Every now and then, a study will be released suggesting that DVR owners don’t actually skip very many ads. While I can understand why people would want to watch certain programs live, it’s always hard for me to take this kind of data seriously, because it tracks so differently, from my own DVR experience.
I love being able to time shift my television and take full advantage of my fast forward button. If I absolutely need to see something live, I’ll still wait 20 minutes, just so that I can skip past the commercials. Over the last six years, I’ve been every marketers worst nightmare and yet, there has been one company that I have never been able to block.
Sleeptrain Mattress Centers
It’s not a major company, but this sleepy little company has been able to outsmart the DVR, by exploiting the very fast forward feature, that I love so much.
When you are fast forwarding, you don’t know when to stop until after your program has already started. Because of this, TiVo has built in a feature that starts playing the program a few seconds before you actually hit the play button. The idea is to account for the time that it takes your brain to tell your finger to hit the button.
When I bought my first TiVo, I did a good job of fusing with the skip back feature. By instinct, I knew the exact moment that I needed to hit play, in order to achieve TiVo nirvana. It sounds funny, but there is a certain sense of satisfaction, in starting a program exactly as a commercial ends.
It wasn’t until I “upgraded” to a cable company HDTV-DVR, that I lost my TiVo mojo. The fast forward speed on the generic device was beyond ridiculous and I had a hard time adjusting. Add to this the lag time, whenever you hit play anyway and it was easy to go 15 minutes into a program, before I could regain control of the DVR. I don’t remember the exact timing on the cable skip back, but it seemed much shorter then TiVo’s and required lightning fast reflexes, in order to get right.
When I upgraded to a TiVo series 3, I thought that my commercial skipping rhythm would return, but sadly, I haven’t been able to make the adjustment back. I’m still trigger happy when it comes to hitting play and start things far too early. I’ve thought about using hacks to shorten the length of the auto skip back feature, but would rather try and adjust to the default if I can.
Because I’ve had difficulty hitting the TiVo sweet spot, it means that I catch the end of a lot of advertisements. There aren’t a lot of companies that have focused on this, but over the years I’ve noticed that Sleep Train Mattress Centers seems to be at the end of a lot of commercial pods.
At first, I thought that this was a random thing, but I’ve also noticed that they buy time at the 30 minute marks, so that their logo is the last thing you see, when you delete a lot of programs from your DVR. As advertising continues to adjust to a DVR world, we’ll see more companies begin to pay a premium, in order to capture even a few seconds of a viewers attention.
In thinking about DVR advertising, there are two key spots. The first spot following a commercial and the very last moments before a program starts. The first spot is important because the advertiser has a chance to convince the viewer to watch. It’s like a home version of the Gong show. The minute you realize it’s boring, you hit fast forward and are back to your program. Sometimes, if it’s a movie preview or an especially creative ad, they can convince me to watch, but most of the time, I’m fast forwarding the second I know that it’s not part of the show.
With all of the middle ads being largely ignored, those last few seconds of a pod may be the only other chance for an advertiser to reach a fast forwarding public. I haven’t seen a lot of companies take advantage of this, but give kudos to Sleeptrain for having taken early advantage of this. They may not be able to convince me to buy a new mattress, but through the use of micro commercials and smart placement, they have succeeded at burning their logo into my brain, every time I hear a train whistle.
TiVo latest hook up with Pay Per Post is beginning to look less like a relationship and more like a one night stand, after the company responded to criticism of the program, by asking “postees” to pull the TiVo ads off of YouTube.
In fairness to TiVo, there is evidence to suggest, that they had intended these ads to carry a sponsored by TiVo disclaimer, but due to quality control issues at Pay Per Post, the ads were leaked without the proper disclaimers.
Even though I think that TiVo made a mistake by partnering with Pay Per Post to begin with, killing the campaign was the right antidote for dealing with this poison in our community. There will always be times when companies make mistakes, but it’s how they react to those mistakes that define who they are and in this case, TiVo made the right move by deleting the campaign.
