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How much of the Internet economy is fake?

We hear of a very disturbing setup that is all too real

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There is little doubt that the Internet is a very different beast to other media, and so different, innovative business models have been implemented in order to squeeze whatever cash is available. Paying per referral, charging per click, making valuations according to traffic etc etc.

However, we have heard of a scam that undermines a large chunk of the Internet economy's foundations, puts current models under the microscope and begs the question: how much of the Internet's perceived worth is real and how much is virtual?

What is it? We'll tell you, but names etc have had to be removed to protect our sources. A large-scale consumer online email site was desperate to gain customers and so offered a small fee of a few dollars per referral to other sites. Deliver them a customer, and you will get a small thankyou.

Fine, you say. But we know of at least one company that abused this setup, creating instead tens of thousands of fake addresses and taking the money, thankyou very much. Obviously, these need to be maintained and so the company wrote some code that gets those email addresses to write to each other, put it on a server and watched the money roll in.

It's a big scam and easily done, what with modern technology the way it is. So what, you say. The email company will see all the requests coming from just one or two IP addresses and shut them down. Or will it? And this is the fundamental flaw in the Internet models in existence.

Why would the email company pull all these accounts when they look real enough, they're being used and far more importantly they make the company a lot of money because it sells the number of accounts it has as its customer base. This customer base is what it earns its revenue on through an ad supply company. Pull those addresses out and you put yourself out of business.

Take the case of the ad supplier. Even if it was aware of exactly what was going on down the line, what possible incentive does it have to come clean? It feels no guilt and the sheer quantity of hits supplied is exactly what also keeps it going.

And so we have the situation where the only people losing are the companies that are paying for the advertising in the first place. Many of the hits it is paying for may exist only in a virtual way - it's like paying for billboard advertising and people not bothering to put it up. It's one of the oldest scams in the book - getting people to pay for something that doesn't exist - but with modern Internet technology, it can be reproduced millions of times at the touch of a button.

Also, this is just one isolated example. There are some clever people out there and while fraud remains in everyone's interests, you have to ponder whether the Internet economy is riding a white elephant. ®

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