICMP “echo request” packets ("Ping?") to the target host and listening for ICMP “echo response” replies (sometimes dubbed "Pong!" as a metaphor from the Ping Pong table tennis sport.) Using interval timing and response rate, ping estimates the round-trip time (generally in milliseconds although the unit is often omitted) and rate of packet loss between hosts (can differ).

The word ping is also frequently used as a verb or noun, where it can refer directly to the round-trip time, the act of running a ping program or measuring the round-trip time. See also: Ping (video games).

History

Mike Muuss wrote the program in December, 1983, as a tool to troubleshoot odd behavior on an IP network. He named it after the pulses of sound made by a sonar, since its operation is analogous to active sonar in submarines, in which an operator issues a pulse of energy (a network packet) at the target, which then bounces from the target and is received by the operator. Later David L. Mills provided a backronym, "Packet InterNet Grouper (Groper)" (sometimes also defined as "Packet Inter-Network Groper).

The usefulness of ping in assisting the "diagnosis" of Internet connectivity issues was impaired from late in 2003, when a number of Internet Service Providers filtered out ICMP Type 8 (echo request) messages at their network boundaries. This was partly due to the increasing use of ping for target reconnaissance, for example by Internet worms such as Welchia that flood the Internet with ping requests in order to locate new hosts to infect. Not only did the availability of ping responses leak information to an attacker, it added to the overall load on networks, causing problems for routers across the Internet.

There are two schools of thought concerning ICMP on the public Internet: those who say it should be largely disabled to enable network 'stealth', and those who say it should be enabled to allow proper Internet diagnostics.

These two schools of thought merge when considering intranet/extranet networks within the same organization. An example would be an organization which maintains 'buffer' network(s) to shield said net from the raw internet, such a network is usually described as a DMZ (after the military designation 'demilitarized zone'). In such a scenario an organization would maintain both a network(s) that would allow ICMP packets to radiate within the internal (trusted network[s]), and disallow ICMP (ping) packets in a separated network that would more often than not include raw internet facing systems.

SEO - Do it the right way by Guido Nussbaum

2007-06-30T07:35:00.000-07:00

SEO - Do it the right way by Guido Nussbaum

There is a lot of information about search engine optimization (seo) going around online and not everything what people tell you is true. There are e-book authors out there who tell their readers not to include any meta tags in their websites. They say that search engines don't read the meta tags these days. Do not believe these things read this article to get a real picture about seo.

The right keywords

Before you can start with search engine optimization, you need to know for what keyword you are going to optimize your website. Finding the right keywords is the first step to take and also the most important one. If you choose the wrong keywords, then you will have a hard time getting into the top 10 search results. You need to find keywords with very low competition so that you can reach a top 10 position even with little back-links.

When you are searching for the right keywords make sure they have less than 100.000 competing websites on google. You can get this number by doing a simple search on google. With the results they also show the number of results. The lower the number, the better for you to get a top 10 ranking. The figure you need to care about is the number of monthly searches for your keywords. Make sure you use keywords that people are actually searching for. You can use several tools to get the number of monthly searches, for example the overture tool or the wordtracker tool.

Onpage Optimization

Nobody knows the algorithm of the google search engine, so nobody can tell you for sure how exactly your website has to look like. Only through a lot of testing and tracking you can get a hint on what you need to change on your website to get a better ranking. There are still some basic things that you want to look at:

- The Website Title (in the header section of your html source code) should have your keyword included. It should not be longer than 10 words. - The Meta Description is used to display the search results, even at google. That's why a good meta description is very important! - The Meta Keywords are not that important but you should make sure that your keywords are included. Don't include keywords that can not be found in your body text and do not practice any keyword stuffing methods. - The Body Text. Google doesn't look much at your keyword density but they look if your keyword is included. That means use your keywords throughout the text where it makes sense but don't worry about having a 1% or 3% keyword density. - The H1,H2,H3 tags. Search engines love structured documents, so they also love the headline tags. Use your keywords in the h1,h2 and h3 tags but don't do any keyword stuffing. - Image alt tags are very important if you do not have much text on your website but can also help to increase your ranking if you have much text. Use keywords in the alt tags but again do not use them too often.

These are the most important on-page factors to look at. Of course you need to have a valid html code and a good link-structure but the above points are major important and can boost your ranking when done right. Always remember that you can only get a top 10 ranking by also doing off-page optimization.

Off-Page Optimization

A lot can be done wrong when doing offpage optimization. Google had a major update on his algorithm at the beginning of 2007. Did you remember the google bombs that used to make pages rank for not relevant search terms? Doesn't work anymore since that update! They have also updated their spam detector, a lot of peoples websites dropped in the search results because they used paid advertisements at certain traffic portals and other grey-hat methods. The way to go nowadays is called "natural link building". This means you create links over a very long time period using different methods. If you submit to directories, then submit to 10 directories every day over a period of 100 days. This way it seems as if your links were build naturally by other people.

There are many ways you can get back-links to your website in a natural way. You can:

- provide good content and people will link to you without any effort on your part. This is the most natural and most effective way of link building! - write articles and distribute them to many different article directories. Your articles get picked up by other people who publish your article at their website with a back-link to your website. This way of building back-links is still very natural and can't be detected by search engines. In the worst case they would not count the links in the article directories or only count them once because of duplicate content. - do 3-way link exchanges. This means you have 2 different websites on 2 different servers with 2 different ip's. You exchange links with other websites by placing their link on your first website and then place the link of your second website on their website. This way you get 1-way links to your second website.

Avoid things like guest-book spamming, ffa sites, link-farms and websites with more than 100 links on the page where your link will be. Finally work on building links every day over a period of at least 100 days. This way you ensure a continues growth of your link-popularity.

part 2....

2007-06-30T07:28:00.000-07:00

3) Use Credit Wisely

The proper use of credit has significantly facilitated the flow of goods and services. Long-term, low-interest loans have made it possible to purchase items such as homes or automobiles that otherwise would have required the accumulation of many years' savings.

Another credit mechanism, the credit card, has been a tremendous boon to the consumer who is temporarily low on cash. It has eliminated the danger of carrying large amounts of cash, especially during long periods of travel. And credit cards may even be required for some purchases. But buying on credit can be a financial curse as well as a convenience, particularly when a person falls behind in making payments.

Credit buying often creates the illusion of prosperity. The small size of the monthly installment, its delayed arrival at the end of the month and the lack of cash at the time of the purchase make luxuries seem suddenly within reach. These features persuade millions of families, with otherwise adequate incomes, to spend their paychecks before they even receive them.

Once you get trapped in installment payments, the money you could have in your savings account goes to a credit institution. In effect, you are paying a premium in order to own something now instead of later.

If you habitually use credit in this manner, it can often turn out to be an expensive proposition. Many credit cards, revolving charge accounts and automatic overdraft facilities require a minimum monthly interest charge on the outstanding balance. It sometimes adds up to a staggering 18 percent a year.

Shopping with cash, on the other hand, can often save the consumer more than just monthly interest charges. The person who pays cash can sometimes buy at a discount. Cash-conscious consumers can also take advantage of seasonal sales. They are able to shop around more freely and buy where their money has the most purchasing power. Individuals operating on credit are sometimes forced to purchase where they have their charge accounts, even though a sale may be going on next door.

Solomon wisely perceived that "the rich rule over the poor, and the borrower is servant to the lender" (Proverbs 22:7). A cash basis of financial management is a good way to avoid this type of financial bondage. Therefore, the question logically arises: Where do I start?

The average money manager first should realize that there are two types of family and personal expenses: needs and wants. It is important to know the difference. In today's society, credit buying for items such as a car or a home can be looked on as a necessity. Even these purchases, however, can sometimes be delayed until more cash is available to lessen the finance charges.

On the other hand, credit should rarely be used for wants. Families in trouble have often used too much credit on wants rather than on what they really needed. Until they can accumulate savings, they should adopt a policy of buying wants, such as television sets, sporting goods or excess furniture, strictly on a cash basis. Here's why: Saving cash for luxuries or desires puts a remarkably stabilizing influence on a family's monetary policy. By the time you have saved the cash, there will be little doubt in your mind whether you can afford the item or if, in fact, you really want it.

To use this approach, you must resolve not to purchase anything on credit until your accounts are all paid in full. At least limit the credit purchases during your transition period to an absolute minimum so you can get your credit accounts paid off as early as possible. Then, instead of immediately obligating yourself to more payments by purchasing additional items, let your savings accumulate until you can begin to buy these items for cash.

Remember: The wise family can learn to live with credit, but it should never live by it!

4) Trim Expenses

We live in an "Era of Aspirations," as one money management authority has called it. That is, we order our lives on the belief in and need for a constant upgrading of personal demands. We take this increase in our standard of living for granted. We spend our money on that assumption.

It may seem strange, then, to say that we should take a hard look at what we buy or use — and cut down expenses. Yet that is exactly what we should be doing if we want to increase the value of our money.

A few examples. Do you need that magazine subscription? Do you need the services of a gardener? Is it really necessary to have a new car? Why not purchase a good used one? New-car payments, plus the required total insurance coverage, have been the ruination of many personal budgets.

One important reason our money doesn't buy what it should is that we are using far more services than ever before. Most services depend heavily on labor costs. If we carefully budget our money, we can identify those services that lead to excess expenses. Then we can take appropriate action to change our spending habits.

One example of an area where you may be able to cut costs is by eating out less often. You might be astonished at what some people spend over a year's time eating in restaurants. Figure out the cost of a single meal at a restaurant. Then estimate how many times you do this weekly, and multiply the amount spent by 52. You will find the yearly sum spent on eating out can be astonishingly high.

5) Invest for the Future

In terms of financial goals, we must first plan for today. But we must also carefully consider the future. If we include a regular savings plan in our budget, we can build up a sizable nest egg over the years.

It's important to think through your goals in life as early as possible. However, it's never too late to do so. Consider your long-term financial goals. Make these a part of your spending and saving plan. What about a possible home purchase, the cost of educating children, and money for retirement?

Perhaps our income is not that large. Can we save at least a small portion each year? If we do this over a 30-year period, placing the money in a wise investment, we'd be surprised at how much we would have for the later years of our lives. From this nest egg, we could draw an income, upon retirement, from the interest we receive on our investment.

So far, we've considered several points on increasing income and spending it wisely. Now, let's turn to the most important consideration in managing your personal finances.

6) Make God Your Partner

Strange as it may seem, what we are able to earn depends little on us. Any income we produce depends on assets we did not create. And they don't really belong to any human being, corporation or government.

The fact is that a personal Creator God made and sustains all that exists. Would not this God, by virtue of having created everything, have good reason to claim that everything — including ourselves — belongs to him? God does make such a claim. "The earth is the Lord's, and everything in it, the world, and all who live in it" (Psalm 24:1). He says the wild animals and cattle are his (Psalm 50:10-12), and so is all the silver and gold (Haggai 2:8).

Everything that's produced depends on some element originating in the earth. Our product may be a tomato, a steel girder or even a piece of plastic. But the primary elements have already existed in some form. We may have used our energy to create a song or write a book, but where did that energy come from? Who made your hands, your eyes, your body — your ability to sell, manage, invent or create? God did.

Of course, we apply a certain thinking process to whatever we do. But God still has a prior claim. God created the human brain and mind that we use. Thus, we finally stand naked before God. We have brought nothing into the world. Everything we have has come as a gift from the Creator.

Out of this truth comes another basic and far-reaching income-generating and -spending principle: Since God ultimately gives us everything we need, we depend on him for our economic survival and prosperity.

God warned the Israelites before they entered the Promised Land: "When you have eaten and are satisfied, praise the Lord your God for the good land he has given you. Be careful that you do not forget the Lord your God, failing to observe his commands, his laws and his decrees that I am giving you this day" (Deuteronomy 8:10-11).

God warned them not to say, "My power and the strength of my hands have produced this wealth for me." He told them, "Remember the Lord your God, for it is he who gives you the ability to produce wealth" (verses 17-18).

We should think of God as our senior partner in any economic endeavor and prosperity we might achieve. Certainly, we should do our part in working harder and smarter both at earning and spending our income. But we must go on to acknowledge the important part God plays in our financial lives, and trust him to supply our needs.

Many people recognize the biblical practice of tithing as an act of honor and worship toward the Creator God who gives us all things. Tithing is the scriptural practice of giving a tenth of one's income to God. Tithes and offerings were commanded in the Old Testament. The New Testament, while not requiring an exact percentage, does command generosity — and it is appropriate for a new covenant Christian, with better blessings and promises from God, to be at least as generous as the old covenant Israelite was.

The Worldwide Church of God uses tithes and offerings to fulfill its God-given mission to preach the gospel. Tithes and offerings reflects the believer's worship, faith and love for God, who is the Source of salvation and Giver of all good things.

credits to....

Six Steps to Financial Security part 1

2007-06-30T07:10:00.001-07:00

Six Steps to Financial Security

If you're like most people, having enough money for a decent and secure life is one of your major concerns. Those on fixed incomes may be especially worried about creeping inflation, the rising costs of goods and services. The threat of unemployment or job loss (or business failure) also causes the jitters.

Perhaps you're a single mother with several children and in great danger of falling under the poverty line. What will you do about improving your financial situation? Or you're deeply in debt. How will you make your payments and become debt-free?

Reasonable prosperity is something all of us would like to achieve and hold on to. But, in many nations, people face nearly insurmountable financial problems. The things that most people in the developed nations take for granted — automobiles, electronic gadgets, savings accounts, adequate clothing and furniture — are out of reach for vast numbers of the human race.

Many developing nations face staggering poverty, near runaway inflation, unpayable national debts, vast unemployment and underemployment. People in such nations must think in terms of basic survival rather than financial prosperity.