By moving quickly to kill the campaign, TiVo demonstrated that they are willing to listen to their community and take action, even when they’ve misjudged the rules that their community plays by.
In the long run, this won’t represent more than a five second skip back in the history of TiVo, but I do think that other companies can learn a valuable lesson from TiVo’s experience.
User generated content is sexy and it’s tempting to try and manufacture buzz, but sooner or later, your customers will find out that you are gaming the system and they will attack. Steve Rubel said it best, when he recomended that marketers be careful about trying to manipulate the social web.
“Digg, Reddit, del.icio.us and other collaborative news sites are like Bengal Tigers. They’re beautiful to look at and admire, but they’re very dangerous to touch. If your stories end up landing on these sites, then terrific. Be happy. Include the metrics in your coverage reports. But seeding PR links is trouble waiting to happen, especially as these communities become barraged with spam and the users’ sensitivity meter goes to code red.”
If your brand has no value, then there may be no place to go but up, but if you think that there is any equity in your brand, then smart marketers will think twice before supporting this tumor on the world wide web.
Even if there were an upside to astroturfing YouTube with fake ads, this controversy alone should make companies rethink their support for the Pay Per Post brand. If by partnering with the company, you end up damaging the reputation of your brand, then what have you really gained by paying people to create fake testimonials?
If I was an ad exec and my marketing consultant suggested Pay Per Post to me, I would fire them and find a marketing firm that has better ethics and an understanding of what it really takes to build grassroot support. Instead of uploading fake ads to YouTube, TiVo would have been better off, by having someone search YouTube, LiveJournal, Blogspot and MySpace for real TiVo testimonials and then leave comments thanking them for the support.
There are lots of times when I make suggestions for TiVo and while not everyone of them is a great idea, I can tell you that I would freak out if someone who worked for TiVo, left me a comment validating an idea and promising to consider it as a future development. Even if TiVo never implemented my idea, knowing that someone from the company took their time to consider it, would be exciting enough. This isn’t astroturfing, this is interacting and responding to your customers.
Fake ads, will always run the risk of blowing up on you, but by being open and transparent with your fan base, it’s not that hard to turn happy customers into viral customers. Instead of supporting companies like Pay Per Post, businesses should instead be thinking about how to engage their existing fans.
While you may or may not agree that the ethics behind Pay Per Post are deplorable, it’s clear that the company is a lightning rod for criticism. Whether or not that criticism is fair, should be irrelevant to marketers. There are some who believe that even bad publicity is good publicity, but I don’t think that anyone wants to see their brand dragged through the social mud. It’s exciting to see grassroots support for your products, but if you are going get into the same cage as the tigers, then you shouldn’t be surprised when they turn on you and attack. If some PR hack recommends Pay Per Post as a way to build buzz, do yourself a favor and go hire someone who knows what they are talking about.
Over the years, I’ve seen a lot of different TiVo marketing campaigns. Some of them have been great and some of them have been bombs, but TiVo has never been afraid of taking risks, especially when it comes to generating publicity. Whether it was their funeral for the VCR or their ad throwing a TV exec out a window, they’ve been able to get pretty good bang for their buck, from the social web.
Despite my normal enthusiasm for TiVo’s PR stunts, their latest campaign has been a little over the top, for even my tastes. It started in late August, when TiVo issued a press release that declared that their new TiVo HD box, had all the features that people expect from a perfect companion. When I first read the release it was so syrupy, I could barely finish it.
I even almost wrote a snarky blog post, where I was going to point out that despite their claims, I’m actually looking for something a little bit different from my “hook ups”, then the family friendly criteria that they included in the PR fluff. Things like someone who won’t freeze up on me after I had been out drinking with the boys or someone with a pair of really big hard drives or a companion that doesn’t get jealous when I play video games.
I ended up getting distracted and never wrote my post, but when I saw TiVo issue another lovefest press release, I just rolled my eyes and figured that I was in the wrong demographic to ever understand this one.
Normally, I wouldn’t have thought much more about this campaign, except while I was surfing YouTube, I came across severalclips that appeared to be fan made videos expressing their excitement for the HD TiVo product. At first I actually thought that these were made by TiVo customers. There is definitely an indie feel to them. One of them actually does an amusing simulation of the world from TiVo’s perspective It wasn’t until I got to my my favorite video of the bunch that I finally figured out why there was such a sudden rush of TiVo videos on YouTube. Of all the clips out there, this is the only one that I could find, that was honest enough to at least identify that it’s part of the Pay Per Post program.
Pay Per Post has been a very controversial company from the start. Because they pay individuals to make fake user generated content, that are really covert advertisements for sponsors, the FTC has even expressed some concerns over the truth in advertising issues related to their service.
Now I don’t think that there is anything wrong with TiVo paying someone to make commercials for them, but there is something wrong with conning consumers into believing, that they are witnessing legitimate testimonials when in fact, it’s really just a shill that is being paid to tout the product. If TiVo were requiring these video bloggers to put Pay Per Post on every video, I wouldn’t even see this as controversial, but 5 of the 6 ads that I saw, carried no warnings.
In the past, I’ve appreciated TiVo’s edginess in how they advertise. It may not always be to my liking, but I don’t mind them taking risks. This time though, they’ve crossed the line. By not clearly identifying this content as an advertisement, they have insulted the grassroots community that already spends so much time and effort evangelizing TiVo’s brand. By polluting their community with this vaporous buzz, they damage the credibility of every piece of user generated content, even if it really is being made by a legitimate fan.
If TiVo already had a terrible reputation or couldn’t get buzz to begin with, I could understand why they would stoop to this level, but their customers already love their products and spend plenty of time gushing over each and every little development. With as PR savvy as TiVo has been, it puzzles me why they would risk this kind of damage to their reputation, just so that they could get a few more videos up on YouTube?
If they really are proud of supporting these artists, why not put a big TiVo logo on the front of every clip and let YouTubers know that they are watching paid programming? If this was on the up and up, TiVo wouldn’t be hiding this, but because they want it to appear authentic, they’ve choosen to support Pay Per Post and let them do the dirty work.
As a member of the TiVo community, I love it when I see cool fan creations. It’s neat to be able to connect with other people who feel just as passionate about the TiVo experience. Over the years, TiVo has gotten a tremendous amount of grassroot support from the social net and to betray that trust is a huge blunder. By choosing to “hook up” with Pay Per Post for their latest ad campaign, they have introduced a toxic poison into the TiVoSphere that can only make it sick. TiVo needs to end this questionable form of guerrilla marketing, before they damage the credibility of their fan base any further.
After doing my research on GrowthStockGuru’s most recent hot stock tip, I contacted the business press and asked for comments on why they would run an ad for a microcap company, whose former Director is married to a convicted stock promoter? I emailed Business Week twice and Smart Money once, but neither of them seemed to feel it was important enough to reply to. Forbes and Investor’s Business Daily did reply though and unfortunately Forbes said that the print ads had gone out, but that future ads were being discontinued.
“Thanks for your note- we obviously take this very seriously given our
reputation in the industry. Just so you know Forbes.com and Forbes
magazine are separate organizations with separate sales teams. I had
some people here at Forbes.com run a check and it appears that we’ve
never shown those ads online. I can confirm that there had been ads run
in the print mag in the past but from what I’m told those are going to
be discontinued.”
While, it’s unfortunate that Forbes ran the ad to begin with, I can understand how they could miss some of the details behind GrowthStockGuru’s tip. Digging through the SEC files was like peeling an onion, the more I read, the more I wanted to cry. Forbes willingness to re-evaluate the history of the company and their decision to discontinue future ads, demonstrates that, while careless, they do care enough about their readers trust, to understand that the easy money, isn’t worth the hit to their credibility.
