Monday, April 5, 2010

SportArbs, PTVPartners and referral commisions

Several key programs have failed in recent months blaming their demise, at least in part, on what they term "referral abuse". This week, both SportArbs and PTVPartners have taken action to prevent a similar fate. Both programs have cited referral abuse as the main concern to the continued viability of their operations.

It is interesting to note that SportArbs began their program with a 3 level referral structure, but after about 3 months switched to a single level. PTV on the other hand, began with a single level, paying 6%, and then switched to a 3 level! Just last week PTV dropped their referral program entirely, after a member poll in their forum indicated the majority of members agreed to drop it. Less than 200 members bothered to vote on the issue. My thoughts are that management had made the decision well prior to the poll, and was simply seeking confirmation from the member base. With talk that it was becoming detrimental to the programs' viability, of course members voted that way!

Changes at SportArbs:
I still quite like this program, but the timing of the changes last week really peeved me! I had my 1st withdrawal pending for over a week before the announcement was made about the changes. They did present a valid argument, giving a detailed explanation of what is really involved with moving funds in/out of ecurrency accounts so that they can be put to use actually creating a profit. Feel free to read the update under "PRESS" on their website.

The changes made are that new money into the program will not earn interest for 5 days after the deposit. Gives them time to put it to work with bookmakers. Fair enough. The other change is to withdrawals. These will be processed within 10-12 days, and will only be paid to their new visa card system. This is the bit that peeved me.....the cards will cost members $100-$120! I have canceled my $150 withdrawal and activated a new deposit with it. This is becoming a long-term project for me.

PTV Partner changes:
This one is pretty simple. No more referral commissions at all. No other changes to the actual program structure have been announced.....yet!

What is referral abuse?
The majority of HYIPs strictly forbid members opening multiple accounts, and many will go to great lengths (monitoring IPs etc) to prevent this. The problem is that a member will open one account, make a nominal deposit, then open a second acct using their ref link to make a more substantial deposit, thus earning for themselves a nice commission on their own deposit. Morally, I agree it is not a good thing, especially when the program was perhaps promoted by another member, who should have earned that commission. But why should this activity affect the viability of a program? Let's do the maths, based on 6% commission.

A member joins a certain program from a link he found on a website, and makes a 10k deposit. The referring member receives a $600 commission immediately.
The referring member deposits his commission into the program to earn interest. The program is now paying interest on $10600, but has only $10000 to work with. This should not be a problem, if the program is genuine and proper allowance has been made to accommodate the paying of commissions.

Another member joins the program, and opens a second acct from his own link in order to gain the commission for himself. Mathematically, it is no different to the 1st example, and should have absolutely no bearing on the viability of the program. When GNI announced its restructure (and ultimate closure) recently, referral abuse by major investors was cited as being a huge drain on their cashflow.

Apparently these members would have multiple accounts, and deposit large amounts into the program. After the 30 day minimum investment period, they were withdrawing in full, and redepositing the funds into different accounts, earning for themselves 6% bonus every time. I can understand this type of activity having an impact on a programs' cashflow. Perhaps better scrutiny of accounts, and maybe some sort of verification process, is necessary to eliminate it. Either way, if a program is properly administered, these issues should be dealt with long before they become a major issue, affecting the overall profitability of the program. Has PTV made the right decision? Time will tell, I guess, but I can't see too many members continuing their promotional efforts for them, without being rewarded. After all, 6% is a small price to pay for new business, especially under the referral model, where no payment is made before the new business is secured. I bet there are a lot of offline businesses who wish they had it so good........TV advertising is expensive!

Another interesting side note is that PTV openly stated in their FAQs that multiple accounts were permissable. Surely they realised the potential for referral abuse by setting this policy.

New Programs:
I have added a nice mix of programs to the list on the left. Something there for all players. Although I haven't completed my full DD on them all, I think they are worth a look. No favourites anymore....this race is getting too hard to call!

Happy investing:-)

1 comment: