Now that Ad View Global appears to be in its death throes as yet another autosurf Ponzi/pyramid scheme, it is time to look at the underlying mathematics of this scheme.   AVG itself arose from the ashes of Ad Surf Daily, an autosurf company that the US Government shut down as an alleged Ponzi scheme, scam,  and wire fraud operation.  As of this writing, the founder of ASD, Andy Bowdoin, has filed court motions admitting that ASD was in fact operating illegally and has submitted a proffer letter to prosecutors that, according to the prosecutors, contains further admissions from Bowdoin that all of the government’s allegations of wrongdoing by ASD are correct.

 

In spite of this, AVG was launched earlier in 2009, with many of the same insiders and promoters as ASD.  What I will present here is a careful mathematical analysis of AVG that demonstrates the pyramid nature of the scheme, and its mathematical un-sustainability.  Much of the credit for the details on the inner workings of the AVG payout scheme comes from “joe”, a poster at the PatrickPretty.com site.  “joe” has made numerous postings on that site, claiming knowledge of, and providing inside information on the AVG program.  He has also made admissions on that blog as to the unsustainable nature of the program, as well as to its illegal nature – he emphatically stated that he does not care that it is illegal, and has posted some details as to the plans of the insiders to keep the money they have stolen from members.  My thanks go out to “joe” for his invaluable input.

 

The goal of this analysis is to provide another tool for assessing the inevitable programs that will arise from the anticipated demise of AVG.  Understanding the basic math will prevent people from being defrauded by programs such as ASD and AVG, if people choose to use it.  Previously I posted the Black Box Model for ASD, another tool, available on this web site, for analyzing business models for sustainability.

 

The method we will use here is a recursive method.  Recursive methods are pretty simple – one sets up the basic analysis for a short period of time, and then repeats that exact same analysis over and over again for each subsequent interval of time.  For the AVG analysis, we will look at one day as our time interval, and repeat the basic analysis over and over again, one day at a time, until it tells us that the model is sustainable or that every human on the planet must be a member of AVG in order for it to be sustainable. Proponents of AVG talk about how great, and how sustainable the AVG business model is – we’ll see if they are right, or if they are trying to deceive.

 

In order to help us model AVG, we’ll use a pretty simple Excel spreadsheet, also found on this web site.   The first thing we need to do is to make some assumptions.  We’ll make the simplest possible assumptions about AVG, and we’ll choose those assumptions to be THE MOST FAVORABLE case possible for the sustainability of AVG.   According to the AVG web site, and verified by “joe”, people with active ad packs in AVG share in ~50% of the daily revenue taken in by AVG provided that the members do their surfing.  Members continue to receive their share of the new revenue for 150 days.   Assume that essentially everyone eligible does their surfing.   We will also assume that AVG starts with just one person joining AVG on the first day.  Further, assume that the number of people that join each day is the minimum number of people needed to pay the rebate liabilities for that day.  If any more people join initially, or more than the minimum necessary join in any one day, the situation gets worse for AVG’s hypothetical sustainability.   For simplicity, assume that each new member purchases $1000 worth of ad packs.  Reinvesting accumulated credits into more ad packs does not change this analysis – explained more fully in the Black Box Method.  We will also assume that no one will get more than the 125% or their original investment in rebates, nor less than that amount provided the program is still running.  Some with argue that the AVG Terms of Service allow AVG to stop rebates at any point – “Rebates are Not Guaranteed” – but that argument is a red herring.  It has not been held to be valid in ANY autosurf case to date (ASD, CEP, 12DP, etc.).

 

The spreadsheet has 9 columns.  The first column is the day, the second is the total dollars flowing into AVG and equals $1000 times the number of new members signing up that day, which is column 7.  Column 3 is the amount of money available for rebates – half of column 2.  the owners keep the other half as described in the AVG terms of service.  Column 4 is the daily payout rate that AVG must pay out in order for members to get their 125% in 150 days.  125% divided by 150 days equals 0.833%   Column 5 is the number of new members who are required to join on that day in order to cover the rebate liability for that day.  Column 6 is the total number of members who have joined AVG since inception at day 1.  Column 7 is the number of people who will share in the rebates on this day.  Column 8 is the total dollars paid out to all of the members who share in the rebates on this day (column 7).  Column 9 is the total payout to any member who joined on this day.