Investors Business Daily on the other hand, did not seem to think that there was anything wrong with advertising a penny stock, in order to increase “awareness” of the company.
“Thank you for your email regarding the advertising from GrowthStockGuru. Investor’s Business Daily does have a policy in of rejecting display advertising that promotes penny stocks. Display advertising refers to the ads that are placed throughout the newspaper.
The ad you referred to ran in our Corporate News section. This is classified advertising section designed as a forum for public companies to increase awareness of their stock. Most of the ads that run in Corporate News are penny stocks. Many of our readers regularly read this advertising feature searching for new and interesting investment opportunities. The section is labeled as advertising and in no way is an endorsement by Investor’s Business Daily. We also run a small disclaimer in the section stating that we can not guarantee the accuracy of the information in the ads.
Thank you for taking the time to share your concerns with us. We value your input and take all suggestions and comments very seriously.”
After reading IBD’s email, I was really surprised to learn that advertising “classifieds” of penny stocks is part of their business model. I’ve always thought of them, as being one of the top five business publications for Wall St. investors. Unfortunately, I didn’t get to see the print ad personally, so I don’t know about the disclaimers there, but on their website, they are still running the growthstockguru ads and I don’t see any disclaimers. In order to get to this ad, you click “corporate news” from their home page and then you see a summary of the stocks being advertised. If you click through to the third page, you finally see an “advertising” logo, identifying the piece as pay for post content.
Since IBD seemed to feel that the stocks being advertised were “new and interesting investment opportunities”, I decided to take a closer look at some of the opportunities, that they were showing their readers. In order to find out how good these picks have turned out, I picked a semi-random sample of companies and took a look at the performance of their stock price, after the ads. Thanks to the magic of Archive.org, it was pretty easy to find the past advertisements, but tracking down the prices was a different story.
The methodology I used for my study was to take any stock under $100 million that was advertised in IBD’s “announcements” section of their “corporate news” service. I then found seven stocks that actually had historical prices and figured out what long term “INVESTORS” would have made, had they bought and held the stocks, at the time they were being advertised. For the stocks that I couldn’t find pricing on, I think it’s fair to call them a failure, but I’ll leave it up to my readers to decide, what they think those returns would have been, if investors had access to historical information.
You Can Get Better Odds In Vegas
On March 1st, 2005, Investor’s Business Daily ran “classifieds” for BSDM, IGTN (now IGTG), AHCKF, GMED and TNSX.
BSDM was a bio-tech play, the company’s seems to think that they have microwaves that can cure diseases. When IBD readers were being tempted to buy in, the stock was at .14 a share, today it closed at .055. A loss of 60%. I couldn’t get pricing on IGTN, but typically when a company changes their symbol, that’s not a good sign. Since being listed as IGTG, the company has gone from 0.15 to .0525, a loss of 65%. AHCKF was another stock that did not have historical information. Currently, the company is priced at .01 per share. After the ads ran in IBD, their auditor started raising questions about insider compensation and the company was issued a cease trade order by the British Columbia Securities Commission.
GMED, I was able to find pricing on. They trade on the pink sheets and on the day the ad ran, they opened at $0.083 per share, today they are at .01, a loss of 88%. TNSX is also a healthcare play, but they use software instead of microwaves. They closed at .14 on the day the ad ran and finished at .055 today, a loss of 60%.
In 2005, this section wasn’t called “corporate news” yet, it was called “investor newswire” and to be fair to IBD, it was listed under the advertising section on the main page. Sometime later, they changed the site and made it so that you have to click to the third page, before you know that you are reading an ad.
On 01/01/06, they ran ads for three companies that I could locate. TLPE, LNXGF and ANSW. TLPE is a “wireless telecommunications provider”. On the day the ad ran, the stock was at .27, today it’s worth .028, a loss of 89%. LNXGF was a mining play, but I’m not sure why they picked their name. Less tech savvy investors may have thought that there was a connection, but Linux Gold Corp. had nothing to do with Richard Stallman. They just look for mines. Things weren’t so golden though, after IBD’s ad. The stock has gone from .35 to .18, a loss of 48%.
