Capsule summaries don't always do justice to the textures and flavors of ethical
and financial fiascoes. Case in point: the eFront debacle.
eFront was basically a network of techie and hacker-oriented sites, with a number
of other topical sites added to the mix as the network grew to a whopping 170
sites. The company began as a site called NetWhirl, which became
eFront Media after a merger. Soon after, eFront began acquiring site
after site, promising their often youthful proprietors equity, higher
advertising rates, and more. Many of the sites were run by teen webmasters who
typically focused on "warez," MP3s, and other topics popular with teenaged
techies. By putting together this motley crew, eFront as a whole was able to briefly
crack the top fifty in the overall Media Metrix rankings of web properties. This
latter achievement just about summed up eFront's whole business model - an
effort to paint a respectable veneer over, and present an image of cohesiveness
to, some rather dubious and uncoordinated business activity.
When those of us who make our living in Internet-related companies twigged to
the unfolding eFront collapse, we plunged into the "full transcript," as it were.
on F***ed Company led us to the web sites which were generously hosting the
"evidence" against eFront; in particular, a long series of pilfered private ICQ
chats that detailed what the company brass were thinking as things came unglued.
We, the reading public, were also made privy to records showing sizeable
but dwindling payouts to eFront from advertising middlemen (such as Doubleclick
and About.com's Luna Network) in connection with advertising shown on their various
The ICQ chat transcripts were not
enormously damning in a legal sense. They merely felt uncomfortable and slimy.
The low point is Sam Jain's infamous comment with regard to breaking an agreement
with one Jennifer Moss, proprietor of BabyNames.com: "Rape her and spit on
With Jain exercising his firm hold on proceedings and keeping an iron grip
on his estimated 85% stake in the company, you could almost feel eFront execs' sweaty
brows in these transcripts as they grappled with the increasingly
difficult process of keeping all the balls in the air. An overriding
theme was a need to dictate terms to their webmaster partners which were far
removed from the original agreements, while continuing to take in as much of advertisers'
money as possible; money which these partners would see less and less of as time
Observers with strong stomachs also took the time to listen in on an audio file
of an hour-long conference call between eFront management and their member
webmasters. At this point, many of the webmasters weren't being paid, and things
were getting ugly. The walls were closing in on eFront as they did for so many
failing Internet business models. The conference call had the eerie feeling of
a summer camp gone wrong. The parental or at least "big brother" figures in eFront
management joked around at the outset about one of their 15-year-old members having
just managed to get permission to get out of school for an "important business
meeting." The brass then went on to explain that it was a "very tough time" for
the company, and that it was much better for webmasters to stay loyal and
receive "some" of the monies owed as opposed to letting the whole ship sink and
getting nothing. Having fun yet, campers?
eFront CEO Sam Jain played the maligned victim as the walls started caving in
and as public scrutiny of his operations grew to uncomfortable levels. Lest one
be too concerned for Mr. Jain's mental health, it would appear that his modus
operandi in the eFront scheme was well rehearsed. It was soon revealed that he had a previous
conviction for, you guessed it, fraud.
But don't go crying for all of these webmasters, either. Many of their web
sites offered little or nothing of redeeming social or market value. Many were
devoid of a business model other than, well, getting acquired by the likes of
eFront. The owners of these sites seem to have been adept in their tactics for
pumping up traffic -- often based on getting the word out that "illicit"
activities could be performed on their sites. Many who remember the days of proprietary
BBS's in the 1980s whose purpose was to trade pirated software will remember this old
game. The difference was, the purveyors of warez in days gone by kept things quiet,
and didn't expect a pat on the back, much less a fat check from a sugar daddy
investor or advertisers, for their troubles.
While the interactions between the adult eFront management and its oft-youthful
webmasters were sleazy and sometimes fraudulent, not a few of the youngsters were
agile con artists in their own right. What's so wrong, one might ask, about driving
a lot of traffic to a site of questionable merit? It doesn't seem particularly
wrong until one recognizes that for a brief time, large numbers of "page views"
could be turned into cold, hard cash, especially in the context of a reputable
"front organization" like eFront whose job was to legitimize their member web
sites in the eyes of the advertising middlemen and in turn, in the eyes of paying
advertisers. In other words, the promise of higher ad rates proferred by eFront
management to these oft-shifty teen webmasters was something along the lines of
"you'll get higher advertising rates per page view if you let us, the adult supervision,
tell the advertisers that you're legit." This nasty little incentive system gave
the script kiddies all the motivation they needed to manufacture as many page
views as they thought they could get away with.
Eventually, the game ended as the advertising middlemen and their customers got
wind of the shockingly low response rates they got for their ad dollars. In the
end, the kiddies didn't get paid for the majority of their deceptive practices.
They discovered that contrary to mythology, there isn't always honor amongst thieves.
Someone might counter that some of the eFront-associated web sites and their
owners were high quality and reputable; some even had cool business prospects
before being gobbled up by these bumbling acquirers. True. Even in a bunch of
rotten apples, there's bound to be a good one or two. And eFront suckered in quite
a few good people.
We have heard much about the ineffectiveness of banner advertising; the 0.1%
clickthrough rates, the abysmal response rates to online advertising in general.
It's often stated in dry terms, like a law of nature that derives from the fact
that surfers have become impervious to advertising. But there is plenty of evidence
to the contrary -- quality industry-specific sites that do offer good response
rates for advertisers; the high CTRs and healthy response rates associated with
search engine keyword advertising and search engine placement (where consumers
are actually looking for something specific).
The usual explanations for what happened to advertising go-betweens like Doubleclick
and 24/7 Media seem to gloss over a key reason for the death of CPM-based banner
advertising: a certain percentage of webmasters figured out how they could abuse
a system in which page views were being treated like hard currency. The presence
of naive advertising dollars and legitimacy-conferring middlemen sent a clear
signal to the most unscrupulous operators: figure out ways of creating phony traffic
in order to generate as much of this new currency as possible while it lasts.
For a time, for some, it was like printing money. Well, that was advertisers'
money. And those advertisers are still holding a grudge about it. That's part
of the reality underlying the so-called "declining effectiveness" of banner advertising.
The actions of some unscrupulous eFront webmasters, and many like them, contributed
to the heightened suspicion and exaggerated focus on results tracking that potential
online advertisers are bringing to the table today. Online publishers must regain
Unfortunately, this won't happen overnight. Fortunately, this is a matter of
market dynamics as well as ethics or image. Now that advertising costs less, some
online advertisers are finding bargains. In fact, some companies that are emerging
now, out of the ashes of the carnage that hit so many of their predecessors, are
making a bundle because of the low cost of introducing their service to new prospects,
and yes, even of blizzarding the Net with ads in an attempt at "branding." One
such company is Classmates.com.
They're getting the returns they're looking for by advertising heavily online.
That sounds like a solid foundation to build on.