To some degree, as they read this booklet, they will have to look over the shoulders of those who live in the well-off nations and who have an opportunity to improve their financial situation.

Let's, then, look at six financial principles that can help a person become more financially secure.

1) Budget Money Wisely

A most important point to remember: Make the most from the money you already earn. To spend one's money more effectively is the same as increasing one's salary. How's your "money management quotient"? One well-known family financial counselor wrote, "Managing your money may well be the single most important thing you can do today."

We may learn to be money earners, but can still end up as paupers. We have to become wise money spenders as well. Studies show that even those individuals who earn large salaries still feel financially strapped. It seems that many people's outgo for needs and wants exceeds their income.

Sound money management teaches us a basic financial maxim: There is never enough money for everything we might want or need. So we need a sensible spending plan.

A spending plan is like a road map. A budget helps us arrive at our financial destination, safe and sound. Every business and government must have a spending plan and must strive to follow it. Such a plan guides the effective use of money in many ways. It helps us:

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Live within our means. A plan gives us greater control over our financial resources. We can immediately know whether something we desire to purchase is affordable.
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Realize personal goals. With a spending budget, we can plan purchases properly, service debt payments, accumulate savings, save for the future.
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Spend money effectively. Merchandisers know that shoppers make spur-of-the-moment purchases. Items on the supermarket counters are often positioned in such a way as to encourage purchases. A spending plan helps us to circumvent impulse buying. We buy only what we planned to buy and only those things our plan tells us we can afford.

A spending plan helps us to ask the right questions about our money. Is this the time to buy this product? Is this the most economical way to buy it? Would we rather have this product than something else? Do we have the money to buy it? Does it fit in with our goals in life?

A spending plan helps us to balance the desire for present enjoyment with long- and short-term financial needs. Instead of buying now and paying later, we begin to think of saving first and then buying when we can afford it.

If you don't know where the money goes, you can't get it to go where it should. A budget or spending plan should include three important areas:

*

Emergencies. We should put money away each month for unforeseen circumstances such as car and house repairs.
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High-cost items. Don't buy that new television today. Each month put money into a savings account. Buy the television for cash — on your terms, without interest and at the most financially appropriate time, such as during a timely sale. Don't buy that new television today. Each month put money into a savings account. Buy the television for cash — on your terms, without interest and at the most financially appropriate time, such as during a timely sale.
*

Annual or periodic bills. Put away money each week, month or pay period for a future bill such as insurance or taxes. For example, if you pay an insurance bill once each year, put away one twelfth of the total in your savings each month.

2) Increase Income

Another step toward financial security has to do with maximizing our income. We need to have enough money and resources to make life what it should be without jeopardizing our mental, social and spiritual needs.

Most people are paid an hourly wage or work on salary for someone else. If you're in this situation, your chances for suddenly increasing your income by a large amount may not be particularly promising. You may receive automatic but small raises based on a company formula or union-management agreement. In some cases, your company may grant built-in cost-of-living increases.

If there is a possibility of "moving up" financially, you will have to demonstrate your usefulness. Make yourself more valuable to your boss or company. Put the emphasis on helping your organization earn more money, save money or improve its product or performance. Earn a raise.

What if you cannot do better financially even though you work harder and smarter? You have two options. Stay put or move to another job or company. Do not consider quitting your present job, however, until you know a better and more secure position awaits you.

Perhaps your type of employment has only limited monetary value. And you've achieved the highest pay possible. Can you educate yourself and improve your value in the job marketplace?

Perhaps you have the ability to create your own job by starting a small business. To succeed, you will have to make your product or service valuable and desirable to the consumer. Beware, however, of the immense amount of paperwork involved in being self-employed.

Simply put, being able to earn more depends on your attitude of service to others. It also means making the most of your abilities and situation.

What is a "Get-Rich-Quick" scheme?

2007-06-29T01:12:00.000-07:00

1. What is a "Get-Rich-Quick" scheme?
A plan which offers high or unrealistic rates of return for a small investment while at the same time promising that such investment is easy and risk -free.

The following "Get-Rich-Quick" schemes are prohibited under the legislation administered by Bank Negara Malaysia :

Illegal Deposit Taking Activities

Illegal deposit taking is an act of receiving, taking or accepting of deposits (moneys, precious metal, precious stone, any other article etc.) from members of the public that promises a repayment with interest or returns in money or money's worth without a valid licence under the Banking and Financial Institutions Act 1989 (BAFIA).

Illegal Foreign Currency Dealings

The following acts tantamount to illegal foreign currency dealings:

o Buying or selling of foreign currency by a person who is not an authorized dealer unless such person has obtained the permission of the Controller of Foreign Exchange under the Exchange Control Act 1953 (ECA).

o Buying or selling of foreign currency by a resident who is not an authorised dealer, with a person outside Malaysia except if the resident has obtained the permission of the Controller of Foreign Exchange under the ECA.

CAUTION: Internet Investment Schemes

Members of the public are cautioned to be on guard against some investment schemes promoted on the internet as these schemes are not licensed or authorized by Bank Negara Malaysia to accept deposits or deal in foreign currency. Such schemes often come in the guise of attractive investment returns or opportunities involving unrealistic rates of returns with zero to low risk.

Investors are reminded that they should only place deposits with institutions licensed or deal in foreign currency with institutions authorised by the Bank. Unlicensed operators may cease operating their business resulting in the investors with no means to recover their investments or seek redress against the persons connected with the scheme.

2. How To Spot The Scams?

Illegal deposit taking scam

o The person (an individual, a company or an organisation) receives, takes or accepts deposits from members of the public and is not licensed under section 6(4) of the BAFIA;
o The person promises to repay the deposit, with or without interest or returns, over a period of time in the form of money or money's worth, etc.; and
o The person promises to repay the initial deposit upon demand or at a time or in circumstances agreed by or on behalf of the person making the payment and the person receiving it, with any consideration in money or money's worth (the repayment of initial deposit is sometimes included in the fixed interest or returns promised).

Warning Signs for Investors

• Illegal deposit taking activities have been disguised and camouflaged in various forms to deceive the public to fall victim to the investment scams, by giving valuable goods as part of the promised returns and camouflaging the deposits as loans to the company;

• Illegal deposit taking activities appear to be able to provide high or unrealistic rates of interest or return over a short period of time as compared to licensed institutions. However, these schemes will not last long;

• The survival of this scheme is dependent upon the recruitment of new depositors, i.e., new funds obtained will be used in paying dividends to the existing depositors. Therefore , the scheme will fail when there is no contribution of funds from new depositors; and

• Initially the depositors may be paid their promised returns. However, the operator would eventually abscond with the moneys collected when he feels that the scheme is about to fail, thus leaving the depositors at the losing end.

Illegal foreign currency scam

Foreign currency dealings with a person, other than an authorized dealer, who has not obtained the permission of the Controller of Foreign Exchange under the ECA, often:
o Offer investors or members of the public the opportunity to deal in foreign currencies with a principal company (purported to have a valid licence to trade foreign currencies overseas);
o Facilitate the trading of foreign currencies by providing access to the principal company's website and trading facilities via internet;
o Recruit fresh graduates as marketing executives and allure them to get their family members to invest;
o Instruct the investors to deposit the investment moneys into either the principal company's bank account or a third party bank account; and
o Induce the investors to top up their investment ("margin call") or otherwise risk losing their investment.

Warning Signs For Investors

Illegal operators of foreign currency scams will try to entice potential investors with a marketing strategy which promises quick and high returns -
• By projecting a professional and reputable image with smart-looking employees, a high-tech office layout and advanced IT facilities where investors are induced to operate their accounts via the internet;

• With tools of the trade, e.g., a news screen showing movements in exchange rates, to give the impression that a professional and legitimate business is being conducted; and

• A business contract is usually entered into between the investors and the company. Such contracts are usually left unsigned by the company. This means no action can be taken by the investors against the company as there is no binding written contract.

3. How To Protect Yourself From The Scams?

+ Remember the golden rule - if it sounds too good to be true, it's probably a lie;
+ Deal only with licensed financial institutions and authorized dealers;
+ Check with the relevant authority before investing;
+ Don't be pressured or rushed to invest;
+ Be extra careful with investments over the internet;
+ Be skeptical of any investment opportunity that is not in writing; and
+ In case an investment has been made, keep copies of all the investment and communications.

4. What Should You Do If You Are a Victim of such Scams?

If you have any information pertaining to illegal deposit taking activities or illegal foreign currency dealings or are a victim of such activities or scams you can send details of such information or complaint together with the documents to Bank Negara Malaysia as follows:

Address:

Unit Penyiasatan Khas
Bank Negara Malaysia
Jalan Dato' Onn
50480 Kuala Lumpur
Fax: 03-26987467
E-mail: upkinfo@bnm.gov.my

We can also be contacted at the following telephone numbers:

Tel.: 03-2691 5090 / 2698 4163 / 2691 0824 / 2692 6482 / 2694 2143

sumber : BNM

Forex Scam &&& Fraud

2007-06-28T10:44:00.000-07:00

A forex scam is any trading scheme used to defraud individual traders by convincing them that they can expect to unreasonably profit by trading in the foreign exchange market, which would be a zero-sum game were it not for the fact that there are brokerage commissions, which technically make forex a "negative-sum" game.

These scams might include churning of customer accounts for the purpose of generating commissions, selling software that is supposed to guide the customer to large profits,[1] improperly managed "managed accounts",[2] false advertising,[3] Ponzi schemes and outright fraud.[4] It also refers to any retail forex broker who indicates that trading foreign exchange is a low risk, high profit investment.[5]

The U.S. Commodity Futures Trading Commission (CFTC), which loosely regulates the foreign exchange market in the United States, has noted an increase in the amount of unscrupulous activity in the non-bank foreign exchange industry.[6]

An official of the National Futures Association was quoted[7] as saying, "Retail forex trading has increased dramatically over the past few years. Unfortunately, the amount of forex fraud has also increased dramatically..." Between 2001 and 2006 the U.S. Commodity Futures Trading Commission has prosecuted more than 80 cases involving the defrauding of more than 23,000 customers who lost $300 million, mostly in managed accounts. CNN also quoted Godfried De Vidts, President of the Financial Markets Association, a European body, as saying, "Banks have a duty to protect their customers and they should make sure customers understand what they are doing. Now if people go online, on non-bank portals, how is this control being done?"

The highly technical nature of retail forex industry, the OTC nature of the market, and the loose regulation of the market, leaves retail speculators vulnerable. Defrauded traders and regulatory authorities, can find it very difficult to prove that market manipulation has occurred since there is no central currency market, but rather a number of more or less interconnected marketplaces provided by interbank market makers.

CFTC warnings

The CFTC lists 9 warning signs for foreign exchange trading fraud:[5]

1. Stay away from opportunities that seem too good to be true

Always remember that there is no such thing as a "free lunch." Be especially cautious if you have acquired a large sum of cash recently and are looking for a safe investment vehicle. In particular, retirees with access to their retirement funds may be attractive targets for fraudulent operators. Getting your money back once it is gone can be difficult or impossible.

2. Avoid any company that predicts or guarantees large profits

Be extremely wary of companies that guarantee profits, or that tout extremely high performance. In many cases, those claims are false.

The following are examples of statements that either are or most likely are fraudulent:

"Whether the market moves up or down, in the currency market you will make a profit."
"Make $1000 per week, every week"
"We are out-performing 90% of domestic investments."
"The main advantage of the forex markets is that there is no bear market."
"We guarantee you will make at least a 30-40% rate of return within two months."

3. Stay Away From Companies That Promise Little or No Financial Risk

Be suspicious of companies that downplay risks or state that written risk disclosure statements are routine formalities imposed by the government.

The currency futures and options markets are volatile and contain substantial risks for unsophisticated customers. The currency futures and options markets are not the place to put any funds that you cannot afford to lose. For example, retirement funds should not be used for currency trading. You can lose most or all of those funds very quickly trading foreign currency futures or options contracts. Therefore, beware of companies that make the following types of statements:

"With a $10,000 deposit, the maximum you can lose is $200 to $250 per day."
"We promise to recover any losses you have."
"Your investment is secure."

4. Don't Trade on Margin Unless You Understand What It Means

Margin trading can make you responsible for losses that greatly exceed the dollar amount you deposited.

Many currency traders ask customers to give them money, which they sometimes refer to as "margin," often sums in the range of $1,000 to $5,000. However, those amounts, which are relatively small in the currency markets, actually control far larger dollar amounts of trading, a fact that often is poorly explained to customers.

Don't trade on margin unless you fully understand what you are doing and are prepared to accept losses that exceed the margin amounts you paid.

5. Question Firms That Claim To Trade in the "Interbank Market"

Be wary of firms that claim that you can or should trade in the "interbank market," or that they will do so on your behalf.

Unregulated, fraudulent currency trading firms often tell retail customers that their funds are traded in the "interbank market," where good prices can be obtained. Firms that trade currencies in the interbank market, however, are most likely to be banks, investment banks and large corporations, since the term "interbank market" refers simply to a loose network of currency transactions negotiated between financial institutions and other large companies.

6. Be Wary of Sending or Transferring Cash on the Internet, By Mail or Otherwise

Be especially alert to the dangers of trading on-line; it is very easy to transfer funds on-line, but often can be impossible to get a refund.

It costs an Internet advertiser just pennies per day to reach a potential audience of millions of persons, and phony currency trading firms have seized upon the Internet as an inexpensive and effective way of reaching a large pool of potential customers.

Many companies offering currency trading on-line are not located within the United States and may not display an address or any other information identifying their nationality on their Web site. Be aware that if you transfer funds to those foreign firms, it may be very difficult or impossible to recover your funds.

7. Currency Scams Often Target Members of Ethnic Minorities

Some currency trading scams target potential customers in ethnic communities, particularly persons in the Russian, Chinese and Indian immigrant communities, through advertisements in ethnic newspapers and television "infomercials."

