Introduction

As a website designer and developer, I have many years of experience in the field of internet commerce and marketing. I became interested in the claims made by Banners Broker, and read as much of their literature and documentation as I could find, in an attempt to understand the revenue model they claim to use. This included signing up as an advertiser and attempting to run an ad campaign using the Banners Broker system. After a full evaluation of all the evidence, I have conluded – and I am certain in this conclusion – that any revenue generated by Banners Broker for its affiliates does not come from advertising.

I have written this post to share my findings and conclusions with interested people who may have come into contact with Banners Broker, or who may even be involved themselves. I urge you to take the time to read this, despite it being quite lengthy, and to take the time to understand the points I make here.

How does Banners Broker generate money?

I know that many BB affiliates are fairly new to the subject of the internet, and especially to the workings of internet advertising, so I will attempt to keep this as simple as I can, while dealing with the facts that should be understood by anyone involved in this business.

First of all, let’s look at how Banners Broker explains its business model:

What does banners broker do?
We connect advertisers with effective ad space and publishers with the most relevant ads to market on their websites. With an extensive online network consisting of hundreds of thousands of publishers and advertisers from around the world, we help our clients increase sales and earn additional advertising revenue. [source: bannersbroker.com FAQ section]

So, this explanation is pretty straightforward, and it sounds like Banners Broker operates on the same basic model of any online advertising broker, for example Google, with its “AdWords” and “AdSense” products. I decided to take a look for myself at what sets Banners Broker apart from all the other existing and successful online ad brokers, to see how it generates so much revenue that it can pay out to all its affiliates.

My experience of advertising with Banners Broker

To test this out, I signed up on bannersbroker.com as an advertiser (since I work for an online retail company, and we could always do with increasing sales). Almost immediately, alarm bells were raised: why do they require a photo ID? Why does my dashboard include such an incredibly complex array of options, using unknown terminology such as “panels” and “traffic packs”? All I wanted to do was place some ads for my website – a very simple concept. You would think that Banners Broker would make this as easy as possible, seeing as it is supposed to be the source of their revenue.

As a comparison, I was able to sign up to Google’s AdWords in about 30 seconds, and their dashboard was suitably straighforward, reflecting the simple concept of “Here is my ad, please show it on some websites and charge me a little bit of money each time someone clicks on it”.

I continued on and created my ad campaign, and at this stage I became fairly convinced that this was just not a serious advertising platform. The reason is the woeful lack of options when setting up the campaign and viewing reports on my campaign. As a comparison, Google’s AdWords allows me to finely-tune exactly where, when, on which devices my ads should appear, and offers all manner of analytics for me to track the effectiveness of my campaign. In contrast to this, Banners Broker offers so little in the way of customization and reporting that I can safely say it would be virtually useless to any company that is serious about using online advertising.

The next question is, where do these adverts end up? Again I will refer to Google as it is a very visible example of how to do things right. Most times that you search Google, you will see a section to the right of the search results page listing adverts that companies have paid AdWords to display. Google also display ads on websites which take part in their AdSense program, displaying boxes on the page with an “Ads by google” label on them.

So which sites do Banners Broker display their ads on? As you may know, there are two options offered: the Choice Network and the Blind Network. I first chose to run my campaign through the Choice Network. The Choice Network is described by Banners Broker as:

“our Choice Network, which is a partnership between two brokers, has now grown to over 60 websites and is well on its way to becoming a major contender in their respective industries.” [source: http://support.bannersbroker.com/index.php?/News/NewsItem/View/8/to-our-loyal-customers-and-affiliates]

So, what kind of industry-leading, high-traffic websites make up the Choice Network? The answer is a collection of virtually empty, content-free, essentially “fake” websites, which only seem to serve adverts for Banners Broker itself, rather than actual paying clients. A few examples: http://150cash.com/, http://www.wethreegreens.com/, http://www.thatisnotasport.com/, http://www.exteriorspread.com/, – a few generic articles, no comments, stale content that’s not been updated for months… you get the idea.

OK, so the other option is the Blind Network. Due to the nature of a blind ad network, we can’t know exactly where our ads will appear, so it’s difficult to verify whether or not my ads actually get shown anywhere. However, due to the aforementioned lack of standard ad campaign options, combined with the fact that Banners Broker steadfastly refuses to name any of its ad network partners, I am fairly certain that they don’t actually appear anywhere.

My conclusion of the Banners Broker advertising platform, after a fair appraisal and given my previous knowledge and experience of how actual online advertising works, is that this is not a real product. It is a fairly well-disguised approximation of the real thing.

What about being a publisher?

Okay, so what about the other half of Banners Broker’s business – paying publishers to display their client’s ads? Ignoring for a moment that I have just demonstrated that there probably aren’t any real advertising clients, let’s take a look at how this works.

As I run an online retail website, we don’t advertise for other companies on our website. Therefore it wasn’t appropriate for me to try out the publisher side of the business. However, I found a detailed account written by the owner of very high-traffic Canadian website. You can read about his experience of using Banners Broker as a publisher here: http://philsmy.com/2012/10/bannersbroker-verdict-scam/, and I recommend that you do in order to appreciate my conclusion below.

In short, he found similar results to what I discovered as an advertiser: the publisher platform is likewise not a real product.

Conclusion regarding the advertising platform

It appears to me that the claim that Banners Broker generates its revenue from selling on-line advertising space cannot possibly be true, based on a good look at their advertising platform. Why would any company choose to pay for a virtually useless product, when there are many companies offering the same, but in a form that would actually work?

So, if there isn’t a significant amount of money coming from real advertisers, the obvious question to ask is, where does the money come from? Affiliates sign up on the promise of good returns, so we should try to figure out what those return might be, and how they could be realised.

A look at the numbers

Here is a quote taken from the Banners Broker setup manual, on page 9 of an instructional manual entitled “How to manage your Banners Broker account” (http://freemoney2wealth.info/blog/wp-content/uploads/2012/10/Managing-Your-BB-Business.pdf)

Let’s take a Green panel as an example. It costs $270 to purchase. When it reaches its traffic cap (approx. 8 weeks) it will have made $540. This amount goes straight into your E-wallet and immediately BB will repurchase back a Green panel ready to be activated once again with traffic to make you a further $270 in approx 8 weeks (see above disclaimer).

Following this example, that means a green panel will, after 16 weeks, have made a profit of 100%, with a further 100% being made every 8 weeks thereafter, which would be a total of 550% profit for the year!

According to Forbes magazine, the 10 most profitable industries are:

So the most profitable industry in the world has a 16.09% profit margin. Note that online advertising does not appear on the list. It also needs to be borne in mind that the profits generated by those industries are the result of specialised skill and training – lawyers, doctors, accountants – and lots of hard work. Banners Broker is promoted as a business that lets you earn without any special knowledge, skill or training, and with very little – if any – work.

As another point of comparison, what is an expected return on investment in other established fields such as gold, stocks, bonds, or real estate? A fairly simple introduction for beginners can be found here: http://beginnersinvest.about.com/od/beginnerscorner/a/What-Is-Considered-A-Good-Rate-Of-Return-On-Your-Investments.htm. The article concludes, “As you can see, if you expect to earn 15% or 20% compounded on your blue chip stock investments over decades, you are delusional. It isn’t going to happen.”

So, 15-20% is a delusional expectation, yet per our calculation, Banners Broker offers up to 550%? Even if the calculated figure of 550% returns based on Banners Broker’s own estimates is considered a best-case scenario, it is still clear that something is not right here. Again: where is the money coming from?

The final thing to consider is this: how can Banners Broker possibly hope to compete in a free market, when it must pay a large proportion of any profits to its affiliates? The fees that Banners Broker would have to charge advertisers (assuming for a moment that there are actual advertisers involved somewhere) would price them out of the market. A list of the top online advertising companies available here (http://en.wikipedia.org/wiki/Online_advertising#Ad_server_market_structure) shows that there are already well-established, major companies that Banners Broker would have to compete with. When we consider the terrible platform that I described earlier, plus the need to pay large amounts of their revenue to affiliates, it should be clear that Banners Broker could not possibly be competetive.

So, where does the money come from?

Now we get to the million-dollar question. I hope I have demonstrated clearly enough that there are profound, fundamental flaws in the business model that Banners Broker promotes to affiliates. To make the amounts of money that Banners Broker claims can be made, that money must come from somewhere. Somewhere other than online advertisement.

If there aren’t significant amounts of money coming from clients, then any money made must come from within the system itself. This is not a new model for making money. It has existed since the early 20th century, and it’s known as a “ponzi scheme”. Here is a definition of a ponzi scheme taken from the Financial Services Authority website:

‘Ponzi’ schemes are named after their creator Charles Ponzi who, in the 1920s, guaranteed a 50% return to investors in the US. However, much of the subsequent money he received was used to pay ‘dividends’ to earlier investors. The scheme collapsed when he was unable to attract more money to pay investors who entered the scheme later. [source: http://www.fsa.gov.uk/consumerinformation/scamsandswindles/investment_scams/ponzi_pyramid]

In effect, any returns that are made by Banners Brokers affiliates come from the money put into the system by other affiliates. The major flaw of a ponzi scheme is that it is unsustainable. In order for anyone to make any money at all, the scheme must continuously, exponentially grow. This growth eventually slows and at that point, the scheme collapses, leaving the vast majority of affiliates out of pocket.

There is a very good description of the typical characteristics of a ponzi scheme in this Wikipedia article: http://en.wikipedia.org/wiki/Ponzi_scheme. I will use this description and compare it with what I have learned about Banners Broker.

Typically extraordinary returns are promised on the investment,^[5] and vague verbal constructions such as “hedge futures trading,” “high-yield investment programs“, “offshore investment” might be used. The promoter sells shares to investors by taking advantage of a lack of investor knowledge or competence, or using claims of a proprietary investment strategy which must be kept secret to ensure a competitive edge.