Of all the microcap stocks that I found, ANSW has been the only one to actually finish in the black. Had you gotten in on their ad, you would have paid $11 and today it’s at $14.50, a positive return of 31%, albeit for a considerable amount of risk. Even though, ANSW has finished positive, it’s also been a very volatile ride. Earlier this month, Eric Savitz’s at Tech Trader Daily, wanted answers on why ANSW was seeing such wild trading, it wasn’t their fundamentals, it was advertisements. A few days after ANSW hit $12.50, WallSt.net announced a partnership with them and the stock took off. WallSt.net specializes in providing “promotional” help to small stocks in exchange for cash or shares. There were no details about any advertising relationship mentioned by Answer.com or WallSt.net, but over the next few weeks, Answer.com mysteriously saw it’s stock price run to $17.15, before crashing on heavy volume. Today it’s back at $12.54. Three days after the sell off, WallSt.net ran a second press release announcing the integration of their bookmarking tools into ANSW’s site.
On March 1st, 2006, IBD advertised “classifieds” for BGES, PTGC and a company named Plasticon International. BGES is another bio-tech play. On the day it was advertised, the price was $1.80 and today it’s at $1.00, a loss of 45%. PTGC was tougher to track down. I knew it’s starting price, but like many stocks that take severe nose dives, they changed their ticker symbol to reflect “a different direction” for their business. In this case they used PEYG. When companies do this, Yahoo! finance and other sites drop the past pricing and hit reset on the historical pricing. It puts the regular investor at a huge disadvantage because they don’t know the trading history on the stock. One way that the SEC could help to prevent these things, is to require that historical pricing be available, if a company wants to change symbols.
I did a little digging and luckily, I was able to track down the SEC document where they report a 5 for 1 reverse split. From there, I was able to figure out that on a split adjusted basis PEYG was at $1.95 on the day the ad ran and today it’s at $0.43, a loss of 78%.
Unfortunately, I could not get historical pricing on Plasticon, but of all the companies, it was by far my favorite. Their CEO should be writing a blog, instead of trying to replace steel with plastic. I would subscribe just for the entertainment value. One of ads featured the CEO wearing a superman suit, it was a hysterical read, even though I would never have invested in his company. It’s hard to believe that even cheesy copy ads seem to work. Unfortunately, for Plasticon though, they weren’t able to leap over creditors in a single bound and filed bankruptcy on May 25th of this year. Their stock is currently worth $0.0001 per share.
Had you gone out and invested $1,000, into just the seven companies that I could find pricing for, your $7,000 investment would now be worth $3,630. You would have taken a 49% loss from buying these stocks, that you saw advertised as a “corporate news” on IBD’s website.
Now I realize that my sample size is too small for this to be a scientific study, but I feel fairly confident, that if you take a closer at the other ads that have run, you will find a similar failure rate, among the businesses being advertised. Maybe I was naive for not knowing that the business press was selling out their readers for penny stock ad money, but I find it outrageous that these “respected” business tabloids run ads, that are very likely, hurting their readers financially.
To make matters worse, this problem appears to be more widespread than just Business Week, Forbes, IBD, & Smart Money. It also appears that Reuters runs ads for microcap companies too. Right now they are featuring an ad from a company, named “lil stock investors”. I took a closer look at the companies that they are advertising and sure enough, GrowthStockGuru’s hot stock pick is one of them.
The business press is very quick to get lathered up about the latest stock scam convictions, but they refuse to acknowledge the role that they are playing in some of these very promotions. When your ads can influence the price of a security, the media owes it to their readers to do their due diligence. When someone knows that a stock will fall, after an ad ends, it might just be insider trading. Why won’t Business Week and “Smart” money return my emails about their relationship with GrowthStockGuru? What is it that they are afraid of? There is clearly a conflict of interest here and if people don’t speak up, the press will bury this, because they have a financial stake in making sure that people don’t know about the cesspool advertisements.