Sometimes those advertisements offer so-called "job opportunities" for "account executives" to trade foreign currencies. Be aware that "account executives" that are hired might be expected to use their own money for currency trading, as well as to recruit their family and friends to do likewise. What appears to be a promising job opportunity often is another way many of these companies lure customers into parting with their cash.

8. Be Sure You Get the Company's Performance Track Record

Get as much information as possible about the firm's or individual's performance record on behalf of other clients. You should be aware, however, that It may be difficult or impossible to do so, or to verify the information you receive. While firms and individuals are not required to provide this information, you should be wary of any person who is not willing to do so or who provides you with incomplete information. However, keep in mind, even if you do receive a glossy brochure or sophisticated-looking charts, that the information they contain might be false.

9. Don't Deal With Anyone Who Won't Give You Their Background

Plan to do a lot of checking of any information you receive to be sure that the company is and does exactly what it says.

Get the background of the persons running or promoting the company, if possible. Do not rely solely on oral statements or promises from the firm's employees. Ask for all information in written form.

If you cannot satisfy yourself that the persons with whom you are dealing are completely legitimate and above-board, the wisest course of action is to avoid trading foreign currencies through those companies.

The use of high leverage

By offering high leverage, the market maker encourages traders to trade extremely large positions. This increases the trading volume cleared by the market maker and increases his profits, but increases the risk that the trader will receive a margin call. While professional currency dealers (banks, hedge funds) never use more than 10:1 leverage, retail clients are generally offered leverage between 50:1 and 200:1, and even up to 400:1.

Fraud

In the broadest sense, a fraud is a deception made for personal gain. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and is also a civil law violation. Many hoaxes are fraudulent, although those not made for personal gain are not technically frauds. Defrauding people of money is presumably the most common type of fraud, but there have also been many fraudulent "discoveries" in art, archaeology, and science.

Definition

In criminal law, fraud is the crime or offense of deliberately deceiving another in order to damage them – usually, to obtain property or services unjustly. [1] Fraud can be accomplished through the aid of forged objects. In the criminal law of common law jurisdictions it may be called "theft by deception," "larceny by trick," "larceny by fraud and deception" or something similar.

In academia and science, fraud can refer to academic fraud – the falsifying of research findings which is a form of scientific misconduct – and in common use intellectual fraud signifies falsification of a position taken or implied by an author or speaker, within a book, controversy or debate, or an idea deceptively presented to hide known logical weaknesses. Journalistic fraud implies a similar notion, the falsification of journalistic findings.

Fraud can be committed through many methods, including mail, wire, phone, and the internet (computer crime and internet fraud).

Acts which may constitute criminal fraud include:

* bait and switch
* confidence tricks such as the 419 fraud, Spanish Prisoner, and the shell game
* false advertising
* identity theft
* false billing
* forgery of documents or signatures
* taking money which is under your control, but not yours (embezzlement)
* health fraud, selling of products of spurious use, such as quack medicines
* creation of false companies or "long firms"
* false insurance claims
* bankruptcy fraud, is a US federal crime that can lead to criminal prosecution under the charge of theft of the goods or services
* investment frauds, such as Ponzi schemes
* securities frauds such as pump and dump

Fraud, in addition to being a criminal act, is also a type of civil law violation known as a tort. A tort is a civil wrong for which the law provides a remedy. A civil fraud typically involves the act of intentionally making a false representation of a material fact, with the intent to deceive, which is reasonably relied upon by another person to that person's detriment. A "false representation" can take many forms, such as:

* A false statement of fact, known to be false at the time it was made;
* A statement of fact with no reasonable basis to make that statement;
* A promise of future performance made with an intent, at the time the promise was made, not to perform as promised;
* A statement of opinion based on a false statement of fact;
* A statement of opinion that the maker knows to be false; or
* An expression of opinion that is false, made by one claiming or implying to have special knowledge of the subject matter of the opinion. "Special knowledge" in this case means knowledge or information superior to that possessed by the other party, and to which the other party did not have equal access.

In the UK a report concluded that the total costs of fraud and dealing with fraud in the year 2005-2006 was at least 13.9 Billion GBP.

Notable fraudsters

* Frank Abagnale Jr., US impostor who wrote bad checks and falsely represented himself as a qualified member of professions such as airline pilot, doctor, and attorney. The film Catch Me If You Can is based on his life.
* Cassie Chadwick, who pretended to be Andrew Carnegie's daughter to get loans.
* Richard Eaton, an English businessman who was business partners with mobster Paul Vario and Jimmy Burke and was involved in the Lufthansa heist.
* Shinichi Fujimura, Japanese archaeologist who announced on October 23, 2000 that he had discovered eight stoneware pieces, from a layer of earth, more than 600,000 years old in the Kamitakamori ruins in Tsukidate, Miyagi Prefecture, believed to be the nation's oldest. However, Fujimura confessed that he had buried the stones at the ruins in advance of the excavation.
* Benny Hinn, televangelist
* Konrad Kujau, German fraudster and forger responsible for the "Hitler Diaries".
* Kenneth Lay, the American businessman who built energy company Enron. He was one of the highest paid CEOs in America until he was ousted as Chairman and was convicted of fraud and conspiracy, but his conviction was reversed by the US Appeals Court.
* Nick Leeson, English trader whose unsupervised speculative trading caused the collapse of Barings Bank.
* Colleen McCabe, British headmistress who stole £½ million from her school.
* Gregor MacGregor, Scottish conman who tried to attract investment and settlers for the non-existent country of Poyais.
* Gaston Means, a professional conman during U.S. President Warren G. Harding's administration.
* Michael Milken, "The Junk Bond King".
* Barry Minkow and the ZZZZ Best scam.
* Frederick Emerson Peters, US impersonator who wrote bad checks.
* Charles Ponzi and the Ponzi scheme.
* Peter Popoff, televangelist
* Alves Reis, who forged documents to print 100,000,000 PTE in official escudo banknotes (adjusted for inflation, it would be worth about US$150 million today).
* Christopher Rocancourt, a Rockefeller impersonator who defrauded Hollywood celebrities.
* John Spano, a struggling businessman who faked massive success in an attempt to buy out the New York Islanders of the NHL.
* John Stonehouse, the last Postmaster-General of the UK and MP who faked his death.
* Richard Whitney, who stole from the New York Stock Exchange Gratuity Fund in the 1930s.
* James Paul Lewis, Jr., ran one of the biggest ($311 million) and longest running Ponzi Schemes (20 years) in US history.

Electronic Commerce (e-commerce)

2007-06-27T20:54:00.000-07:00

Electronic Commerce is exactly analogous to a marketplace on the Internet. Electronic Commerce (also referred to as EC, e-commerce eCommerce or ecommerce) consists primarily of the distributing, buying, selling, marketing and servicing of products or services over electronic systems such as the Internet and other computer networks. The information technology industry might see it as an electronic business application aimed at commercial transactions; in this context, it can involve electronic funds transfer, supply chain management, e-marketing, online marketing, online transaction processing, electronic data interchange (EDI), automated inventory management systems, and automated data collection systems. Electronic commerce typically uses electronic communications technology of the World Wide Web, at some point in the transaction's lifecycle, although of course electronic commerce frequently depends on computer technologies other than the World Wide Web, such as databases, and e-mail, and on other non-computer technologies, such as transportation for physical goods sold via e-commerce.

E-Commerce according to Person Halls book E-Commerce started in 1994 with the first banner ad being placed on a website.

According to the October 2006 Forrester Research report entitled, "US eCommerce: Five-Year Forecast And Data Overview, "Nontravel online retail revenues will top the quarter-trillion-dollar mark by 2011. The driver of this growth? A segment of the most active Web shopping households that is approximately 8 million strong. This group of consumers is extremely comfortable with technology and values convenience above all else in the online retail experience. As retailers begin to wade through their copious data warehouses and understand the who, what, when, where, why, and how of this segment, they will benefit from targeting these customers.

Historical development

The meaning of the term "electronic commerce" has changed over the last 30 years. Originally, "electronic commerce" meant the facilitation of commercial transactions electronically, usually using technology like Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT), where both were introduced in the late 1970s, for example, to send commercial documents like purchase orders or invoices electronically.

The 'electronic' or 'e' in e-commerce refers to the technology/systems; the 'commerce' refers to be traditional business models. E-commerce is the complete set of processes that support commercial business activities on a network. In the 1970s and 1980s, this would also have involved information analysis. The growth and acceptance of credit cards, automated teller machines (ATM) and telephone banking in the 1980s were also forms of e-commerce. However, from the 1990s onwards, this would include enterprise resource planning systems (ERP), data mining and data warehousing.

In the dot com era, it came to include activities more precisely termed "Web commerce" -- the purchase of goods and services over the World Wide Web, usually with secure connections (HTTPS, a special server protocol that encrypts confidential ordering data for customer protection) with e-shopping carts and with electronic payment services, like credit card payment authorizations.

Today, it encompasses a very wide range of business activities and processes, from e-banking to offshore manufacturing to e-logistics. The ever growing dependence of modern industries on electronically enabled business processes gave impetus to the growth and development of supporting systems, including backend systems, applications and middleware. Examples are broadband and fibre-optic networks, supply-chain management software, customer relationship management software, inventory control systems and financial accounting software.

When the Web first became well-known among the general public in 1994, many journalists and pundits forecast that e-commerce would soon become a major economic sector. However, it took about four years for security protocols (like HTTPS) to become sufficiently developed and widely deployed. Subsequently, between 1998 and 2000, a substantial number of businesses in the United States and Western Europe developed rudimentary web sites.

Although a large number of "pure e-commerce" companies disappeared during the dot-com collapse in 2000 and 2001, many "brick-and-mortar" retailers recognized that such companies had identified valuable niche markets and began to add e-commerce capabilities to their Web sites. For example, after the collapse of online grocer Webvan, two traditional supermarket chains, Albertsons and Safeway, both started e-commerce subsidiaries through which consumers could order groceries online.

The emergence of e-commerce also significantly lowered barriers to entry in the selling of many types of goods; accordingly many small home-based proprietors are able to use the internet to sell goods. Often, small sellers use online auction sites such as EBay, or sell via large corporate websites like Amazon.com, in order to take advantage of the exposure and setup convenience of such sites.

Success factors in e-commerce

In many cases, an e-commerce company will survive not only based on its product, but by having a competent management team, good post-sales services, well-organized business structure, network infrastructure and a secured, well-designed website. A company that wants to succeed will have to perform 2 things: Technical and organizational aspects and customer-oriented. Following factors will make business of companies succeed in e-commerce:

Technical and organizational aspects

1. Sufficient work done in market research and analysis. E-commerce is not exempt from good business planning and the fundamental laws of supply and demand. Business failure is as much a reality in e-commerce as in any other form of business.
2. A good management team armed with information technology strategy. A company's IT strategy should be a part of the business re-design process.
3. Providing an easy and secured way for customers to effect transactions. Credit cards are the most popular means of sending payments on the internet, accounting for 90% of online purchases. In the past, card numbers were transferred securely between the customer and merchant through independent payment gateways. Such independent payment gateways are still used by most small and home businesses. Most merchants today process credit card transactions on site through arrangements made with commercial banks or credit cards companies.
4. Providing reliability and security. Parallel servers, hardware redundancy, fail-safe technology, information encryption, and firewalls can enhance this requirement.
5. Providing a 360-degree view of the customer relationship, defined as ensuring that all employees, suppliers, and partners have a complete view, and the same view, of the customer. However, customers may not appreciate the big brother experience.
6. Constructing a commercially sound business model.
7. Engineering an electronic value chain in which one focuses on a "limited" number of core competencies -- the opposite of a one-stop shop. (Electronic stores can appear either specialist or generalist if properly programmed.)
8. Operating on or near the cutting edge of technology and staying there as technology changes (but remembering that the fundamentals of commerce remain indifferent to technology).
9. Setting up an organization of sufficient alertness and agility to respond quickly to any changes in the economic, social and physical environment.
10. Providing an attractive website. The tasteful use of colour, graphics, animation, photographs, fonts, and white-space percentage may aid success in this respect.
11. Streamlining business processes, possibly through re-engineering and information technologies.
12. Providing complete understanding of the products or services offered, which not only includes complete product information, but also sound advisors and selectors.

Naturally, the e-commerce vendor must also perform such mundane tasks as being truthful about its product and its availability, shipping reliably, and handling complaints promptly and effectively. A unique property of the Internet environment is that individual customers have access to far more information about the seller than they would find in a brick-and-mortar situation. (Of course, customers can, and occasionally do, research a brick-and-mortar store online before visiting it, so this distinction does not hold water in every case.)

Customer-Oriented

A successful e-commerce organization must also provide an enjoyable and rewarding experience to its customers. Many factors go into making this possible. Such factors include:

1. Providing value to customers. Vendors can achieve this by offering a product or product-line that attracts potential customers at a competitive price, as in non-electronic commerce.
2. Providing service and performance. Offering a responsive, user-friendly purchasing experience, just like a flesh-and-blood retailer, may go some way to achieving these goals.
3. Providing an incentive for customers to buy and to return. Sales promotions to this end can involve coupons, special offers, and discounts. Cross-linked websites and advertising affiliate programs can also help.
4. Providing personal attention. Personalized web sites, purchase suggestions, and personalized special offers may go some of the way to substituting for the face-to-face human interaction found at a traditional point of sale.
5. Providing a sense of community. Chat rooms, discussion boards, soliciting customer input and loyalty programs (sometimes called affinity programs) can help in this respect.
6. Owning the customer's total experience. E-tailers foster this by treating any contacts with a customer as part of a total experience, an experience that becomes synonymous with the brand.
7. Letting customers help themselves. Provision of a self-serve site, easy to use without assistance, can help in this respect. This implies that all product information is available, cross-sell information, advise for product alternatives, and supplies & accessory selectors.
8. Helping customers do their job of consuming. E-tailers and online shopping directories can provide such help through ample comparative information and good search facilities. Provision of component information and safety-and-health comments may assist e-tailers to define the customers' job.

