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.”
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.