One of the problems with stock spam, is that it preys on the get rich quick mentality. Investors are encouraged to act right away and to take claims at face value. I’ve never been opposed to investing in high risk investments, but you can bet that I do my homework before I jump in. Unfortunately, too many investors don’t take the time to read the SEC filings, before making an investment and when the hype dies down, they get hurt.
Another problem with stock spam is that sometimes the companies being promoted, are as much a victim to the fraud, as investors are. Some microcap companies will even issue press releases warning investors that spamming is going on. Even though these companies temporarily benefit from the attention, for legitimate businesses, the volatility can create real problems in the long term execution of a business plan.
Because GrowthStockGuru was willing to pay bulk postage rates, just to get my attention, I wanted to take a closer look at the people behind Guangzhou Global Telecom (GZGT), just to make sure they weren’t a victim, in all of this. The deeper I dug, the more ugly things looked.
It All Started With $100
In order to better understand the prospects for GZGT to succeed, you need to look at the qualifications of the key players behind the business. Because the company was formed as part of a reverse merger, it’s important to look at the pieces that make up this puzzle before the company merged. Even though, GZGT is being promoted as a Chinese stock market play, a Florida real estate company named Avalon Development Enterprises played a more important role, in creating the company.
Avalon was first formed in 1999, after Charles Godels, invested $100 into the company and filed the appropriate paperwork. Shortly thereafter his wife, Marguerite Godels also purchased 100 shares for $100. Between Aug. 2004 and and Feb. 05, the company must have needed more capital because they had another underwriting where they sold 3 shares a piece at a $1 valuation and brought in 44 more investors.
On 12/5/05, the company did a forward stock split of 4500:1 and overnight, investors saw their 332 shares turn into 1,494,000. They also filed a registration, that would allow them to sell their shares at .50 cents a piece to other investors. At this valuation, it meant that on a split adjusted basis, their $1 share price was now closer to $2,250.
On 01/08/07, Charles P. Godels, Diane J. Harrison, Madanna Yovino, Michael T. Jones, and David E. Dunn all resigned from Avalon’s board of directors. At that time, Allen S. Greenberg officially took over as the company’s president. Two days later, they entered into their merger transaction.
In the footnotes of the 8k filing announcing the resignations, I noticed something about Mr. Greenberg’s biography that raises some interesting questions about where the money is going to.
“from 2005 until the present, Mr. Greenberg served as the Operations and Customer Service Manager for Global Administrative Provider in Costa Rica. In that capacity, he was the client service contact for all investment advisory firms, was responsible for setting up offshore investment structures for clients, oversaw all incoming and outgoing wires via international custodian banks, and oversaw all company invoicing.”
Avalon was supposed to be a local Florida Real Estate company and yet, they brought Mr Greenberg’s in, in order to set up offshore investment structures from Costa Rica? As a Chinese company, I can understand why there would be some need for this, but while doing my research I found several offshore accounts, that can be connected to different players behind Avalon Development. I also found an alarming amount of small shell companies, that are either currently trying to get listed or who have tried, but failed to go public. If GZGT really is a once in a lifetime opportunity, why have so many investors utilized accounts, that are beyond the immediate reach of the US Government?
Investors Cool To Hurricane Real Estate, China Gets Bubble Fever
Investor were tuning out Real Estate, so if Avalon wanted to make a splash they needed access to a hot sexy growth market that investors like right now. They decided on a Chinese phone card company and agreed to buy them out with stock. In order to get access to Global Telecom Holding Limited,(herein referred to as GTHL) Avalon issued 39,817,500 of restricted common stock, in exchange for 100% of the company. During the merger, the company also executed another forward split, this time at 8.75 - 1.