 

Here’s how it works in more detail.  Columns 1-4 are self-explanatory.  In order to calculate column 5, we have to first figure out how much money is needed to pay off the rebates for a particular day.   The excerpt from the spreadsheet below contains the first 20 days modeling of the life of AVG under our assumptions.  Refer to Day 20.  By this time, 20 people will have joined AVG.  19 of those 20 people will receive 0.833% of their original investment back on this day, or $8.25 each (the person who joined that day gets nothing).  The total payout on this day is 20 times $8.25, or $165.00    This is the value in column 8.   In order to have enough new money flowing into AVG, we only need 1 member to join (they join for $1000, and $500 is available for the rebates).  Thus, on Day 20, column 5 is 1 person.  Column 6 is pretty straightforward, just the sum of the number of people who have joined on all days since Day 1.  Column 7 is easy as well – the sum of the number of people who have joined in the last 150 days (150 days being the length of time you can earn rebates).  Column 9 represents the sum of the payouts for any one member over the next 150 days, assuming the program does not implode or get shut down.  It is equal to $1250 on the original $1000 investment.

 

 

So far, so good.  Doesn’t look like much problem, but now let’s look out at 200 days. To get there, we just repeat this exact process for Day 21, then Day 22, then Day 23, etc. until we reach Day 200.  Here’s what Day 200 looks like:

 

 

Notice that at Day 200, we need to only have 14 new members in order to fund the program on an ongoing basis at this particular point.  Since we plan on continuing the program for a total of 3 to 4 years (it is sustainable according to “joe” and other promoters, so 3 to 4 years should be a minimum, right?)   Where are we at one year into the program?  On our one-year anniversary, things are beginning to get a little bit dicey.   One Day 365, we need to have 158 new members join, 160 join on Day 366, 163 on Day 367, etc.  Still possible…….   At this point, the owners have collected a total of $11.5 Million and have paid members back $5.7 Million in rebates.

 

 

Here’s the model at Days 600, 700, 800, 900, 1000:

 

 

Well, things are really getting tough for our darling AVG.  In order to continue to be sustainable at around one month shy of two years (700 Days), we need to have 21,700 people join each day.  Some AVG promoters would have you believe that this is possible, so let’s spin forward another 10 months.  AVG is now two years and six months old (1000 Days).  We will need to recruit 410,000 people on Day 900, or slightly more than every man, woman, and child in the state of Wyoming.  Of course, three months later, on Day 1000 we’ll need to recruit almost  the entire state of Nevada.  Good thing we have 50 states.   The founders of AVG will have brought in about $165 Billion by now, and the amount that they keep for themselves will make them neck-and-neck with Mr. Buffett as the world’s richest people.

 

Happy Birthday to AVG!  On the third anniversary of the birth of AVG, we have:

 

 

7..2 MILLION people need to join AVG on this birthday in order for it to continue to be sustainable.   The owners are now profiting by $3.6 Billion per day, and that number is growing. They have long-since become the richest people in history.  However, the end is near, if we restrict our members to people who reside on Earth….. Day 1273….

 

 

The whole planet is in AVG.  However, none of the 98,000,000 people who had to join on this last day will get any money from AVG whatsoever.  Their simply is no more money flowing in from new members except for new births, perhaps.    At this terminal point, the AVG owners will have collected around $3.4 trillion, which after taxes make them the worlds first multi-trillionaires.  Their personal GDP in this final year lies between that of France and Germany, and it is all pure profit.  The proponents would have you believe that this is possible…….  Another significant note:  At the end of the program, once every human has joined the program, 83.4% of everyone who has joined the program WILL LOSE MONEY!   The first 16.6% of the people who joined the program will make money at the expense of everyone who joined later.  Regardless of the assumptions one uses, the late entrants are the losers who pay for the “winnings” of the early entrants. 

 

This analysis shows definitively that AVG is a pyramid scheme, and is unsustainable using even the most optimistic assumptions.  The tool can be easily adapted to the other schemes that will soon arise from the crash of AVG.  As of 7-16-09, AVG has essentially crashed and it is HIGHLY likely it won’t be back…..

 

This recursive analysis can be modified in many different ways. 

