Dark Lords of the Internet
In last week’s Covert Redirects and Perverse Incentives I described an open redirect vulnerability in the OAuth protocol which social login providers may not fix because it would require locking out third parties with slack security practices but lucrative business relationships. I then wrote “A weak protocol meets risk aggregation and perverse incentives. There may be an even bigger story here. Unfortunately, it seems the big service providers may be equally loose on fraud, when it comes to their advertising bottom lines.”
The Rot Goes Deeper
Check out Taylor Clark’s Jesse Willms, the Dark Lord of the Internet article in Atlantic magazine. It chronicles the rise and fall of a con artiste and business genius whose alleged fraudulent dealings on the web made – and lost – fortunes. Atlantic’s story of Willms weekday deeds and weekend gamboling makes fascinating reading – evoking memories of the equally sordid “Wolves on Wall Street” movie. Clark disapproves but cannot help admiring Willm’s “phantom empire scattered all over the world [made to] look like a legitimate enterprise.”
False Advertising
Clark wrote: “…your cursor has probably lingered over ads for Willms’s Web sites more times than you’d suspect. His pitches generally fit in nicely with what have become the classics of the dubious-ad genre: …such as “Shocking Diet Secrets Exposed!”; too-good-to-be-true stories of a “local mom” who “earns $629/day working from home”; …miracle teeth whiteners and “loopholes” entitling you to government grants; and most notorious of all, eye-grabbing animations of disappearing ‘belly fat.'”
And “most of us have not fully realized the extent to which scams are now operating through sites we’ve come to trust. A lot of this happens when scammers buy targeted ads that crop up alongside a user’s search results on Google, Yahoo, or Microsoft’s Bing.”
Swarms of Affiliates
Technically, the scammers have “affiliate marketing” relationships with the big Internet companies. Clark describes affiliates as “the door to door salesmen of Internet” and notes that they provide a useful channel for getting all kinds of products from small businesses to market on a commission basis that scales. But “the downside to affiliate marketing is its astonishing rate of fraud.” Some affiliates play fast and loose with the truth while promoting products by “saying anything to dupe consumers” and recoup their investment.
Contracts of Adhesion
Jesse Willms pushed the envelope far beyond false advertising, however. “Willms buried an assortment of charges in the fine print of his terms and conditions. After the 14-day trial period for each product, customers automatically became enrolled in monthly subscription plans, for up to $80 a month [and] the charges for the original product were only the beginning of a long, difficult journey…With few exceptions, a ‘free trial’ from Willms included hidden extras like a ‘Comprehensive Weight Loss ebook’ or a club membership, each of which carried separate monthly fees.”
How could this happen to customers? Easy, like most everyone on the Internet, they ignored the fine print in the copious legal agreements behind the “I Accept” button. They signed what Doc Searls in his book “The Intention Economy” calls contracts of adhesion. We’ve all be trained that its no use reading those contracts; you can’t change them, you may not understand them, they will bore you to death, and if you actually understood things well enough after investing an hour reading them you probably wouldn’t feel comfortable buying anything (and that wouldn’t be any fun).
Not Much Recourse
Clark describes Willms customers’ tortuous and ineffective journey through customer support and in some cases through the courts. In a constantly changing global Internet, regulatory authorities such as the U.S. FTC charged with protecting consumers are under-staffed and lag far behind legions of nimble affiliates working together in a bewildering variety of corporate structures and business relationships like Willms’. In the end, in Wilmms’ case a court decided that some of his contracts of adhesion were not binding; it concluded you can’t drown out an overall impression create by repetitive large font “FREE! FREE! FREE!” messages with fine print that says just the opposite. Duh…
But the fine print accomplished one thing: According to Clark, Jesse Willms won’t serve any jail time.
Business as Usual
In the end, Willms was forced to accept hefty civil penalties in court. But the U.S. FTC has not been able to put Willms out of business permanently, doesn’t have the resources to keep up with legions like him, and has an uphill battle in a legal system stacked in favor of contracts of adhesion. The Willms settlement has hardly “sent shock waves through the seedy back alleys of the Internet.”
It’s business as usual in the main store fronts, too. Clark writes that since “…Web gatekeepers like Google, Yahoo, and Microsoft…have huge financial stakes in maintaining user faith, the thinking might go, they would surely never endanger that by doing business with potentially shady companies or affiliates. Right?
Well, no: the evidence shows that they, too, often work with unsavory advertisers—sometimes knowingly…the Harvard Business School professor Ben Edelman’s Web site houses a numbingly long list of cases in which trusted companies have sold ads for services they knew to be suspicious or fraudulent.” Clark goes on to give some examples of cases where the big Internet store fronts have been complicit.
Clark notes that “To Edelman, the main obstacle to better-regulated Web commerce is the judicial branch’s unwillingness to force online gatekeepers to change their practices.“
As long as courts, governments and voters are unwilling to put a stop to the affiliate fraud that poisons the online, advertising supported economy it will be business as usual: covert redirects, perverse incentives and huge hassles for those who click on the wrong ad, or buy the wrong deal.