Problems

Even if a provider of E-commerce goods and services rigorously follows these "key factors" to devise an exemplary e-commerce strategy, problems can still arise. Sources of such problems include:

1. Failure to understand customers, why they buy and how they buy. Even a product with a sound value proposition can fail if producers and retailers do not understand customer habits, expectations, and motivations. E-commerce could potentially mitigate this potential problem with proactive and focused marketing research, just as traditional retailers may do.
2. Failure to consider the competitive situation. One may have the will to construct a viable book e-tailing business model, but lack the capability to compete with Amazon.com.
3. Inability to predict environmental reaction. What will competitors do? Will they introduce competitive brands or competitive web sites? Will they supplement their service offerings? Will they try to sabotage a competitor's site? Will price wars break out? What will the government do? Research into competitors, industries and markets may mitigate some consequences here, just as in non-electronic commerce.
4. Over-estimation of resource competence. Can staff, hardware, software, and processes handle the proposed strategy? Have e-tailers failed to develop employee and management skills? These issues may call for thorough resource planning and employee training.
5. Failure to coordinate. If existing reporting and control relationships do not suffice, one can move towards a flat, accountable, and flexible organizational structure, which may or may not aid coordination.
6. Failure to obtain senior management commitment. This often results in a failure to gain sufficient corporate resources to accomplish a task. It may help to get top management involved right from the start.
7. Failure to obtain employee commitment. If planners do not explain their strategy well to employees, or fail to give employees the whole picture, then training and setting up incentives for workers to embrace the strategy may assist.
8. Under-estimation of time requirements. Setting up an e-commerce venture can take considerable time and money, and failure to understand the timing and sequencing of tasks can lead to significant cost overruns. Basic project planning, critical path, critical chain, or PERT analysis may mitigate such failings. Profitability may have to wait for the achievement of market share.
9. Failure to follow a plan. Poor follow-through after the initial planning, and insufficient tracking of progress against a plan can result in problems. One may mitigate such problems with standard tools: benchmarking, milestones, variance tracking, and penalties and rewards for variances.
10. Becoming the victim of organized crime. Many syndicates have caught on to the potential of the Internet as a new revenue stream. Two main methods are as follows: (1) Using identity theft techniques like phishing to order expensive goods and bill them to some innocent person, then liquidating the goods for quick cash; (2) Extortion by using a network of compromised "zombie" computers to engage in distributed denial of service attacks against the target Web site until it starts paying protection money.
11. Failure to expect the unexpected. Too often new businesses do not take into account the amount of time, money or resources needed to complete a project and often find themselves without the necessary components to become successful.

Product suitability

Certain products or services appear more suitable for online sales; others remain more suitable for offline sales. While credit cards are currently the most popular means of paying for online goods and services, alternative online payments will account for 26% of e-commerce volume by 2009 according to Celent.[2]

Many successful purely virtual companies deal with digital products, (including information storage, retrieval, and modification), music, movies, office supplies, education, communication, software, photography, and financial transactions. Examples of this type of company include: Google, eBay and Paypal. Other successful marketers such as use Drop shipping or Affiliate marketing techniques to facilitate transactions of tangible goods without maintaining real inventory. Examples include numerous sellers on eBay.

Virtual marketers can sell some non-digital products and services successfully. Such products generally have a high value-to-weight ratio, they may involve embarrassing purchases, they may typically go to people in remote locations, and they may have shut-ins as their typical purchasers. Items which can fit through a standard letterbox — such as music CDs, DVDs and books — are particularly suitable for a virtual marketer, and indeed Amazon.com, one of the few enduring dot-com companies, has historically concentrated on this field.

Products such as spare parts, both for consumer items like washing machines and for industrial equipment like centrifugal pumps, also seem good candidates for selling online. Retailers often need to order spare parts specially, since they typically do not stock them at consumer outlets -- in such cases, e-commerce solutions in spares do not compete with retail stores, only with other ordering systems. A factor for success in this niche can consist of providing customers with exact, reliable information about which part number their particular version of a product needs, for example by providing parts lists keyed by serial number.

Purchases of pornography and of other sex-related products and services fulfill the requirements of both virtuality (or if non-virtual, generally high-value) and potential embarrassment; unsurprisingly, provision of such services has become the most profitable segment of e-commerce.[citation needed]

There are also many disadvantages of e-commerce, one of the main ones is fraud. This is where your details (name, bank card number, age, national insurance number) are entered into what look to be a safe site but really it is not. These details can then be used to steal money from you and can be used to buy things on line that you are completely unaware of until it is too late. If this information is leaked into the wrong hands. People are able to steal your identity, and commit more fraud crimes under your name. Finally there are many problems with e commerce some of which are:

Failure to understand customers, why they buy and how they buy. Even a product with a sound value proposition can fail if producers and retailers do not understand customer habits, expectations, and motivations. E-commerce could potentially mitigate this potential problem with proactive and focused marketing research, just as traditional retailers may do. Failure to consider the competitive situation. One may have the will to construct a viable book e-tailing business model, but lack the capability to compete with Amazon. Inability to predict environmental reaction. What will competitors do? Will they introduce competitive brands or competitive web sites? Will they supplement their service offerings? Will they try to sabotage a competitor's site? Will price wars break out? What will the government do? Research into competitors, industries and markets may mitigate some consequences here, just as in non-electronic commerce. Over-estimation of resource competence. Can staff, hardware, software, and processes handle the proposed strategy? Have e-tailer's failed to develop employee and management skills? These issues may call for thorough resource planning and employee training.

Products less suitable for e-commerce include products that have a low value-to-weight ratio, products that have a smell, taste, or touch component, products that need trial fittings — most notably clothing — and products where colour integrity appears important. Nonetheless, Tesco.com has had success delivering groceries in the UK, albeit that many of its goods are of a generic quality, and clothing sold through the internet is big business in the U.S. Also, the recycling program Cheapcycle sells goods over the internet, but avoids the low value-to-weight ratio problem by creating different groups for various regions, so that shipping costs remain low.

Acceptance

Consumers have accepted the e-commerce business model less readily than its proponents originally expected. Even in product categories suitable for e-commerce, electronic shopping has developed only slowly. Several reasons might account for the slow uptake, including:

* Concerns about security. Many people will not use credit cards over the Internet due to concerns about theft and credit card fraud.
* Lack of instant gratification with most e-purchases (non-digital purchases). Much of a consumer's reward for purchasing a product lies in the instant gratification of using and displaying that product. This reward does not exist when one's purchase does not arrive for days or weeks.
* The problem of access to web commerce, mainly for poor households and for developing countries. Low penetration rates of Internet access in some sectors greatly reduces the potential for e-commerce.
* The social aspect of shopping. Some people enjoy talking to sales staff, to other shoppers, or to their cohorts: this social reward side of retail therapy does not exist to the same extent in online shopping.
* Poorly designed, bug-infested e-Commerce web sites that frustrate online shoppers and drive them away.
* Inconsistent return policies among e-tailers or difficulties in exchange/return.

Dot-com bubble

2007-06-27T20:21:00.000-07:00

Dot-com bubble

The "dot-com boom" was a speculative bubble covering roughly 1995–2001 during which stock markets in Western nations saw their value increase rapidly from growth in the new Internet sector and related fields. The period was marked by the founding (and in many cases, spectacular failure) of a group of new Internet-based companies commonly referred to as dot-coms. A combination of rapidly increasing stock prices, individual speculation in stocks, and widely available venture capital created an exuberant environment in which many of these businesses dismissed standard business models, focusing on increasing market share at the expense of the bottom line. The bursting of the dot-com bubble marked the beginning of a relatively mild yet rather lengthy early 2000s recession in the developed world.

The bubble builds

The venture capitalists saw record-setting rises in stock valuation of these and other similar companies, and therefore moved faster and with less caution than usual, choosing to hedge the risk by starting many contenders and letting the market decide which would succeed. The low interest rates in 1998–99 helped increase the start-up capital amounts. Although a number of these new entrepreneurs had realistic plans and administrative ability, most of them lacked these characteristics but were able to sell their ideas to investors because of the novelty of the dot-com concept.

A canonical "dot-com" company's business model relied on harnessing network effects by operating at a sustained net loss to build market share (or mind share). These companies expected that they could build enough brand awareness to charge profitable rates for their services later. The motto "get big fast" reflected this strategy.[1] During the loss period the companies relied on venture capital and especially initial public offerings of stock to pay their expenses. The novelty of these stocks, combined with the difficulty of valuing the companies, sent many stocks to dizzying heights and made the initial controllers of the company wildly rich on paper.

An annual event started in 1995, the Webby Awards, working to recognize the best websites on the Internet. The event was typically an extravaganza held annually in San Francisco, California, near the heart of Silicon Valley. The ceremonies mirrored the flashy dot-com lifestyle with costumed guests, modern dancers, and faux-paparazzi to make guests feel important. The event peaked in 2001 with thousands in attendance. In 2002 it was a more somber event with only several hundred guests and little of the excess of the late 1990s. In 2003 the awards were reduced to a virtual event because many of the nominees could not fly to San Francisco due primarily to corporate belt-tightening and fear of losing their jobs. The 2005 and 2006 editions were held in New York City.

Historically, the dot-com boom can be seen as similar to a number of other technology-inspired booms of the past including railroads in the 1840s, automobiles and radio in the 1920s, transistor electronics in the 1950s, computer time-sharing in the 1960s, and home computers and biotechnology in the early 1980s.

Soaring stocks

In financial markets a stock market bubble is a self-perpetuating rise or boom in the share prices of stocks of a particular industry. The term may be used with certainty only in retrospect when share prices have since crashed. A bubble occurs when speculators note the fast increase in value and decide to buy in anticipation of further rises, rather than because the shares are undervalued. Typically many companies thus become grossly overvalued. When the bubble "bursts", the share prices fall dramatically, and many companies go out of business.

The late 1990s boom in technology dot-com company stocks is a good example of a bubble, which burst in the Spring of 2000 and through 2001 .

The dot-com model was inherently flawed: a vast number of companies all had the same business plan of monopolizing their respective sectors through network effects, and it was clear that even if the plan was sound, there could only be at most one network-effects winner in each sector, and therefore that most companies with this business plan would fail. In fact, many sectors could not support even one company powered entirely by network effects.[citation needed]

In spite of this, a few company founders made vast fortunes when their companies were bought out at an early stage in the dot-com stock market bubble. These early successes made the bubble even more buoyant. An unprecedented amount of personal investing occurred during the boom. Stories of people quitting their jobs to become full-time day traders, while not representative, were common in the press.

Free spending
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According to dot-com theory, an internet company's survival depended on expanding its customer base as rapidly as possible, even if it produced large annual losses. The phrase "Get large or get lost" was the wisdom of the day. At the height of the boom, it was possible for a promising dot-com to make an initial public offering (IPO) of its stock and raise a substantial amount of money even though it had never made a profit - or, in some cases, even any revenues. In such a situation, a company's lifespan was measured by its burn rate; that is, the rate at which a non-profitable company lacking a viable business model runs through its capital served as the measuring stick.

Public awareness campaigns were one way that dot-coms sought to grow their customer base. These included television ads, print ads, and targeting of professional sporting events. Many dot-coms named themselves with onomatopoeic nonsense words that they hoped would be memorable and not easily confused with a competitor. Super Bowl XXXIV in January 2000 featured seventeen dot-com companies that each paid over $2 million for a 30-second spot. By contrast, in January 2001, just three dot-coms bought advertising spots during Super Bowl XXXV. In a similar vein, CBS-backed iWon.com gave away $10 million to a lucky contestant on an April 15, 2000, 30-minute primetime special that aired on CBS.

Not surprisingly, the "growth over profits" mentality and the aura of "new economy" invincibility led some companies to engage in lavish internal spending, such as elaborate business facilities and luxury vacations for employees. Executives and employees who were paid with stock options in lieu of cash became instant millionaires when the company made its initial public offering; many invested their new wealth into yet more dot-coms.

Cities all over the United States sought to become the "next Silicon Valley" by building network-enabled office space to attract internet entrepreneurs. Communication providers, convinced that the future economy would require ubiquitous broadband access, went deeply into debt to improve their networks with high-speed equipment and fiber optic cables. Companies that produced network equipment, such as Cisco Systems, profited greatly from these projects.

Similarly, in Europe the vast amounts of cash the mobile operators spent on 3G-licences in Germany, Italy, and the United Kingdom, for example, led them into deep debt. The investments were blown out of proportion regardless of whether seen in the context of their current or projected future cash flow, but this fact was not publicly acknowledged until as late as 2001 and 2002 . Due to the highly networked nature of the IT (information-technology) industry, this quickly led to problems for small companies dependent on contracts from operators.

Thinning the herd
The technology-heavy NASDAQ Composite index peaked in March 2000, reflecting the high point of the dot-com bubble.
The technology-heavy NASDAQ Composite index peaked in March 2000, reflecting the high point of the dot-com bubble.

Over 1999 and early 2000, the Federal Reserve had increased interest rates six times, and the runaway economy was beginning to lose speed. The dot-com bubble burst, numerically, on March 10, 2000, when the technology heavy NASDAQ Composite index [1] peaked at 5,048.62 (intra-day peak 5,132.52), more than double its value just a year before. The NASDAQ fell slightly after that, but this was attributed to correction by most market analysts; the actual reversal and subsequent bear market may have been triggered by the adverse findings of fact in the United States v. Microsoft case which was being heard in federal court. The findings, which declared Microsoft a monopoly, were widely expected in the weeks before their release on April 3.