As we saw earlier, extraordinary returns are promised, or at least promoted. Banners Broker takes advantage lack of investor knowledge in the online advertising industry. Their website claims that, “Unlike other online marketing techniques, our unique Ad-Pub Combo Package allows entrepreneurs to advertise their businesses while earning ad revenue simultaneously.” The actual explanations I have found of the way the “Ad-Pub Combo” works are all but impossible to understand, and do not stand up to logic.

Initially the promoter will pay out high returns to attract more investors, and to lure current investors into putting in additional money. Other investors begin to participate, leading to a cascade effect. The “return” to the initial investors is paid out of the investments of new entrants, and not out of profits.

Affiliates are often drawn onto the scheme by reports from friends or associates that people they know have made a lot of money from Banners Broker. Indeed, it is reasonable to assume that there are some people who have made a lot of money from this scheme – especially those at the very top. However, as mentioned earlier, a ponzi scheme relies on a constant stream of new investors. The method used to ensure this is by referrals. Originally it was promoted that you could make money with Banners Broker without having to refer anybody. As you may be aware, changes announced at the Bolton World Tour event mean that there is increased focus on making referrals. Their explanation is: “The very strong message in all the changes is to eliminate passive earnings as this is a business not an investment.” (taken from a message posted to the Banners Broker Network Facebook page) My take on this is that they are increasingly worried about the cash flow from new affiliates drying up, leading to a collapse of the scheme.

Often the high returns encourage investors to leave their money in the scheme, with the result that the promoter does not have to pay out very much to investors; he simply has to send them statements showing how much they have earned. This maintains the deception that the scheme is a fund with high returns.

Promoters also try to minimize withdrawals by offering new plans to investors, often where money is frozen for a longer period of time, in exchange for higher returns. The promoter sees new cash flows as investors are told they cannot transfer money from the first plan to the second. If a few investors do wish to withdraw their money in accordance with the terms allowed, their requests are usually promptly processed, which gives the illusion to all other investors that the fund is solvent.

There are two mechanisms by which Banners Broker achieves the above.

First is the concept of “panels”, and their rules concerning how much of your investment must be kept in active panels at any given time. With the 2.9 update, further restrictions have been introduced to keep even more money inside the system. Panels keep your initial investment locked up inside the scheme. I have read reports that the time it takes to qualify a panel has increased markedly in recent weeks. This is an attempt to freeze invested cash for longer.

Secondly, there is the eWallet. Many Banners Broker affiliates who claim to have made  profits base this claim on the figure shown in their eWallet. There is a big difference between the figure shown in your eWallet, and having actual money in your bank account. Ask any affiliate who thinks they have made a profit how much money they have actually withdrawn. I would guess that most of them haven’t actually withdrawn the money, or have only withdrawn small amounts to test the system.

On top of this, with Banners Broker, withdrawals are generally not processed promptly. There are countless accounts I have come accross of affiliates facing weeks or even months of delays when attempting a withdrawal. As a ponzi scheme nears collapse, it become more and more difficult to make any withdrawals, and I believe the current delays experienced by affiliates are a sign that Banners Broker is nearing the end of its lifespan.

Overall conclusion

In this post, I have specifically chosen to focus solely on the claims made by Banners Broker in regard to its business model. I believe the facts speak for themselves, without even looking into the numerous other red-flags that I found when researching the company and it’s methods. I know that the management of Banners Broker have attempted to defend themselves against various allegations made on blogs and internet forums, arguing that they are the targets of a campaign to sabotage a legitimate business. I believe such a campaign to be unnessecary, since the company themselves have, through their extraordinary claims, provided all the evidence one needs to figure out the truth.

I believe that Banners Broker is a fraudulent ponzi scheme which preys on those who can least afford to lose their money, and that the vast majority of affiliates stand to lose some or all of the money they put into it. Any money that is made, comes at the expense of those who have been introduced later. Most affiliates have signed up in good faith, and are unwitting victims of a very sophisticated scam. A minority of early-adopters, and the people behind the scheme, know exactly what they are doing, and unfortunately stand to make a lot of money at the expense of everyone else.

Predictions

Based on what I have found, and the developments that I see happening within Banners Broker, I predict that the scheme is approaching collapse. I think that affiliates will find it very difficult, if not impossible to reclaim their investments. I foresee increasingly desperate attempts by Banners Broker management to stall payments, recruit more aggressively, discourage withdrawals, and it will become increasingly difficult to actually contact anyone at Banners Broker – support calls already cost $5 per question – something which I find absurd.

The excuses given as to why the service is getting worse and worse, and why it is becoming more and more difficult to make and claim earnings, will get even more outlandish and complex. Finally, it will become impossible to contact anyone at Banners Broker, the panels will freeze, and those behind the scheme will disappear.

If you are still convinced about Banners Broker, as a final word, I would recommend you read this Q & A session with Terry Stern, and see how the International Public Relations Director of Stellar Point deals with some of the same issues as I have raised in this post. There are also two other posts on the same blog, here and here, which go into detail about more warning signs that I did not even get into here.

http://finchsells.com/2013/01/29/banners-broker-qa-with-terry-stern/

Michael

UPDATE 8/03/13: I’ve written a follow-up to this article, which you may be interested to read.