After completing the merger, they had 52,890,000 shares outstanding and could authorize up to 75,000,000. Based on Friday’s closing price of $1.95, this means that on a split adjusted basis, the original $1 per share investment is now worth $77,000 per share. Mr. Godels initial $100 investment is now worth $7.6 million or $15.2 million if you include his wife’s shares (assuming that he hasn’t sold anything along the way, of course ). Not a bad return, given that Avalon admits that Florida real estate wasn’t much of a business in their 10KSB filing.
There isn’t a lot of information about GTHL, in the SEC’s database, but we do know that GZGT’s CEO Yankuan Li was by and large the largest beneficiary of the acquisition. He ended up with about 12.3 million shares (about $23 million based on Friday’s close) When all the dust was settled, GTHL ended up with 51% of the company, but a lot of it was in restricted shares.
Investors Get Caught In PacificNet’s Tidal Wave
In Mr. Li’s bio, it’s disclosed that he worked at PacificNet (PACT) from 2004 until 2005. During that time, the company experienced unusually high trading volume and went from $2.50 a share to as high as $13, before crashing back down again to $7 per share. These gains occurred largely in late October of 2004. According to Bloomberg, Sept 04′ was the highest activity of insider buying, in PACT’s history. Currently, PACT is delinquent in their SEC filings due to back dating issues, which occurred during Mr. Li’s employment with the company. I do not believe that this will end up being a slap on the wrist, there was a lot of insider selling at the top. The company has claimed that they relied on the advice of their auditor, Clancy and Co., P.L.L.C., who has since been forced to withdraw their certifications from that time.
Three months before PACT saw their share price spike and than drop, the Public Company Accounting Oversight Board (PCAOB) performed an audit of Clancy and Co. During that Audit, they reviewed 6 of Clancy and Co’s 15 clients. I don’t know if PACT was one of those clients selected, but the PCAOB’s review did find 14 serious issues with their auditor, including “failure to properly perform procedures related to consideration of the possibility of material misstatement due to fraud.” None of this suggests, that Mr. Li was personally involved in any shenanigans, but it does raise some important questions about the corporate culture at his previous employer.
The Bankers, The Bean Counters And The Ambulance Chasers
In order to be able to underwrite stock to the public, there are a few key pieces you need in place. Mostly, bankers, attorneys and most importantly, the auditor. Information about GZGT’s banking relationships are scarce, but there is an SEC filing that references a company named Zenith Capital Management, who has agreed to buy 200,000 shares at a price of $2.50 per share. They only committed part of the money up front, which for me, would raise questions about Zenith’s credibility and their intentions to make good on these pledges, especially if GZGT falls apart, before it can get back to $2.50.
When Avalon did their 4500:1 forward stock split, Diane J. Harrison was the attorney who wrote the consenting legal opinion. Charles Godels audited the books himself, (under small business rules that allowed him to avoid an independent audit) and later on, the company brought in Randall N. Drake as their official auditor.
Mr Drake’s name shows up as the auditor in many of the companies mentioned in this article. In 2001, he audited the books of Mobile Area Networks Inc. (MANW.ob) Investors may have been hoping that MANW would make them rich, but it turned out to be a belly flop. After MANW went public, it briefly kissed $4.87 before it came crashing down to $1.00 over the next month. Today, the stock is at $0.10.
Of all of the characters in this bizarre story, Diane Harrison is the one that raises the most eyebrows. She is the attorney. She helped create Avalon. She has been involved, either as an investor or as legal council, in many different penny stocks that can be linked to Godels or his partners. On 10/27/06, the Secretary of Avalon resigned and Harrison was official brought in as the new Secretary and as a Director. Her role at GZGT is unclear, but two days before Avalon’s merger, she resigned from the board. In 1999, her husband, Michael J. Daniels, was convicted of securities fraud and spent 6 months under house arrest and 3 years on probation. He is now officially classified as a stock promoter under the SEC rules.
