I will crush you under a pyramid of lame

So I was at a seminar the other day on starting a business, and a (very) young guy called Francis approached me afterwards and struck up a conversation. He seemed sincere enough, and said he was part of a VoIP Video business. Intrigued, I agreed to meet him for lunch 2 days later.

That meeting was today.

Some context: I am interested in VoIP video-conferencing at the moment because (a) I\’ve been broadcasting live events using various technologies, and I\’m always interested in new ones, and (b) a few friends are interested in integrating video conferencing into their businesses.

The first thing I asked was “how does the technology work, what protocols does it use?”. I was shown a brochure whose only mention of technology was accompanied by the word “proprietary”, which immediately rang alarm bells.

The entire history of the PSTN has been a fight against proprietary communications networks. They are the enemy of connectivity and utility. They are a technological leech, a barrier to communication creating problems where none should exist.

By the way, we do have open standards for video conferencing. They\’re called SIP and H.264, or H.323, or whatever. They work well enough. My friends and I can buy different SIP-phones and still talk to each other. By contrast, proprietary protocols are the bugle-call of the Cavalrey of Lock-In Hell.

I asked him to tell me what these proprietary protocols were, and he had no idea. He called his boss, and his boss (allegedly) had no idea. Uh-oh.

So I proceeded to tell him that I wasn\’t interested, and he said “let me show you this DVD, it might explain the technology”. Right.

The DVD showed a lot of people driving fancy cars, and living in enormous homes filmed through vaseline-covered lenses, populated by actors who run the gamut of ethnic backgrounds and age groups. No dice.

The owner (or some other senior guy) comes on.

“ACN will become the biggest company in the world.”

Alarm bells.

Then, Donald Trump comes on. Donald Trump! Now there\’s a man whose image conjures up respect. For the death penalty. For white-collar crime. When the revolution comes.

Trump opined: “ACN offers a great opportunity for you to start your own business with none of the risk and costs associated with starting a normal business.”.

Louder alarm bells.

He went on: “In the coming years, the video phone market could become bigger than the property market.”

Alarm bells so loud they alter the orbits of nearby satellites.

I clicked the next menu item. Ooh! A bit about the phone!

It\’s just a video phone. You can only talk to other people using the same video phone. You can make normal phone calls with it too. Nice, but kinda useless and not exactly revolutionary.

The video stops and I still know nothing.

My first question: “What makes you think people are going to pay $30 a month for a video phone service when they can get the same thing for free with their PC and a webcam?”

“Sure”, says the kid, “Telstra make money don\’t they? We charge the same way they do.”. Uh, yes, and Telstra has a government-granted monopoly. This is not exactly comparing apples to apples.

I go on for a while about how proprietary consumer-level VoIP is a stupid idea, and then it hits me: he\’s not asking me to use their tech; he\’s asking me to be a reseller. And not just any reseller – a multi-level marketing reseller.

That\’s right, folks. ACN is a pyramid scheme. Note that I said scheme, not scam. They are legal (they barely escaped prosecution for violating the Trade Practises Act of 1974), but they\’re also extremely deceptive and when you run the numbers it\’s simply not possible for the vast majority of participants to make money. I didn\’t have a calculator in front of me at the time but I told this kid that I reckoned only the top 30% make any money, and that the top 5% make 95% of the money.

Turns out my guesstimate wasn\’t far off. And I wasn\’t even including the vast array of hidden fees that you can find listed elsewhere.

So I tackle this with Francis, and he seems a little perturbed but presses on. It turns out they also sell mobile and fixed line telecommunications products.

Ok, so they sell:

(a) A product nobody wants (proprietary videophones that don\’t talk SIP), and
(b) A product so commoditised that there\’s practically no margin in it (mobile and fixed line phone plans)

But the common link between these two products? They\’re both new enough that normal people don\’t understand the market dynamics yet. They think they\’re getting in “ahead of the curve”, when in fact they\’re taking a sharp turn off a cliff.

I could go on, but I won\’t. Suffice it to say: They won\’t be getting my $500 sign-up fee. They won\’t be convincing me to sell stuff to my friends they don\’t need. They won\’t have a chance to lock me into bizarre non-compete contracts that take any hope of true business initiative away from me (you can\’t do your own marketing. You can\’t cold-call. You can\’t approach suppliers directly. Etc).

And, hopefully now that I\’ve written this, they won\’t have any more customers or representatives in Australia. Fingers crossed.