One possible cause for the collapse of the NASDAQ (and all dotcoms) were massive, multi-billion dollar sell orders for major bellwether high tech stocks (Cisco, IBM, Dell, etc.) that happened by chance to be processed simultaneously on the Monday morning following the March 10th weekend. This selling resulted in the NASDAQ opening roughly four percentage points lower on Monday March 13 from 5038 to 4,879-the greatest percentage 'pre-market' selloff for the entire year.

The massive initial batch of sell orders processed on Monday, March 13 triggered a chain reaction of selling that fed on itself as investors, funds, and institutions liquidated positions. In just three days the NASDAQ had lost nearly nine percent, falling from roughly 5050 on March 10th to 4580 on March 15th.

Another reason may have been accelerated business spending in preparation for the Y2K switchover. Once New Year had passed without incident, businesses found themselves with all the equipment they needed for some time, and business spending quickly declined. This correlates quite closely to the peak of U.S. stock markets. The Dow Jones peaked on January 14, 2000 (closed at 11,722.98, with an intra-day peak of 11,750.28 and theoretical peak of 11,908.50)[2] and the broader S&P 500 on March 24, 2000 (closed at 1,527.46, with an intra-day peak of 1,553.11)[3]; while, even more dramatically the UK's FTSE 100 Index peaked at 6,950.60 on the last day of trading in 1999 (December 30). Hiring freezes, layoffs, and consolidations followed in several industries, especially in the dot-com sector.

The bursting of the bubble may also have been related to the poor results of internet retailers following the 1999 Christmas season. This was the first unequivocal and public evidence that the "Get Big Fast" internet strategy was flawed for most companies. These retailers' results were made public in March when annual and quarterly reports of public firms were released.

By 2001 the bubble's deflation was running full speed. A majority of the dot-coms ceased trading after burning through their venture capital, often without ever making a net profit. Investors often jokingly referred to these failed dot-coms as either "dot-bombs" or "dot-compost".

[edit] Aftermath

On January 11, 2000, America Online, a favorite of dot-com investors and pioneer of dial-up internet access, acquired Time Warner, the world's largest media company. Within two years, boardroom disagreements drove out both of the CEOs who made the deal, and in October 2003 AOL Time Warner dropped "AOL" from its name. The acquisition thus became a symbol of the dot-coms' challenge to "old economy" companies and the old economy's ultimate survival. The revolutionary optimism of the boom faded, and analysts once again recognized the relevance of traditional business thinking.

Several communication companies, burdened with unredeemable debts from their expansion projects, sold their assets for cash or filed for bankruptcy. WorldCom, the largest of these, was found to have used accounting tricks to overstate its profits by billions of dollars. The company's stock crashed when these irregularities were revealed, and within days it filed the largest corporate bankruptcy in U.S. history. Other examples include NorthPoint Communications, Global Crossing, JDS Uniphase, XO Communications, and Covad Communications. Demand for the new high-speed infrastructure never materialized, and it became dark fiber. Some analysts believe that there is so much dark fiber worldwide that only a small percentage of it will be "lit" in the decades to come.

Many dot-coms ran out of capital and were acquired or liquidated; the domain names were picked up by old-economy competitors or domain name investors. Several companies and their executives were accused or convicted of fraud for misusing shareholders' money, and the U.S. Securities and Exchange Commission fined top investment firms like Citigroup and Merrill Lynch millions of dollars for misleading investors. Various supporting industries, such as advertising and shipping, scaled back their operations as demand for their services fell. A few large dot-com companies, such as Amazon.com and eBay, survived the turmoil and appear to have a good chance of long-term survival.

Recent research suggests, however, that as much as 50% of dot-coms survived through 2004, reflecting two facts: the destruction of public market wealth did not necessarily correspond to firm closings, and second, that most of the dot-coms were small players who were able to weather the financial markets storm.

Nevertheless, laid-off technology experts, such as computer programmers, found a glutted job market. International outsourcing and the recently allowed increase of skilled visa "guest workers" (e.g., those participating in the U.S. H-1B visa program) exacerbated the situation. University degree programs for computer-related careers saw a noticeable drop in new students. Anecdotes of unemployed programmers going back to school to become accountants or lawyers were common.

Some believe the crash of the dot-com bubble contributed to the housing bubble in the U.S. Yale economist Robert Shiller said in 2005, "Once stocks fell, real estate became the primary outlet for the speculative frenzy that the stock market had unleashed. Where else could plungers apply their newly acquired trading talents? The materialistic display of the big house also has become a salve to bruised egos of disappointed stock investors. These days, the only thing that comes close to real estate as a national obsession is poker" (from Barron's Magazine's article "The Bubble's New Home", 20 June 2005).

In September 2005, The Economist referred to discussion of "Web 2.0", accompanied by rumors that Microsoft was considering buying America Online (AOL), as "Bubble 2.0".[4]

In 2006, some speculated that a new dot-com bubble might be at hand, citing the acquisition of Intermix Media (owner of MySpace) by News Corporation, Skype by eBay and YouTube by Google as well as the possible acquisition of Facebook by Yahoo.

Pay to surf

2007-06-27T20:13:00.000-07:00

Pay to surf is a business model that became popular in the late 1990s, prior to the dot-com crash. It is a type of Get-Paid-To website. Essentially, a company places advertising on members' screens and pays them from advertising earnings.

A pay-to-surf company would provide a small program, commonly called a "viewbar", to be installed on a member's computer. Advertisers' banner ads were then displayed while the member was browsing the web. Since the viewbar tracked websites that the user visited, the pay-to-surf company was able to deliver targeted ads for their advertisers. Advertisers paid the pay-to-surf company a small amount (typically US$0.50) for every hour of a member's surfing.

Members were usually limited on the amount of time per month for which they would be paid to surf (typically 20 hours). However, pay-to-surf companies also paid their members for each new user referred to the company (typically US$0.05 - US$0.10 per recruit). Thus, it was profitable for a member to garner as many referrals as possible, encouraging some users to recruit members using spam, though officially forbidden by the user's agreement.

The first and most well-known pay-to-surf company was AllAdvantage. It launched in March 1999 and grew to 13 million members in little over a year with the multi-level marketing system of recruiting new members. The scheme capitalized on the notion that anyone could make money on the internet without much effort.

AllAdvantage’s success attracted many imitators. At its peak, there were several dozen pay-to-surf companies. AllAdvantage had US$175 million in venture capital; its imitators did not and thus their members were never more than a small fraction of AllAdvantage's.

Most pay-to-surf companies disappeared just as quickly as they appeared after the dot-com crash. This is not surprising since 100% of the revenue came from internet advertising, which was the area hardest hit. After 18 months, even AllAdvantage ceased operations. At that point, AllAdvantage had paid out over US$120 million to its members. Many members of smaller pay-to-surf companies were never paid when the companies shut down.

As with many Internet business models, pay-to-surf companies attracted people trying to defraud the company out of money. First, as noted above, the companies had to deal with spammers, often having to terminate member accounts. They were also required to get parental permission from members under the age of 18, many of whom flocked to these programs as an easy source of income. Finally, utilities started appearing which allowed users to simulate surfing activity. Some users even created mechanical mouse-moving devices which ran around their desks. These programs and devices allowed users to get paid simply for leaving their machines on. This began an arms race between the pay-to-surf companies who built fraud-prevention software and fraud program developers, with each releasing increasingly sophisticated versions of their software.

Autosurf

2007-06-26T20:09:00.000-07:00

Autosurf

An autosurf is a type of Pyramid scheme. Autosurfs are traffic exchanges that automatically rotate advertised websites in one's Internet browser. Therefore, they are capable of bringing a large amount of traffic to the advertised websites. Members earn credits for each site that they view, which can then be spent to advertise members' sites by adding them to the autosurf rotation. Sites may additionally be added by external advertisers who pay the autosurf operators.

Concept

Autosurfing is a unique form of advertising: normally, advertisers pay intermediaries to display advertising to their target audience, and the advertising is presented to the audience in places where they are likely to see it, such as in public places, or packaged with entertainment. In this sense, no money changes hands between the audience and the advertiser.

In comparison, autosurfers are paid to view pure advertising (that is, advertisers' websites) for a certain amount of time (usually, less than 30 seconds). Interested viewers can pause the surf timer or open any site in a new window, giving themselves more time to peruse an ad. If the viewer is not interested and does nothing, the surf timer will restart after the specified period of time and a new site will be loaded into the browser. The surf rotation requires no feedbacks of any kind; in contrast to manual surfs, paid to read email or paid to click sites.

Autosurfing allows members to promote websites of their own choice, according to a system of credits earned by surfing. Members usually earn credits in a fixed ratio to the number of sites they view. Member-promoted websites may or may not be their own websites. If not, they are most often the members' referral page at another autosurf or an online money-making program. This is because many autosurfs are structured as pyramid schemes: members may earn a commission for each site that their referrals view, and are therefore encouraged to build a downline.

As autosurfs are run from websites, online payment processors are used for members to upgrade and withdraw their profits. The most popular form of e-currency used is e-gold or e-bullion. StormPay was a very popular payment processor until February 2006 but has now converted to an auction site.

"Investment" Autosurfs

A large number of autosurfs are investment autosurfs: to earn money surfing, members must pay a fee and are then promised a certain return on their fee. The "investment" is claimed to be a membership or upgraded membership fee and the "return", a per-site commission.

In the case of investment autosurfs, members either pay a fee to join and/or to upgrade their account level. This fee can usually vary from a few cents to thousands of dollars, and the minimum and maximum is set by the site operator. The program then offers a commission based on the member's account level for viewing a minimum number of sites, for example, for a period of X days, every day that the member views Y sites, Z% of the upgrade fee will be credited and can be withdrawn from the site. The product of Z% and X is always over 100% to ensure that the member makes a profit. Members also have even more incentive to build a downline because further commissions are received based on the amount of money that referred members put in or earn.

The investment autosurf concept is against PayPal's Acceptable Use Policy[1]. Historically, Paypal has blocked most autosurf programs' accounts.

Controversy

A large amount of controversy is concentrated over whether autosurfs are inherently structured as Ponzi schemes. Traffic-only autosurfs that involve no monetary transactions can also be Ponzis if more credits are earned than page views available; older members are promised a certain number of website hits which can only be fulfilled by newer members joining. Due to the precedent set by 12 Daily, there is a strong possibility that most investment autosurfs are Ponzi schemes, and thus breaking the law and/or deceiving their users; whereas paid to surf sites usually had a viable business model where advertisers pay for the site to be viewed but not earn money in return.

On the other hand, autosurfs which require an investment and promise to pay a profit must, to not be a Ponzi, have other sources of income which can yield the high percentages they offer. Therefore, they often come under attack for failing to reveal their income sources or not registering with the proper authorities as a legitimate investment company. Ponzi schemes will end when no new investors are found, and it follows that autosurf sites have rather short lifespans, existing from one week to a few years depending on the popularity and "investment plans" offered. Additionally, if one pays a fee to join and receives commission for viewing ads, it makes no sense that those who "invest" a higher amount are paid a higher amount for viewing the same number of sites a day.

12DailyPro

12DailyPro was one of the largest autosurfs in 2005. Promising a return of 12% daily for 12 days, funds invested went into the millions. In February of 2006, autosurfs reached the United States national news when funds of members of 12DailyPro were frozen by payment processor StormPay [2].

Rather than focus entirely on StormPay, news organizations such as ABC4 (Utah) and WTOC (Georgia) investigated the autosurf itself. In a statement released by the Georgia Government Consumer Protection Agency titled "Pyramid Schemes Never Die; Just Evolve", 12DailyPro was closely scrutinized. Media calls to 12DailyPro owner Charis Johnson went unanswered.

Later in February, 12DailyPro was given a cease and desist order by the SEC, who claimed that 95% of the program's funds came from new members. On February 28, the SEC filed a proposed stipulation, agreed to by the attorney for Charis Johnson, LifeClicks, and 12DailyPro, that these parties would turn over all assets and records to a permanent legal receiver.

2006-Present

After the demise of 12DailyPro, many other autosurfs collapsed as well; this is widely assumed to be because they invested member funds into 12DailyPro, causing a domino effect. Subsequently, autosurfs have become less popular and are more widely believed to be ponzi schemes. However, many still autosurf, either refusing to accept that they are ponzi structured, or knowingly using this to profit (through attracting new investors to prolong the life of the program). Also, some autosurfs have begun to focus on the advertising side of their business model, by, for example, converting to manual surf or by paying members bonuses that are not dependent upon the advertising fee. They have introduced disclaimers on their sites saying that purchases are solely for advertising, earnings are payments for viewing advertising and that there is no guarantee of earnings. However, disclaimers do not override the law and thus do not legalize an otherwise fraudulent program.

Money invested in 12DailyPro is currently being held by a court-ordered payment receiver

PayPal history

2007-06-26T20:01:00.000-07:00

PayPal is an e-commerce business allowing payments and money transfers to be made through the Internet. It serves as an electronic alternative to traditional paper methods such as cheques and money orders. PayPal performs payment processing for online vendors, auction sites, and other corporate users, for which it charges a fee. On 3 October 2002, PayPal became a wholly owned subsidiary of eBay.[1] Their corporate headquarters are in San Jose, California, at eBay's North First Street satellite office campus. The company also has significant operations in Omaha, Nebraska; Dublin, Ireland; and Berlin, Germany.

History

Beginnings

PayPal, Inc., as it is known today, is the result of a March 2000 merger between Confinity and X.com.[3] Confinity was founded in December of 1998 by Max Levchin, Peter Thiel, and Luke Nosek, initially as a Palm Pilot payments and cryptography company.[4]Both Confinity and X.com launched their websites in late 1999. X.com was founded by Elon Musk in March of 1999, initially as an Internet financial services company. Both companies were located on University Avenue in Palo Alto. Confinity's website was initially focused on reconciling beamed payments from Palm Pilots [5] with email payments as a feature and X.com's website initially included financial services with email payments as a feature.

At Confinity, many of the initial recruits were alumni of The Stanford Review, also founded by Peter Thiel, and most early engineers hailed from the University of Illinois at Urbana-Champaign, recruited by Max Levchin. On the X.com side, Elon Musk recruited a wide range of technical and business personnel, including many that were critical to the combined company's success, such as Amy Klement, Sal Giambanco, Roelof Botha, Sanjay Bhargava and Jeremy Stoppelman.[6]

To block potentially fraudulent access by automated systems, PayPal devised a system (see CAPTCHA) of making the user enter numbers from a blurry picture, which they coined the Gausebeck-Levchin test; according to Eric M. Jackson, author of the book The PayPal Wars, PayPal invented this system now in common use; though, there is evidence AltaVista used a captcha as early as 1997, before PayPal existed. The neutrality of The PayPal Wars, which was self-published by Eric Jackson through his company World Ahead Publishing, funded in part by Peter Thiel, is disputed.[7]

eBay watched the rise in volume of online payments, and realized its fit with online auctions. eBay purchased Billpoint in May 1999, prior to the existence of Paypal. eBay made Billpoint the official payment system of eBay, dubbing it "eBay Payments", but cut the functionality of Billpoint by narrowing it to only payments made for eBay auctions.

For this reason PayPal was listed in several times as many auctions as Billpoint. In February of 2000 there were approximately an average of 200,000 daily auctions advertising the PayPal service while Billpoint (in beta) had only 4,000 auctions. By April of 2000 there were more than 1,000,000 auctions promoting the PayPal service. PayPal was able to turn the corner and become the first dot-com to IPO after the September 11 attacks.

Acquisition by eBay

In October 2002 PayPal was acquired by eBay. PayPal had previously been the payment method of choice by more than fifty percent of eBay users, and the service competed with eBay’s subsidiary Billpoint. eBay has since phased out its Billpoint service in favor of retaining the PayPal brand. Most of PayPal’s major competitors have shut down or have been sold; Citibank’s c2it service closed in late 2003, and Yahoo!'s PayDirect service closed in late 2004. Western Union announced the December 2005 shut down of their BidPay service, but subsequently sold it in 2006 to CyberSource Corporation. Some competitors which offer some of PayPal’s services, such as Wirecard, Moneybookers, 2Checkout, CCNow and Kagi, remain in business.

PayPal’s total payment volume, the total value of transactions in Q4 2006, was $11 billion, up 36% year over year. The company continues to focus on international growth and growth of its Merchant Services division, providing online payments for retailers off eBay.

Business today

As of the end of Q4 2006, PayPal operates in 103 markets (including China) and it manages over 133 million accounts. PayPal allows customers to send, receive and hold funds in 17 currencies worldwide. These currencies are the U.S. Dollar, Canadian Dollar, Australian Dollar, Euro, Pounds Sterling, Japanese Yen, Chinese RMB, Czech Koruna, Danish Krone, Hong Kong Dollar, Hungarian Forint, New Zealand Dollar, Norwegian Krone, Polish Zloty, Singapore Dollar, Swedish Krona, and Swiss Franc. PayPal operates locally in 13 countries.

Residents in 48 new markets can now use PayPal in their local markets to send money online. These new markets include Peru, Indonesia, the Philippines, Croatia, Fiji, Vietnam and Jordan. A complete list can be viewed at https://www.paypal.com/worldwide.

In China PayPal offers two kinds of accounts[1]:

* PayPal.com accounts, for sending and receiving money to/from other PayPal.com accounts. All non-Chinese accounts are PayPal.com accounts, so these accounts may be used to send money internationally.
* PayPal.cn accounts, for sending and receiving money to/from other PayPal.cn accounts.

It is impossible to send money between PayPal.cn accounts and PayPal.com accounts, so PayPal.cn accounts are effectively unable to make international payments. For PayPal.cn, the only supported currency is the Renminbi (RMB, ISO: CNY), whereas PayPal.com supports Canadian Dollar, Euro, Pound Sterling, U.S. Dollar, Australian Dollar, New Zealand Dollar, Swiss Franc, Hong Kong Dollar, Singapore Dollar, Swedish Krona, Danish Krone, Polish Zloty, Norwegian Krone, Hungarian Forint, Czech Koruna.

PayPal’s operation center is located near Omaha, Nebraska and PayPal’s international headquarters is located in Dublin, Ireland. The company also recently opened a technology center in Scottsdale, Arizona.

Legal issues

In March 2002, two PayPal account holders separately sued the company for alleged violations of the Electronic Funds Transfer Act (EFTA) and California law. Most of the allegations concerned PayPal's dispute resolution procedures. The two lawsuits were merged into one class action lawsuit (In re PayPal litigation). An informal settlement was reached in November 2003, and a formal settlement was signed on June 11, 2004. The settlement requires that PayPal change its business practices (including changing its dispute resolution procedures to make them EFTA-compliant), as well as making a $9.25 million payment to members of the class. PayPal denied any wrongdoing.

In August 2002, Craig Comb and others filed a class action against Paypal in Craig Comb, et al. v. PayPal, Inc.. They sued for alleged mishandling of customer accounts and customer services, with regards to Paypal's user agreement. Allegations included the up-to 180 day restriction on deposited funds until disputes are resolved, forcing customers to arbitrate their disputes under the American Arbitration Association's guidelines (a costly procedure), and requiring users to file claims individually, restricting class action suits. The court deemed these actions unconscionable and ruled in favor of Comb.

Accolades

According to PayPal's little-updated "About Us" webpage [2], "PayPal has received close to 20 awards for technical excellence from the internet industry and the business community at large - most recently the 2003 Webby Award for Best Finance Site and the 2003 Webby People's Voice Award for Best Finance Site."

They have won awards since, notably the "Best Finance Services Site" and "People’s Voice Award" at the 2006 Webby Awards.

Bank status

In the United States, PayPal is licensed as a money transmitter on a state-by-state basis. Although PayPal is not a bank, the company is still subject to and adheres to many of the rules and regulations governing the financial industry including Regulation E consumer protections and the USA PATRIOT Act. However, on the 15th May 2007, PayPal announced that it would move its European operations from the UK to Luxembourg commencing 2nd July 2007, as PayPal (Europe) S.à r.l. & Cie, S.C.A. This would be as a Luxembourg entity regulated as a bank by the Commission de Surveillance du Secteur Financier (CSSF), the Luxembourg equivalent of the FSA. PayPal Luxembourg will then provide the PayPal service throughout the EU.

Safety & Protection Policies

The PayPal Buyer Protection Policy[4] claims that customers may file a buyer complaint within 45 days if they did not receive an item or if the item they purchased was significantly not as described. If the buyer used a credit card, they might get a refund via chargeback from their credit card company.

PayPal protects sellers in a limited fashion via the Seller Protection Policy[5]. In general the Seller Protection Policy is intended to protect the seller from certain kinds of chargebacks or complaints if seller meets certain conditions including proof of delivery to the buyer. PayPal states the Seller Protection Policy is "designed to protect sellers against claims by buyers of unauthorised payments and against claims of non-receipt of any merchandise". Note that this contrasts with the consumer protection they claim to offer. This policy should be read carefully before assuming protection. In particular the Seller Protection Policy includes a list of "Exclusions" which itself includes "Intangible goods", "Claims for receipt of goods 'not as described'" and "Total reversals over the annual limit". There are also other restrictions in terms of the sale itself, the payment method and the destination country the item is shipped to (simply having a tracking mechanism is not sufficient to guarantee the Seller Protection Policy is in effect).

The company--by its own admission--uses automated systems to verify tracking numbers. If a seller has an item not received claim filed against them, they are required to enter a tracking number for the item. If they fail to enter a valid tracking number that shows a successful delivery, or even mistype the number by one digit, they will lose the claim automatically without a real person ever adjudicating the claim. In general, if a valid tracking number is entered which can be accessed online and shows a successful delivery, the seller will automatically win the claim.

The item significantly not as described claim is a more complicated matter. In this situation, the buyer has acknowledged the receipt of the item but has found the item to be "significantly not as described." The multi-level process provides an initial period of time for the seller and buyer to attempt to reach an agreement on their own. If the seller does not respond to the initial dispute from the buyer, or if the seller is unable to offer a settlement which is agreeable to the buyer, the buyer then has the option of escalating the dispute to a claim. If seller does not wish to communicate with buyer, the seller also may choose to escalate a dispute to a claim. The escalation from dispute to claim is not automatic; if a dispute is not escalated it will be automatically closed after a certain period of time. By escalating the dispute to a claim, the party is asking a PayPal representative to review the claim and make a settlement decision. In most cases, if the seller has been found to have misrepresented the item in a significant way, the buyer will be required to return the item to the seller at buyer's expense — and provide a tracking number for the return shipment — in order to receive their refund for the transaction. This policy is criticized as being in favor of the fraudulent seller. A seller can exaggerate the condition of his items and the worst that can happen is that he has the item returned. The innocent buyer has to pay return shipping and ends up out of pocket for something that was not his fault. This is in line with criticism of eBay's general policy of putting sales and its own profits above buyer protection against fraudulent sellers (for instance shill bidding).

If the seller has not been found to have misrepresented the item in a significant way, then the buyer's claim will be denied and the buyer will have no further opportunity for claims of any type using Paypal's systems. The only recourse the buyer would possibly have at that point would be through their credit card company (if payment was made using a credit card) or by filing a claim against Paypal through the Better Business Bureau or another similar consumer protection organization.

Security Key

In early 2007 PayPal introduced an optional security key to its users. This adds an additional layer of protection when logging into a PayPal or eBay account. Once a user enters their login ID and password, they are prompted to press a button on the small security key, then enter the six digit number to complete the login process. There is a one-time US $5 charge for this device, with no ongoing fees, however business accounts get them free of charge.

Money Market

In 2000, PayPal began offering its customers the option of investing their funds in a Money Market account managed by Barclays plc. If a user activates it, the balance of their account begins earning monthly dividends. The rate fluctuates daily, but thus far has been around 5%, and this percentage is the same regardless of the account balance.

Funds are not insured by the FDIC. While other online bank accounts like ING Direct, Citi Direct, HSBC Direct, or Emigrant Direct offer comparable or higher percentage yields and are FDIC-insured, one major advantage of the PayPal money market account is the accessibility of it with no long term commitment.

Sandbox

Developers implementing larger PayPal projects will likely want to avoid using real money. PayPal has a "sandbox"[6] version of its website geared towards such developers. PayPal has detailed developer information for all aspects of its API online in PDF form, as well as a developer community and a third party developer market.

Entrepreneurship by former employees

A number of companies have been started and funded by former PayPal employees. This trend prompted the New York Times to publish a story entitled "It Pays to Have Pals in Silicon Valley" that analyzes the connections between several PayPal employees who went on to become influential. [9]

* LinkedIn was founded by Reid Hoffman, a former VP at PayPal.
* Facebook received its first angel investment from Peter Thiel.
* Clarium Capital Management is a hedge fund run by Peter Thiel. Principal partners at Clarium include Ken Howery and Luke Nosek, both of whom were among the earliest employees at PayPal.
* Palantir Technologies was founded by Nathan Gettings, who developed PayPal's anti-fraud models. Palantir received funding from Peter Thiel.
* Slide was founded by Max Levchin, Jared Kopf, and former PayPal board member Scott Banister.
* Yelp was founded by Jeremy Stoppelmann, former VP of Engineering at PayPal, and Russ Simmons, one of the first employees at PayPal. Yelp is funded by Max Levchin.
* YouTube (now owned by Google) was founded by Chad Hurley, Steve Chen, and Jawed Karim, all of whom were early employees at PayPal. YouTube is funded by Sequoia Capital. Roelof Botha, the former CFO of PayPal, is a partner of Sequoia Capital who sits on YouTube's board of directors.
* Room 9 Entertainment, which produced the movie Thank You for Smoking, was founded by David O. Sacks, who founded PayPal's Product Group and later served as Chief Operating Officer (COO).
* Geni.com was also founded by David Sacks.
* SpaceX was founded by Elon Musk, who founded X.com and served as the CEO following its merger with PayPal.
* Fraudwall Technologies is run by Ken Miller, who was VP of Risk Management at PayPal and the architect of PayPal's anti-fraud system.
* Tesla Motors's principal owner and Chairman of the Board is Elon Musk.

Trivia

PayPal is one of the few Internet companies with a single letter domain name in use (http://www.x.com) since early 1998.

A High Yield Investment Program, or HYIP,

2007-06-26T07:52:00.000-07:00

A High Yield Investment Program, or HYIP, is a type of pyramid scheme normally offered via the Internet. HYIPs typically accept deposits as low as $1 while promising astoundingly high returns..

Online HYIP schemes rarely last for the long term. Overwhelming number of cases suggest that HYIPs are Ponzi schemes, in which new investors provide the cash to pay a profit to existing investors, which they typically then withdraw.[citation needed] This approach allows the scam to continue as long as new investors are found and/or old investors leave their money in the scheme, known as compounding (because even higher profits are promised).

The introduction of e-currencies has made it possible for HYIPs to operate on the internet and cross international boundaries, and to accept large numbers of small investments. HYIPs usually accept deposits by either e-currency, like e-gold, e-bullion and INTGold, or use specialist third party payment processors like AlertPay, SolidTrustPay, CEPTrust, TriStarMoneyChangers and StormPay. HYIPs typically offer a significant incentive commission (for example, 9% of invested funds) for members to attract and refer new investors.