 

Let’s consider the situation where AVG offered a 200% matching bonus on new ad pack purchases.  We’ll ignore the 200% bonus that was offered to the uplines of these new ad pack purchasers.  What happens in the recursive analysis is that the people getting the matching bonus will receive a bigger payout for their 150 days of rebate eligibility.  We’ll do it this way.  Again, start with the minimum number of members joining per day.  After one month, offer the 200% matching bonus for a period of 60 days, but still allow only the minimum number of new members to join such that they cover the liabilities for the rebates.  Here are the results at 90 Days, 200 Days, 1 Year, 600, 700, 800, and 900 Days.  Not unexpectedly, the early 200% matching bonus DRAMATICALLY accelerates the need for new members to join in order to be minimally sustainable.  Note that the people joining between days 30 and 90 will get $3750 (3 times $1250).  At 800 days, the matching bonus case requires 584,000 new members to join on Day 800.  In the base case, shown previously, we needed “only” 122,000 new members on Day 800.  The matching bonus means we need a factor of 4.8 or so more members by Day 800.

 

 

Continuing the analysis, with the 60 day matching bonus beginning at Day 30, on Day 1158 AVG requires that everyone on the planet be a member in order to be sustainable, and then the pyramid scheme collapses again.  Again, 84% of the people are losers, 16% “winners”, and ALL of the winners are the first entrants. 

 

Obviously, there is a strong incentive to be an early entrant, since late entrants ARE GUARANTEED to lose.  Let’s see what happens if instead of having the minimum number of people joining each day required for sustainability, we have 20 people joining per day for the first 60 days, because (like all good Ponzi players and promoters), they know they need to join early in order to victimized the later joiners (illegally, by the way).  Here’s the first 20 days….

 

 

Notice that the number of members grows by 20 per day, increasing future liabilities as will be seen.  Let’s now see what happens further on, at 50, 90, 200, 365, 600, 700, 800, 900, and 1000 days as before.

 

 

Not unexpectedly, the early rush to join by the Ponzi Players has created greater stress on the sustainability of AVG.  Now the scheme will blow up (ie everyone on Earth must be a member) after 1108 days.  Again, 84% of the people, all late entrants, are losers.  Combining the 200% matching bonus with the higher number of people joining early leads to an even faster point of collapse.

 

Virtually anything that we do to the base model accelerates AVG’s inevitable demise vs. the most optimistic base case we looked at.   It is the very nature of pyramid schemes that this collapse is inevitable.  One simply cannot keep generating new membership at a rate that can feed the exponential growth rate of these scams.  No matter what the promoters and players say, there is simply no way around the mathematics of these schemes.  I have tried hard to give the program every possible benefit of the doubt, but the laws of mathematics are harsh. AVG is a pyramid scheme, and it is in its death throes after 6-7 months.  Its parent, ASD, was an unsustainable pyramid scheme.  Beware of AVG’s forthcoming children.  They are virtually guaranteed to be pyramid schemes as well.

 

One final note on this analysis.  Promoters and cheerleaders of these Ponzi schemes, such as “joe” and many of the posters at the ASD Surf’s Up Forum, will tell you how great they are and how they always pay out and that they are sustainable.  They will not tell you the truth, but here it is, in could, hard mathematical fact.  Make them prove that this math is wrong – no one has even tried.  So far, we have shown that AVG is definitely not sustainable (nor ASD, BAS, AGW, etc).  You will hear the cheerleaders also talk about the scheme “always paying out”, or “they were paying out as planned until (fill in your excuse here)”  but here’s the thing about Ponzi schemes.  They ALWAYS pay out to the first people to join, and NEVER pay out to the last people to join.  If they never paid out, they wouldn’t even get started.   I worked through a number of different permutations of the recursive analysis of AVG.  Interestingly, in every variation of the model, the analysis shows that 16% of the people will make money, and 84% will lose money.  Further, no matter how many people eventually join AVG, the first 16% of the people who join will be the 16% who make money.  THE LAST 84% WHO JOIN WILL BE THE 84% WHO LOSE MONEY.  GUARANTEED!  The majority of the people you see posting at the pro-Ponzi sites (like the AVG Forum and ASD’s Surf’s Up forum) are in that 16%.  The people who lose generally don’t sing the praises of the criminals who took their money (though some do).  Something to think about......if you are considering joining one of these Ponzi schemes, it’s probably already too late.  Your alternatives are to choose a life of crime and join early, or to continue to live an honest lifestyle and realize you can’t get something for nothing.

 

Use this analysis tool, or use the Black Box Method – you’ll get the same result.  ASD is a scam, AVG is a scam, Biz Ad Splash is a scam, etc.  Alternatively, use what your mother told you.  If it sounds too good to be true, it is.  No program that is legal can pay you for not really working (come on, “surfing” is NOT working).  No legal program can have the kinds of payouts that ASD and AVG promised.

 

Thanks again to “joe” for his insights and detailed information on the workings of AVG.  Without his information, this modeling would not be possible.