Better Living Global Marketing warned its affiliates on October 2nd about members using "non-natural means to place bids" in its penny auctions. This notice suggests the company faces the same bid inflation issues that plagued Zeek Rewards, a previous penny auction Ponzi scheme.
The underlying problem in these multi-level marketing models combines Ponzi points with a penny auction front. Affiliates must continuously reinvest in an extraordinary number of bids. This daily reinvestment generates a massive amount of bid saturation on the auction platform.
Affiliates typically dump bids on customer accounts to generate Ponzi points. They often create these accounts themselves or pay others to do so. Once dumped, these bids usually sit unused. Most affiliate investors find participating in the auctions too time-consuming. Some, however, do use their dumped bids, hoping to maximize their return by winning an occasional auction prize.
Over time, enough affiliates engage in these auctions that every single one becomes flooded with an excessive amount of used bids. Retail activity, meaning purchases by non-affiliates, is already low in Ponzi points-fueled penny auctions. Zeek Rewards, for example, saw less than 2% of its total revenue come from retail.
A facade of retail activity is crucial for these companies. It allows them to attract new investors by suggesting legitimacy. Penny auctions typically lure non-affiliates by promoting how easy it is to win items at prices far below retail. This becomes impossible when affiliate investors swamp every auction with nearly infinite Ponzi points bids.
Retail activity inevitably dies off completely. No one wants to spend money on practically unwinnable auctions. Affiliates then just bid each auction into oblivion. Winning an auction becomes a game of patience, not a calculation of bid cost versus item value.
Zeek Rewards experienced significant bid inflation in its Zeekler auction just before the U.S. Securities and Exchange Commission shut it down. The company's revenue was on the verge of turning negative.
Better Living Global Marketing, with its nearly identical penny auction Ponzi points business model, appears to follow Zeek's path. Zeek Rewards simply called its bid inflation "fraud." Better Living Global Marketing now refers to it as a "non-natural means to place bids."
The company issued its October 2nd warning in response to likely complaints from its few retail customers about unwinnable auctions. The notice stated: "Despite our polite reminders given to Members not to use 'non-natural means' to place bids, situation has not improved but, on the contrary, deteriorating."