Most HYIPs disclose little or no detail about the underlying management, location, or other aspects of how money is to be invested, and relatively little information (other than asserting that they do various types of trading on various stock and other exchanges) on how they actually generate the returns they purport. They are sometimes presented with some form of an emotional appeal, appeals for faith, and promises that they will help investors achieve financial freedom.

Arguably, the largest HYIP scam that has existed on the internet was PIPS (People in Profit System or Pure Investors)[1][2]. The investment scheme was started by Bryan Marsden in early 2004, (according to the Wayback Machine record of http://pureinvestor.com) and spanned more than 20 countries. PIPS was investigated by Bank Negara Malaysia in 2005 which resulted in Marsden and his wife being charged in a Malaysian court with 97 counts of money laundering involving more than RM77 million - US$20 million - (copy of New Straits Times article dated 11 Oct 2006). Even after these charges were brought forth many of Marsden's followers/investors continued to support him and believe they would see their money some day. This behavior and denial could be seen and still is seen on hyip forums such as Talkgold Forum and others.

Interest rates

HYIPs typically claim to offer interest rates of 1% or more per day on invested funds; some claim to offer much higher daily rates exceeding 200% a day. Allegedly, the highest-return HYIP on record has offered 1,100% ROI in one day. Claims of astronomical returns without large capital outlay or background information are indicative of a Ponzi-structured HYIP program.

As a comparison with a typical 1% per day claim, Warren Buffett, one of the world's most successful investors, made around 30% per year during his most successful period; that is on average, less than 0.1% per day. As the claimed returns of 1% per day are extremely unlikely to be produced legitimately, all HYIPs are therefore likely to be Ponzi schemes, and so most investors will in due course lose their money

HYIP games

As a result of online forums and monitoring sites which have made HYIP investors more aware of their nature, a different sort of "honest" HYIP began springing up in the early months of 2006. Basically, the HYIP owner calls his or her program a "ponzi-structured game" where one should "not invest money one cannot afford to lose", and where there is "never a guarantee of earnings or refunds". They promise to pay out up to (for example) 95% of deposits, the rest going to hosting or other fees and the owner's profit.

In such "games", the first participants ("investors") may make a good profit and are encouraged to refer other people to the program because of referral commission, the fact that they have already made back their principal and are playing with profit, and that the more people who deposit money, the more money can be paid out to participants. In theory, strategies can be developed to maximize profit using these games (but, of course, since this is a zero-sum game, such strategies work by taking advantage of ignorance or errors by others). Some forum users may gain a reputation whereby others will trust their word that they have been able to withdraw their profits, encouraging others to invest in the hopes that more will invest after them and that they can therefore make a profit. As these games are by definition Ponzi schemes, it is inevitable that the vast majority of investors who are not at the top of the pyramid will lose their money.

These "games" might be considered as lotteries. However, the odds of winning cannot be determined, as one cannot know whether one is playing early enough to win money (that is, whether a sufficient number of new participants will follow). Thus, these activities are unlike a lottery or other forms of gambling, where a player has an equal chance of winning no matter when a ticket is bought, or where the odds of the game are known.

HYIP monitors

HYIP monitors, or HYIP listing/rating sites, are websites that list and/or promote HYIPs for referral commissions. The monitor charges each HYIP a listing fee which is usually then invested into that program, although there exist free listings and occasionally monitors which invest their own money. The monitor then labels the HYIP as "Paying" or "Not paying/Scam" depending on whether interest is received within the terms specified by the program. Monitors also allow other HYIP investors to rate and comment on the programs, based on factors such as promptness of payouts and responsiveness of the HYIP administrator. Programs with higher ratings achieve higher rankings on the monitor sites, which coupled with a "Paying" status may entice more investors who rely on the monitor.

In most cases, HYIPs only pay monitor sites to keep their "Paying" status visible, but do not pay other investors. As HYIP monitors are not affiliated with the HYIPs themselves, they are unable to prevent investors from being scammed; they neither help to recover lost funds nor track down the scammers. Promoting or perpetuating Ponzi schemes is a criminal offense punishable by jail terms or fines in most countries. That the monitor sites place disclaimers saying that they "do not promote the programs advertised on their website" does not absolve them from criminal liability.

In order to generate a "paying" status early (so that future visitors will see it) and maintain it for the longest possible time, newly opened HYIPs list their site quickly as well as constantly pay monitors their interest on time. Added to the fact that many monitors invest the listing "fee", and that a commission is received on each deposit made by people who visit the HYIP via the monitor, they are the most likely to profit when a program runs out of funds.

HYIP owners can manipulate monitors and forums, by paying people to comment positively or by using a range of IP addresses or proxy servers in different locations so that "paying" votes appear to come from around the world. This allows the HYIP to rise up the rankings more quickly than others, giving investors a false sense of security. Additionally, even if they know it will scam in the future, some investors will also rate new HYIPs positively until the HYIP stops paying, because they want more people to invest after them in the hopes that the program will last longer. Future scammers can also build up a good reputation on forums for a large payoff once most forum members trust them.

An Internet forum

2007-06-26T07:24:00.000-07:00

An Internet forum is a web application for holding discussions and posting user generated content. Internet forums are also commonly referred to as web forums, message boards, discussion boards, (electronic) discussion groups, discussion forums, bulletin boards, fora[1] (the Latin plural) or simply forums. The terms "forum" and "board" may refer to the entire community or to a specific sub-forum dealing with a distinct topic. Messages within these sub-forums are then displayed either in chronological order or as threaded discussions.

Such forums perform a function similar to that of the dial-up bulletin board systems and Internet newsgroups that were numerous in the 1980s and 1990s. Early web-based forums such as UBB.classic date back as far as 1996. A sense of virtual community often develops around forums that have regular users. Technology, computer games and/or video games, fashion, religion, and politics are popular areas for forum themes, but there are forums for a huge number of different topics. Internet slang and image macros popular across the internet are abundant and most widely used in internet forums.

Membership and anonymity

Anonymous forums may offer full anonymity or pseudonymity, allowing posts without registration. Captchas, e-mail authentication, and tripcodes are often used to prevent comment spam on such forums.

Registered members of a forum, who are identified by unique usernames, may have additional privileges, such as the ability to edit their previous posts, start new topics, and control their individual settings and profiles. The profiles tend to include graphical avatars and signature blocks which are appended to their future posts, sometimes consisting of elaborate shoutboxes. Members also have the ability to send personal messages to each other. In certain cases, members have been given the ability to close their own topics, edit previously posted comments, or delete posts in topics they have started.

Western-style forums place heavy emphasis on identity and user registration. This makes the tone of discussion very different from the more anonymous 2channel style boards. The burdens of status and persona encourage both highly formal discourse and close personal relationships, depending on the tone given a forum by its moderators and heaviest users. The permanence of messages on many western-style forums can encourage users to self-moderate. Precursor systems like Usenet have been archived as far back as 1981 by Google Groups (formerly DejaNews).

An example of a forum that has very laid back rules is, www.tehnoobs.com/forums

Administrators and moderators

A forum administrator typically has the ability to edit, delete, move or otherwise modify any thread on the forum. Administrators also usually have the ability to close the board, change major software items, change global skins, modify the board, and ban, delete, or create members. Moderators have a subset of these powers, which may include editing, deleting, and moving threads, mass pruning, warning members for offences, and changing minor forum details. It is often possible for moderator privileges to be delegated to other forum members.

A board's moderation system can include moderation of the moderators via a meta-moderation system. The board software may also allow administrators to create wordfilters, automated scripts which strip undesirable text from users' messages. Other features may include sticky threads and allowing moderators and administrators to cause significant threads to display at the top of the forum's index.

Software Features

Forum software packages are widely available on the Internet and are written in a variety of programming languages, such as PHP, Perl, Java and ASP. The configuration and records of posts can be stored in text files or in a database. Each package offers different features, from the most basic, providing text-only postings, to more advanced packages, offering multimedia support and formatting code (usually known as BBCode). Many packages can be integrated easily into an existing website to allow visitors to post comments on articles.

Several other web applications, such as weblog software, also incorporate forum features. Wordpress comments at the bottom of a blog post allow for a single-threaded discussion of any given blog post. Slashcode, on the other hand, is far more complicated, allowing fully threaded discussions and incorporating a robust moderation and meta-moderation system as well as many of the profile features available to forum users. Full content management systems such as Drupal or Mambo can also incorporate full-blown forums as plugins or basic features of forums in other portions of their website.

Comparison with other web applications

One significant difference between forums and electronic mailing lists is that mailing lists automatically deliver new messages to the subscriber, while forums require the member to visit the website and check for new posts. Because members may miss replies in threads they are interested in, many modern forums offer an "e-mail notification" feature, whereby members can choose to be notified of new posts in a thread, and RSS feeds that allow members to see a summary of the new posts using aggregator software. The main difference between newsgroups and forums is that additional software, a newsreader, is required to participate in newsgroups. Visiting and participating in forums normally requires no additional software beyond the web browser.

Wikis, unlike conventional forums, typically allow all users to edit all content, including each other's messages. This level of content manipulation is reserved for moderators or administrators on most forums. Wikis also allow the creation of other content outside of the talk pages. On the other hand, weblogs and generic content management systems tend to be locked down to the point where only a few select users can post blog entries, although many allow other users to comment upon them.

Forums differ from chat rooms and instant messaging in that forum participants do not have to be online at the same time; forums also usually deal with one topic and personal exchanges are typically discouraged. Messages posted to a forum or Usenet are publicly available for some time, which is uncommon in chat rooms, with only few exceptions.

Multiple posts

One common faux pas on internet forums is to post the same message twice. Users sometimes post versions of a message that are only slightly different, especially in forums where they are allowed to edit their earlier posts. Multiple posting instead of editing prior posts can artificially inflate a user's post count. Multiple posting can be unintentional; a user's browser might display an error message even though the post has been transmitted or a user of a slow forum might become impatient and repeatedly hit the submit button. Multiple posting can also be used as a method of trolling or spreading forum spam.

A user may also send the same post to several forums, crossposting. This problem was inherited from Usenet and is a common complaint in many forums.

Spamming

Main article: Forum spam

Forum spamming is a breach of netiquette where users repeat the same word or phrase over and over, but differs from multiple posting in that spamming is usually a wilful act which sometimes has malicious intent. This is a common trolling technique. It can also be traditional spam, unpaid advertisements that are in breach of the forum's rules. Spammers utilize a number of illicit techniques to post their spam, including the use of botnets.

Trolls

Main article: Troll (Internet)

A troll is a user that repeatedly and intentionally breaches netiquette, often posting derogatory or otherwise inflammatory messages about sensitive topics in an established online community to bait users into responding. They may also link to shock sites or plant images on networks that others may find disturbing in order to cause confrontation. Although trolling is not hacking, where the intent of such mischief is to cause chaos, the American Computer Misuse act of 1990 could be interpreted as banning it. [2]

e-Bullion history

2007-06-26T05:43:00.001-07:00

e-Bullion is a digital gold currency founded by Jim Fayed and his wife, Pam Fayed. The company was incorporated in December, 2000, and launched on July 4, 2001. Similar to competing systems such as e-gold, e-Bullion allows for the instant transfer of gold and silver between user accounts. e-Bullion is a registered legal corporate entity of Panama.

Features

As with any digital gold currency, the main focus is keeping assets away from fiat currencies so as to avoid inflationary risks associated with such currencies.

* It has also moved its primary servers to Switzerland. The redundant servers and equipment are also outside of United States jurisdiction.
* Unlike e-gold, e-Bullion provides its own in-house currency exchange service. An e-Bullion account can be funded directly via wire transfer from a bank account.
* It is also the only digital gold currency (DGC) that allows direct funding to and redemption from an account with precious metals.
* e-Bullion was the first DGC to issue its own debit card linked to an account.
* e-Bullion was the first to use CRYPTOCard technology to physically protect user accounts.
* Goldfinger Bullion Reserve Corporation, a sister company of e-Bullion, hold the precious metals in bullion storage vaults located in either Los Angeles, Delaware, Zurich or Australia.
* Users can hold and transfer value in gold, silver, or US dollars which they designate as e-Currency. The amount of bullion or US dollars held in the e-Bullion system is undisclosed.

Criticism

Two of Goldfinger Bullion Reserve's vaults are located in the United States. One is in Los Angeles, and the other in Dover, Delaware. This is seen as a drawback by those who may be worried about possible asset seizure by U.S. authorities (see Executive Order 6102 and Gold Reserve Act).

The Better Business Bureau (BBB) currently rate e-Bullion.com "F" [1], which they define as:

We strongly question the company’s reliability for reasons such as that they have failed to respond to complaints, their advertising is grossly misleading, they are not in compliance with the law’s licensing or registration requirements, their complaints contain especially serious allegations, or the company’s industry is known for its fraudulent business practices.

However, it must be noted that the BBB have collected a minimal amount of data on e-Bullion over the last 36 months. As of February 27, 2007, this consisted of only five unanswered customer complaints. e-Bullion do not disclose their Panama or U.S. addresses on their website, so the BBB list their own address for e-Bullion.

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e-gold history

2007-06-26T05:18:00.000-07:00

e-gold is a digital gold currency operated by Gold & Silver Reserve Inc. under e-gold Ltd., and is a system which allows the instant transfer of gold ownership between users. e-gold Ltd. is incorporated in Nevis, Lesser Antilles.

According to the company's website, as of April 2007, e-gold had 112,188 oz (3,489,436 grams) of gold and 138,567 oz (4,309,923 grams) of silver in storage, which is worth approximately US$86 million [1]. There are typically 66,000 e-gold spends each day totalling 15,000 oz (460 kilograms), which is about US$10.5 million. There are over three million e-gold accounts of which about one quarter are active [2].