Useful links:

11 Replies to “I will crush you under a pyramid of lame”

  1. I hope you managed to convince him to bail, but it’s probably unlikely. My dad’s a real sucker for pyramid setups, he’s tried em so many times and lost out every time.
    Amazing how reasonably bright and talented people can be sucked in by that stuff.

  2. I like this analysis a lot.

    On my website, the acn pyramid posts appear to the most popular.

    (Except for the recent interest in Kirk Wright’s suicide.)

    I will shoot you a link from my site because this is a nice and clear business analysis with what is wrong with ACN product.

  3. so… I don’t have a website, but if I WERE to do so there wouldn’t be a section called “Nope, not a baby-eater. No babies eaten since 1984, promise.” because, you know, I’m NOT a baby-eater, so I don’t need a section on the website that I don’t have telling people that I’m not.

  4. I have a friend that tried to convince me to try ACN. They think they are going to retire from it in a couple of months. So far they have made some money, but i hear that runs dry. I’ve tried giving the cons. I find it unmoral. We just don’t talk about it anymore or we argue.

  5. A colleague was just contacted by an ACN rep (allegedly) via text message after placing a normal “for sale” classified ad in a local newspaper. Presumably other advertisers were contacted too.

    From what I’ve read, such cold-calling is not allowed (I’m not even certain if number-farming like this is legal?) but could not see any such limitation in the Australian agreement at:
    https://myacn2.acninc.com/OnLineRepAgreement/jsp/AU/AULegal.jsp

    Has the agreement changed or did I miss the important bit as I skimmed through?

  6. We were just approached about this “opportunity”. First of all, if anyone asks you to listen to a presentation about an “opportunity” but won’t tell you what it’s about – RUN. Second, if the presentation is all about how much money you can make and says nothing about the actual product you are to sell….RUN.

  7. You are a fool no offense my friend but you don’t understand the concept of the video phone or the way the business works and that’s a shame. It is not a pyramid scheme because pyramids are illegal in a lot of countries including my own. I don’t know about yours but this company is in 20 different countries all around the world and i have had no complaints with my customers and people who have chosen ACN as there provider. This is not a get rich quick so if that’s what you were looking for right off the bat then i am sorry to say that nothing in life is that easy. This is simple you sell EXISTING services wireless, local and long distance, TV etc. If you recall way back bell was the only option for Internet and home phone, do to deregulation it opened up the doors for other companies like Sprint, Rogers, AT&T etc…. ACN is just another one of those options. The difference is they have a method that bypasses advertising, marketing and mass mailing which costs millions a day to allow people like myself and others to acquire customers themselves and by doing so putting themselves in a position to earn a percentage of there customers bills every time they pay them. This is legit the start up fee is basically a license to sell telecommunication services and telus phones and plans, like any license you want to acquire there is a fee. ACN takes care of all customer service all technical service and all the things nobody wants to do when they open there own business. Try opening up your own Telus phone booth and see how much it costs you i guarantee that it is nowhere near $500. This is your own business you have the ability to sell all the services that you use today and the services of the future, your going to pay for them anyways why not make some money off of it.

  8. Missing:
    The Videophone does two things: Make it easier for non techies to setup and use.
    Is less expensive than a landline: Is it more expensive than Skype? Yes. Is it more expensive than Webcam? Yes. Is it easier to use? As of (9/1/2010) yes it is.

    However, THIS IS NOT THE ONLY PRODUCT THAT ACN HAS!

    ACN also has cell phones which cost less than the carriers offer (phones are less, provider plans are identical). ACN offers Satellite TV services Direct TV and Dish Network for less than on the open market by $5-10/mo (depending on the plan). ACN offers ADT Home Security, for the same monthly service, but installation is free. (Some ADT contractors charge $350!)
    ACN offers Landline for less than the local provider, by almost $10 (depending on plan features).

    More services are being added! ACN has WIMAX in select markets and is growing quickly.
    ACN will be adding Gas and Electric by the end of the year. In Canada, this results in around a 10% discount monthly on utility bills.

    I am a former Real Estate Broker, and I got involved in ACN around 8 months ago. Things were slow in the beginning as it was moderately difficult to get the ball rolling. But in my 4th month I got my first check for $185. My 4th month, it was around $400. My 5th month $635, My 6th month $961, my 7th month $1400(ish), and my 8th month ($1822). My goal for my 9th month is $2500, and my Real Estate brokerage is currently for sale.

    When I opened my brokerage, I didn’t make a profit for around 18 months. And it cost me over $20k to start.

    In closing, I’m sorry if some presenters “push” the video phone(s). But as I read this post was authored in 2008, perhaps you should take a second look at ACN.