DragonHorse Blog: Is DubLi a Scam??

A Response to the Scam Claims

Occasionally, we get questions from people who read negative comments posted on a couple of Internet sites. These sites allegedly report “scams”, but their real business is delivering advertising to people who visit their site. Their strategy is to post defamatory comments that create controversy and elicit responses (thus driving traffic to the site and boosting ad revenue). The comments they post are consistently inaccurate, irrelevant, out of context, and/or completely fabricated. If you read through all of the comments, they subsequently retract most of their claims (but they rarely remove the original comments, because inflammatory comments drive more traffic than retractions).

So, to paraphrase Mark Twain, the problem is not what people know; the problem is what they know that “just ain’t so.” As Business Associates, most of you already have enough facts and first-hand experience with DubLi to discredit the postings on these sites as things that “just ain’t so.” But for those of you who are new, and for those who are seriously considering the opportunity, here are some facts that should help. First, you need to understand DubLi’s business model, because without that understanding, it will be difficult to evaluate the comments in context. However, before we get to the business model......a little history.

DubLi History

In 2003 Michael Hansen came up with the concept of the Dubli platform and the DubLi Reverse Auctions. Michael purchased the Technical Division from eBay's Berlin office in late 2003 and they began putting together the infrastructure of Dubli. They spent the next 3 years building out the back end of DubLi and launched a beta site, in Germany only, in early 2007 with the Express Auction, the Zero Auction and the Unique Bid Auction.

The programmers spent the next several months debugging the Dubli Auction site and went live in January 2008 in 28 countries in Europe. In their first 8 months of operation in Europe Dubli acquired 2.3 million customers, and now, according to the corporate web site, have a customer to associate ratio of 72 to 1. After operating for nearly 16 months in Europe, the unique bid auction is by far the most popular auction with a nearly 4 million customer base.

Dubli officially launched in North American on April 4th 2009, and just announced that the reverse auctions will be operating on a Global Basis beginning in April, 2010.

DubLi Business Model

Most people look at dubli.com and think it’s an auction site, in business to sell auction items to customers. This is not really the case. DubLi’s auctions are a strategic “means to an end”, a “hook”, and only a small part of the revenue model. DubLi.com is an early stage shopping portal with the goal of becoming the largest shopping portal, globally. IN addition, DubLi.com has arrangements with major retailers for click-through fees and revenue-share fees. Aggregating online shoppers for click-through fees and revenue-share fees is an established, multi-billion-dollar industry, led by companies like Google, Amazon and eBay.

The most successful shopping portals have “hooks” to draw traffic to their site. Google’s hook is search; Amazon’s has always been books; eBay’s is auctions. DubLi’s hook is reverse auctions and shopping games (entertainment shopping). DubLi uses reverse auctions and games to drive traffic to dubli.com. In an eBay auction, the seller is charged the auction fee. In a DubLi auction, the bidder is charged the fee with each bid, in the form of a DubLi “credit” that costs 80¢. This auction fee covers DubLi’s cost of acquiring the customer and running the auctions and games, and it also covers the cost of reducing the auction price of the product by 25¢ with each bid, which makes the auctions exciting and drives traffic. In exchange for the 80¢ fee, the customer gets access to discounted prices at dubli.com (in the same way that a Costco member gets access to discounted prices at Costco stores in exchange for the membership fee). The DubLi customer also gets “entertainment” value in watching the price drop, which is critical to the viral growth of the customer base.

In addition, when DubLi.com launches globally in 2010, the bidding will become frantic as thousands of bidders all bit at the same time, thus dropping the price dramatically in a very short period of time.

DubLi’s strategic focus is on expanding its customer base, because the value of any shopping portal business is directly related to the size of its customer base. DubLi uses a traditional network marketing distribution model to launch its initial customer base in new markets, both because DubLi’s founder has had successful experience in network marketing, and because a network model can create large, loyal, initial customer bases faster and cheaper than advertising-based models. What DubLi gets with its network marketing model is initial customers fast and cheap (without having to raise millions of dollars for each new market launch); what DubLi gives up is a cut of its revenue stream, paid out in commissions to its Business Associates for the life of their customers.

DubLi’s Business Associates are paid commission to create new customer bases and to sponsor new Business Associates (who, in turn, create more new customer bases). Commissions are paid to Associates whenever their registered customers buy credits to participate in dubli.com auctions or whenever their customers generate click-through or revenue-share fees by clicking through to DubLi’s search engine partner. In order to create a new customer base, Business Associates buy DubLi credits in bulk (called “Product Packages”), and then give away the credits to prospective customers to get them to visit the site and try out the auctions. When a new Business Associate buys a Product Package, commission is paid to the recruiting Business Associate, just as if a customer had bought the credits (and that is how Business Associates earn commission from recruiting new Business Associates).

DubLi Scam Responses

Here are the negative comments that are posted on the Internet (in italics), followed by the facts, along with some answers to frequently asked questions:

“DubLi is a de facto pyramid scheme because . . . 97% of its revenue comes from [the sale of Product Packages].” Actually, the percentage of revenue coming from Product Packages is probably higher, closer to 100%, than that in the U.S. right now; but that is because customers buy credits, not from DubLi.com, but from the distributors. When a customer buys credits at 80¢ each the distributor make a profit on those credits because the distributor bought a “product package” at a discount. This process will continue, even into and beyond the customer acquisition stage. There is nothing about selling credits to Business Associates to launch new markets that constitute a pyramid.
“If [my] updated estimates are correct, DubLi has made between $8,500 and $12,000 on the 3 games in 1 month . . . How can DubLi sustain itself?” It can’t sustain itself on auction revenue, and no one has ever claimed that it would. The objective of DubLi’s auction unit is not to sell product. It is instead to drive traffic to the portal, while selling as many credits as possible (and ironically, while selling as few items as possible). DubLi is a shopping portal, not an auction house. Its success is measured by the number of shoppers it aggregates and sells. The amount of auction revenue generated is irrelevant and has no bearing on DubLi’s success or sustainability.
“DubLi is a pyramid scheme because it sells nothing of value”. Not true........all of the registered DubLi customers who buy credits each month and participate in the auctions agree that there is tremendous value in the credits. Saying that there is nothing of value is like saying that an annual Costco membership has no value. With Costco you pay to see the reduced prices of all the items they sell. With DubLi you pay to see the reduced price, but only on the items that you want. There is no question that businesses and customers alike find DubLi’s products and services valuable and are willing to pay for them month after month. This false comment is nothing more than a “cry pyramid” attempt to drive traffic, and it comes with zero substantiation (because there is none).
“DubLi is a Ponzi scheme because it uses new investor dollars to pay returns to earlier investors”. Can’t be true. DubLi does not sell licenses, or investments or securities of any type, and it does not offer “returns” of any sort. It only sells products and services of value, and pays commission to its Business Associates on what is sold. By definition, therefore, it cannot be a Ponzi scheme.
“DubLi’s founder, Mike Hansen, has bankrupted four companies”. Not true, and the information posted to allegedly “substantiate” this claim is taken completely out of context. Early in his career, Mike Hansen was a restaurant entrepreneur who co-founded several companies in Denmark. Long after he sold his interest and resigned from management, the subsequent owners and management teams of three of those companies bankrupted them (which is not at all uncommon in the restaurant industry). Although the Danish public records will always show Mr. Hansen linked to those companies as a founder (which is the out-of-context information prominently posted by one site), Mr. Hansen had no involvement in the subsequent management or bankruptcy of those companies. It is true that DubLi’s original corporate entity, DubLi Denmark ApS, was voluntarily liquidated and dissolved when the company acquired a German company and moved its headquarters from Denmark to Germany. Here again, the information posted is presented out-of-context of being an orderly and proper wind up of a corporate entity that was no longer being used. A later post on the same site (by someone not affiliated with the site) provides a list of dates and events that corroborates everything stated here. The site acknowledges the new information and does not dispute its veracity, but continues to leave the out-of-context information displayed as the lead items under the heading of “DubLi Fact Repository” (so that it will continue to create controversy and drive traffic, which makes them money).
“DubLi isn’t even registered in the United States”. Incorrect. DubLi now has an operational headquarters in Boca Raton Florida, and through a reverse merger is now a public company called Media Net Group (with a stock symbol of MEDG on the OTC). The site that posted this ridiculous claim subsequently retracted it.
“DubLi doesn’t even register when you compare traffic analysis”. That’s true, but the claim is made out-of-context because the analysis comes from public web metrics companies (like Google or Alexa) who don’t measure traffic that comes through “personal home pages”. Most DubLi customers visit dubli.com via a Business Associate’s individual website link (i.e., dubli.com/xxxxxxx). By their own admission, most web metrics companies do not count what they classify as “personal home pages”, which are treated separately if they can be automatically identified as such from the URLs in question, which is the case with any Business Associate’s dubli.com/xxxxxxx link.
“DubLi is a gambling business.” Not true, and the U.S. States’ Attorney offices seem to agree. None have elected to take any action or even object to DubLi’s auctions as “gambling enterprises” or “lotteries”. The people who post negative comments about DubLi in order to drive traffic to their own site can “say” that it’s gambling, but the legal authorities who are responsible for enforcing gambling laws in each state do not agree.
DubLi has no connection to Andy Bodowin or TNI, and any innuendo to that effect is false. The writer who likes to name these two in his posts about DubLi has denied that he is implying any connection . . . but he continues to name them.
DubLi uses Fedex, UPS and DHL, and has never overcharged for shipping. The comments posted to the contrary (most of which have been retracted) are fabrications and can be easily verified as such by checking any of the above carriers’ price lists.
DubLi customers are never overcharged for products that are purchased or won on the auctions. The comments posted about “paying double at the checkout” stem from the poster’s lack of understanding of how the auctions work. This comment was subsequently withdrawn by the poster, who admitted that he was wrong.
There are numerous erroneous comments posted about the cost of Product Packages to Business Associates, most of which have been subsequently retracted (but most of which remain posted on the sites). The errors range from simple math inaccuracies to a complete lack of understanding of what is being charged and to whom.

Bottom line, DubLi is a complex business that combines a customer-focused shopping portal with a network marketing distribution model. That combination gives Business Associates the rare opportunity to earn an ongoing cut of the revenue stream in an emerging Internet company; a benefit that is normally available only to equity holders and venture investors.

Now, get this......this is only the beginning. Not even the shopping portal is DubLi's ultimate goal. DubLi is looking to change the buying habits of the global online market place. Something that I haven't even mentioned yet is a piece of propriety software called the "Cinch" that has been created for the PC is now being redeveloped for the smart phone. This will allow two-way communication between the shopper and the merchant that will bypass all the email issues. It will allow for "Targeted" messages to shoppers who are truly interested with TRMENDOUS value for all involved: 1) the Customer, 2) the DubLi Distributors, 3) the Merchant, 4) Dubli.com. This becomes a true WIN, WIN, WIN, WIN scenario.

This is only the beginning. Will you be COMING ALONG for the RIDE?

As for comments posted on the Internet about DubLi, please consider the source (and the source’s underlying motivation) before you attribute any credibility to the comment. Also, if you read something not covered here that appears to raise a red flag, please ask about it . . . you’ll find that, most often, it “just ain’t so.” They have no clue what Dubli is doing, or where DubLi is going.