Thalasar Ventures

I have started reading John Chow’s blog largely because he’s a pretty good writer and I always like reading good writers. I really wish he would do more reviews for The Tech Zone. One thing I have noticed though, John’s recent posts about Agloco have toned down the rhetoric quite a bit.

In order to understand how much he has actually cooled on Agloco, let’s take a look at what he said in his first few posts on the subject. Here’s the January 28th, 2007 post on the subject

So how much can you make with AGLOCO? The Simmons Report came up with the following data.

• A user who has no referrals should receive ownership in AGLOCO worth about $150 plus monthly cash distributions.
• The average value of an AGLOCO user’s referral network should be $30 each in ownership shares plus the referrer’s share of monthly cash distribution.
• The average AGLOCO direct referral should be worth in excess of $3,000 each.
• The monthly cash distributions should be between $5 and $15 a month per user.

Wow that sounds like a lot of money is going to be made. Except of course these numbers are wholly made up and John happens to be cherry picking them. It’s exerpted from the “Simmons Report” which appears to be a blog entry on Windows Live. I have bought quite a few research reports in my time but not a blog entry. This “report” really isn’t a report. It’s blog entry and to contact the author you simply email someone at hotmail.com. Why that sounds reputable doesn’t it? Why it’s just like the investment reports I normally read. Except it’s a blog, and the author has a hotmail address. Just like something you might get a Smith Barney.
The simple fact is John is simply quoting this report which has a pretty shady provenance should be telling. It’s called plausible deniability – he can simply say it’s the report and not really his opinion. Furthermore the report is quoting valuations, not actual revenue. When the report says a member is worth X dollars, that isn’t how much an individual is going to recieve in revenue but rather it’s how public markets, specifically the US securities markets have valued the user base in such transactions. Typically when a public company buys a private entity, a valuation usually as a multiple of annual revenue is used or a valuation is assigned to the user base. Most people signing up for AGLOCO may not know the difference. Furthermore here’s something everyone signing up for AGLOCO should read about AGLOGO shares

As a new company, AGLOCO™ is a private company that is not traded on any stock exchange. We are exploring public offerings of the stock on various major global stock exchanges as a means to facilitate the issuance of shares to Members.

This should be a real warning for people expecting quite a bit of revenue/stock shares out of AGLOCO. What they want to do might be largely impossible or even illegal under US securities law. Furthermore the valuation model cited in the report is based on companies trading in US markets – not companies venue shopping their public offering because it won’t qualify under US securities law (I find it doubtful that AGLOCO can survive in a Sarbanes/Oxley environment). So these valuations will certainly be lower undoubtedly far lower than the quoted “report”. You cannot have the valuation model for a US exchange such as the Nasdaq with smaller less regulated exchanges. Furthermore these quoted valuations are for US customers. Customers in other places will be worth FAR less because they don’t have a great deal of discretionary income and therefore are less valued to advertisers. Additionally there is NO track record on the Street for such MLM opportunities so it’s comparing Apples to Oranges. You cannot compare Youtube’s valuation with AGLOGO’s valuation, especially this won’t be on a US exchange.
John has recently begun to back pedal on his over-eager promotion of AGLOCO, perhaps because he realizes that his credibility might be at stake. Here is his latest post on having 6,000 members in his downstream.

Do I believe in AGLOCO? Yes I do. I’ve been there before. I made money from it. People in my network made money from it. Did we get rich? No we didn’t. But we made money for doing something we were already doing. Even though the average member made $5 to $10 per month, that is still pure profit because this doesn’t cost anything.
The beauty of AGLOCO is the average member can’t lose. Unless you spend less than 5 hours a month on the Internet, you are not making any extra time commitment and it doesn’t cost you anything. If you never sign up anyone and just surf your five hours each month, the worst thing that can happen is you make money.
Look at it this way. You can sit by the sideline and do nothing, and gain nothing. You can join AGLOCO, just run the Viewbar, and not promote it. Still won’t cost you anything and you’ll make a few bucks. You can take a chance and promote it, built a network, maybe luck out and sign up some guy like me who runs with it (McCall signed up just 110 people but those people went to sign up 17,000 more).
If AGLOCO fails, what have you lost in terms of time or money? If it hits big, what have you lost by standing on the sideline? AllAdvantage failed, but I still made $25,000 in the process. AGLOCO may fail or AGLOCO maybe the next YouTube. I don’t know. All I do know is the risk to reward ratio is so great, I can’t pass it up and neither should you.

Notice how much more John has toned down the rhetoric? What have you got to lose? In other words it went from quoting a user getting thousands of dollars in revenue to you won’t get rich and it might fail. What John Chow is doing properly setting expectations for his readers. Most of them won’t make much and if they do, I doubt it will be enough to compensate for the lost CPU cycles of running the toolbar. AGLOCO functions on the principle of age old scams – that there is something for nothing and if you sign up enough people you will have “passive income” . No income is passive, at least not for very long. Members come and members go. But people are pushing it in the hopes that they will be the lucky one and win the lottery. Effectively that what Agloco is – because quite frankly spending time trying to sign up people and convince them it’s a good opportunity is a waste of your time when you could be building your business online – something that you will have a unique proposition for and something that you build value over time.
There’s one more line from the “Simmons Report” I would like to quote because it’s the most telling of all. Especially they think that signing up 2% of the US internet population will be easy – it’s “We only need 2% of the market” example you hear in a VC pitch that immediately makes the VC groan. It’s the we only need X%, where X is a small number. Getting 2% of any market is huge and far more time consuming that it appears.

Obviously, eventually all the users who want to join an entity like AGLOCO will be exhausted so referring will not be very significant and new direct referrals will not result in 100 total new user. At that point, direct referrals would not be so valuable (but with more than 100,000,000 adult US Internet users alone, getting to two million in the US should not hit any limits in the next two years).

Don’t worry about exhausting the number of people wanting to sign up. As a famous showman once said, There’s one born every minute.