On 27 April 2007, a federal grand jury in Washington, D.C. indicted e‑Gold Ltd and its owners on charges of money laundering, conspiracy, and operating an unlicensed money transmitting business.[1] e-gold, however, considers the charges completely groundless, and has responded to the allegations in their own press release.

History

e-gold was founded in 1996 by Dr. Douglas Jackson and Barry K. Downey [4]. Transactions using e-gold have grown dramatically since 2005. The total amount of gold bars (over three tonnes) in the e-gold system is approaching the size of the national reserves of smaller countries. e-gold now generates a substantial income from spend and storage fees — there is a charge of a few cents to make each e-gold "spend" and e-gold itself now earns well over a million USD per year from fees.

The number of e-gold accounts (as claimed by e-gold) grew from 1 million in November 2003 to 3 million on 22 April 2006. That represents a compound growth rate of approximately 55% per annum. This high growth rate has been sustained by e-gold almost since inception.

Role in global commerce

Many small businesses in the U.S., Europe and Asia, each with full-time staff now operate as "digital currency exchangers," doing nothing other than buying and selling digital gold currency for fiat currencies, as gold bugs term national legal tender currencies not backed by hard assets.

e-gold transactions — a "spend" — are completed electronically, usually using the web interface, and they always settle by weight of the metal even if denominated in some other way. A user may send (or "spend") a tiny amount of gold (a fraction of a gram, ounce or kilogram) to another user account instantly, anywhere in the world.

Even though e-gold is careful to not advocate any particular political agenda, as the Liberty Dollar does for example, e-gold could be viewed as a libertarian form of private currency.

Features

Asset protection

Unlike fractional-reserve banking, e-gold holds 100% of clients' funds in reserves with a store of value. Proponents of the e-gold system contend that e-gold deposits are protected against inflation, devaluation and other possible economic risks inherent in fiat currencies. These risks include the monetary policy of countries or territories, which are perceived by proponents to be harmful to the value of paper currency.

The repository of the actual bullion bars with serial numbers and other data can be seen using the live "Examiner" function on the e-gold web site. Bullion is held in allocated storage with Brink's Global Services (part of The Brink's Company), Transguard Security Services (part of The Emirates Group) or MAT Securitas Express AG (part of the VIA MAT Group) [7]. Clients hold an unallocated share of this allocated bullion.

The user may take physical delivery of the precious metal upon payment of an additional fee, and provided the user has an available balance of at least the weight of the smallest individual item displayed in the Examiner. This is currently a 32 troy ounce gold bar, which is worth approximately $20,000. However in practice, most users permit the company to store the metal for them.

Bullion investing

Main articles: Gold as an investment and silver as an investment

e-gold is a form of commodity money, so it is subject to the price fluctuations of that commodity. If the price of gold drops versus a national currency, the value of e-gold drops in that currency. The account balance, which is denominated in gold grams, does not change, but its purchasing power will change in relation to the gold price.

This can, of course, work both ways. Proponents of the e-gold system would argue that the risk of significant price fluctuation is small compared to the risk of value fluctuations among fiat currencies. The opposite argument is that a typical user is more affected by changes in the price of e-gold than of fiat currencies; this is because most people are paid in and spend their local currency, while the use of e-gold will typically involve a foreign exchange transaction each time. In both cases, long-term shifts in the price of a currency or e-gold affect its owner, but anyone who frequently buys and sells e-gold will be exposed to short-term fluctuations as well. The price of gold has increased over the past five years [8], so this factor has worked out to the advantage of anyone holding e-gold over that period.

As well as digital gold, e-gold also offers e-silver, e-palladium and e-platinum. Funds can be switched between e-metals using their sister company OmniPay. Metal-to-metal (or M2M) exchanges are completed at spot price with no bid/offer spread.

Exchanging for currency

e-gold does not sell its e-metal directly to users. Instead digital currency exchangers, such as OmniPay (a sister company of e-gold), and numerous independent companies act as market makers selling e-metal in exchange for other currencies and a transaction fee. Conversely, these exchange providers will buy e-metal with other currencies, again taking a transaction fee. In this manner e-metals can be converted back and forth to a variety of national currencies. The amount of a particular currency or e-metal necessary to complete a transaction is determined by the spot price of the metal in relation to the value of the currency. e-gold is known as private currency as it is not issued by governments.

Compared to other systems like PayPal, the process of buying e-gold can be confusing to a person unfamiliar with the e-gold system. e-gold, unlike e-Bullion for instance, does not sell digital currency directly to the user. According to their website the reason e-gold does not provide an in-house exchange service is so there can be no debt or contingent liabilities associated with the business, making e-gold Ltd. absolutely free of any financial risk. They claim e-gold Ltd. does not possess currency of any nation or even have a bank account.

Fees

e-gold charges an account fee (or Agio Fee) of 1% per annum (deducted in monthly payments) on all e-metal stored.

Spending e-gold is free, with processing fees (or Spend Fees) deducted from the recipient. As of 2007 these spend fees vary on a sliding scale from about 5% for spending 0.1 grams of gold to 1% for 5 grams of gold. Over 5 grams of gold, the fee is capped at 0.05 grams of gold (about $1.12 with gold at US$700 per ounce). [9]

e-gold spends clear instantly, in contrast to cheques or credit card transactions. Unlike other online payment systems such as PayPal, there are no distinctions between merchant and non-merchant e-gold accounts. Anyone can instantly create a "merchant account" (there is only one type of account). All e-gold accounts carry the same fees and have the same capacity to receive and transmit e-gold account holdings.

Universal currency

Proponents claim that e-gold offered the first truly borderless global currency system which was independent of exchange rate variations. Gold, silver, platinum and palladium each have recognised international currency codes under ISO 4217.

Incentive program

e-gold clients can place a referral link on a website to generate a few cents in referral income. If a new client sets up an e-gold account from someone else's referral link, it is harmless and does not cost the new client any money when performing future e-gold transactions [10]. An e-gold user who recruits a new user, is henceforth compensated with a percentage of all future processing fees that this new user pays. This is a legal multi-level marketing practice, as users are paid from actual payment processing fees rather than simply for recruiting new users.

Crime and fraud

e-gold has been perceived as the medium of choice for many online con-artists, with pyramid schemes and High Yield Investment Programs ("HYIPs") commonplace. This has been blamed on e-gold's policy of irreversible transactions. However, e-gold is now blocking accounts where fraud is proven or suspected [11].

e-gold and OmniPay have also been accused of being a medium for money laundering, although this is questionable given that there were only 24 customer accounts holding over 10kg of gold (approximate value $200,000) by April 2006 [12]. As digital gold currency providers are not banks, they are not legally required to perform various sorts of "know your customer" background checks. However, many legitimate e-gold exchange providers, for example GoldNow, may require a higher level of identification, generally more intrusive than a bank, for security purposes.

Opening an account at www.e-gold.com takes only a few clicks of a mouse. Customers can use a false name if they like because no one checks. With a credit card or wire transfer, a user buys units of e-gold. Those units can then be transferred with a few more clicks to anyone else with an e-gold account. For the recipient, cashing out — changing e-gold back to regular money — is just as convenient and often just as anonymous. [13]

In January 2006, BusinessWeek reported on the use of the e-gold system by ShadowCrew, an 4000-strong international crime syndicate involved in massive identity theft and fraud [14]. Omar Dhanani of Fountain Valley, California, connected to the ShadowCrew, is an e-gold customer and is reported to have moved amounts ranging from $40,000 to $100,000 a week from proceeds of crime through e-gold [15].

In response, Chairman and founder, Dr. Douglas Jackson published a letter which stated that "e-gold operates legally and does not condone persons attempting to use e-gold for criminal activity. e-gold has a long history of cooperation with law enforcement agencies in the US and worldwide, providing data and investigative assistance in response to lawful requests." He further noted that "Our staff has participated in hundreds of investigations supporting the FBI, FTC, IRS, DEA, SEC, USPS, and others." [16].

In August 2006, WORLDLawDirect lawyers announced e-gold Ltd. officials and their legal counsel to be the subject of a U.S. Federal Court subpoena. They believe e-gold Ltd. is subject to U.S. Federal Court jurisdiction and may be held liable for some or all of the investors' losses (and potential triple damages) in the Solid Investment (Solidinvestment.com) large scale HYIP scam.

2007 Indictment

See the full text of the indictment.

The essence of the allegations in the indictment is two-fold: 1) e-gold is an unlicensed money transmitting entity as defined by Title 18 USC Section 1960. 2) e-gold was a de facto means of moving money from illegal activities to wit: HYIP's which are Ponzi scams, credit card and identity fraud sites and retailers of child pornography.

The indictment alleges (paragraph 34) that the defendants knew of the activities associated with the accounts and noted those activities in the e-gold database with notations such as: "child porn", "Scammer", and "CC fraud."

The indictment further alleges that knowing that certain accounts were associated with illegal activities e-gold placed "value limits" on the accounts and suggested that the account holders open new accounts and placed no restrictions on the customer's ability to move funds out of the account.

Criticisms

Non-reversible transactions

Unlike credit cards, there is no way of having transactions reversed, even in case of a legitimate error or an unauthorized expenditure. e-gold's Terms of Use stipulate that all transactions are final and e-gold cannot be held responsible for any spend. In this respect, an e-gold spend is more akin to a cash transaction (except for the fact that there is a fee levied) while PayPal transfers, for example, could be considered more similar to credit card transactions.

Security

As with any online payment system, e-gold is vulnerable to various threats, notably phishing (for example, forged emails asking for login details) and malware (such as keystroke logging spyware).

e-gold offers no protection whatsoever if an attacker succeeds in obtaining:

* the user's e-gold account number
* the user's e-gold password
* access to the user's registered email account (web-based email accounts without a secure login are especially vulnerable)

as the e-gold account will then be completely open for malicious use.

All three pieces of information can be gathered with a trojan keylogger which monitors accesses to the e-gold web-site. All online services are affected by this security issue, but what makes e-gold especially vulnerable is that any losses resulting from a security breach cannot be undone since transfers are non-reversible and, unlike online banking, e-gold do not provide any insurance against such abuse. Also if funds are stolen, e-gold will not block a recipient's account without being issued with a court order. Since there is a lag time in obtaining a court order, the stolen funds can easily be withdrawn from the offending account and the e-gold system, rendering the recovery of any funds virtually impossible. This is not clearly stated in e-gold's user agreement, but an abused user will receive the following explanation from the company:

Unfortunately we will not be able to refund your money because all e-gold spends are final and not reversible as stated in the e-gold account user agreement. e-gold is also contractually prohibited from freezing e-gold accounts or releasing e-gold account information in the absence of a court order or subpoena. You might want to consider obtaining some combination of help from a legal professional or law enforcement to obtain a court order, if the size of your loss warrants expenditure of your resources (time and money) to resolve.

In 2005, the Los Angeles Times reported on a specially created trojan horse that compromised "dozens" to "the low hundreds" of e-gold accounts [18] . While trojans usually silently record the login details of the unsuspecting user, the trojan in question (Win32.Grams) emptied the accounts themselves by transferring the contents to the attacker's accounts.

To partly counter the threat from keystroke logging it is imperative that users never enter their password via a keyboard when logging-in, or authorising spends, if the computer they are using is potentially infected. Instead, users without a disability should always use a mouse and the popup window provided (SRK Passphrase Entry). However this is not a panacea as advanced spyware can take a screen shot and read the mouse clicks. Other security recommendations from e-gold include restricting access to a single IP address or browser (Account Sentinel) plus using Mozilla Firefox, a firewall and antivirus software [19].

Some competing DGCs offer similar features to combat typical, simple, "mass" phishing attacks and keystroke loggers. e-Bullion utilizes a two-factor authentication security token from CRYPTOCard, an alternative to RSA's SecurID. Pecunix has an extremely secure, somewhat complicated, log-in procedure. 1mdc has a simple PIN-pad addition. GoldMoney allow user certificates to be used. Most systems also include an optional or compulsory "email confirmation" type of process when logging-in or authorising spends.

Regulatory challenges and shortcomings

e-gold Ltd. was registered in Nevis, Lesser Antilles in 1999, but was temporarily removed from the register. e-gold cleared an administrative issue and as of July 14, 2006, it is properly registered in Nevis.

In September 2004, several Australian based e-gold currency exchangers ceased operation as they did not hold an Australian Financial Services licence (AFSL) [20]. Australian based digital currency exchangers that closed down voluntarily, due to the Australian Securities and Investments Commission (ASIC) licencing requirements, included:

* goldex.net
* sydneygoldsales.com
* ozzigold.com

Whilst exchange providers can still operate in Australia, many have found it impractical to do so due to licencing or proxy issues. Australian residents can exchange e-gold via exchangers in the U.S., Europe or other countries. There appears to be no issues about New Zealand citizens buying e-gold in NZ, and a number of AU citizens have opened NZ bank accounts, specifically to purchase e-gold from NZ based exchangers (even though e-gold doesn't denominate e-gold in NZD).

On 24 November 2006, e-gold suspended all accounts held by customers located in Iran. [2]

Bullion storage

As of November 2005, it is unclear if e-gold has an independent auditor of the physical bars, so there is no way of knowing if e-gold Ltd. really has the reserves to back the currency in the e-gold system. e-gold does maintain an "Examiner", a web page with updated statistics on outstanding liabilities and the total amount of each precious metal in its holding [21]. While proponents generally consider this assuring enough, critics remain skeptical as there is no way of determining if the web page's portrayal is accurate.

Limited use

Beginning January 2006, eBay has restricted buyers and sellers from using many online payment systems and encouraged them to use Paypal, which is wholly owned by eBay. eBay specifically named e-gold as one of the online payment systems that will result in them cancelling a seller's account if used [22]. e-gold runs a non-reversible transaction policy, meaning that there is no protection for purchasers if vendors fail to supply goods.