Daniels has had no direct affiliation with GZGT, but he can be connected to Godels through an auditing relationship with Godels, Solomon, Barber & Company, L.L.C. Before Avalon, Daniels tried to raise financing for a company called MCFTY National. The company was originally a mailbox etc. type business, but later tried to cash in on the vitamin water craze and changed their name to the International White Tea company. When Daniels and Harrison started the company, they also brought in Steven A. Sanders and Robert Bedore. Both Sanders and Bedore have also been classified as stock promoters by the SEC.
Over the last several years, Ms. Harrison has helped to set up several other companies with Godels and/or his partners. These include WES Consulting, Ivecon, Harcom Products, Technology Resources Inc. (herein referred to as TRI), and Contracted Services Inc.
What is interesting about all of these companies, is the number of related transactions between the different individuals involved. They would not only hire each other’s employees, but there was also money changing hands, between various companies. At one point, Godels CPA practice was a significant contributor to Avalon’s revenue. Even after studying the SEC documents on these companies, I still cannot sort out all of the different players involved. If you look at the shareholders, of these investments, there does appear to be another layer to this mystery, but for now, these players are beyond the scope of my discussion on GZGT’s business.
In trying to unravel this complex piece of financial engineering, it didn’t take me long to figure out that, everything always ends up coming back to the Godels. Whether it’s the high number of family members who were shareholders of Avalon, or tracing the cash from the different related transactions, the Godels’ family name keeps popping up. It’s as if they are trying to build a dynasty for the entire family. Interestingly enough, in the GrowthStockGuru newsletter, the anonymous author who wrote the report hints that a family may be behind GZGT’s marketing attempts, by using the name Aharon Bronfman.
The Bronfman family is a famous name on Wall St. In the 1920’s, they made their fortune selling bootleg liquor to the Northern United States. After prohibition ended, the Bronfman family distilleries were some of the most profitable in Canada. Later they would buy Segrams from the Segrams family and made a killing off the whiskey. The family’s history has always been checkered with allegations that their fortune was linked to the mob.
There is no way to know for sure, whether or not the Godels are connected to Mr. Bronfman’s marketing campaign, but the subtle undertones of the alias, raise suspicions that Mr. Bronfman might be working on behalf of a family that is willing to do whatever it takes, for them to build their own dynasty.
Electro Energy Shocks Investors
Given the level of sophistication involved, in this sort of transaction, it came as no surprise, when I learned, that this wasn’t the Godels first reverse merger. They got their first taste of the profits that could be made, when they first set up MCG Diversified Inc. The company was created by the same players who keep popping up again and again. Diane Harrison wrote the legal opinion on the common stock and Randall Drake provided the auditing.
MCG was supposed to be a human resources company. A lot of their revenue came directly from Avalon. Human resource companies seemed to be a common theme among the various public filings. On most of the filings they do not include information about partnerships, but it appears that some of the recruiting gong on, was just individuals shuffling from one company to another.
Marguerite Godels owned 50% of MCG and from the filings, you can sense that she was eager to cash out. Things were on track for MCG, but they almost ran into a disaster, when Mr. Drake made a mistake that almost scuttled their plans.
Somehow, he had managed to let his registration with the PCAOB lapse, but still filed audit reports for Technology Resources Inc. and for MCG, at that time. The PCAOB denied his application for a new license, after he agreed to a settlement, where he would be allowed to get his license back, in another year.
Frustrated, with their attempts to get listed on the bulletin boards, the Godels turned their sites to the white hot alternative energy market and in 2004, they executed a reverse merger with Electro Energy. (EEEI) In exchange for the access to income statements with real revenue, MCG was forced to take a 30% position, following the completion of the merger. Even at 30% though, they still realized obscene profits, considering how little they had actually contributed to MCG’s capital. When EEEI announced their change of auditors, they never mentioned that Mr. Drake’s license was no longer current.
After the reverse merger launched, stock promoters immediately jumped in. Had you invested at the first trading price, you would still be down 79%, but if you listened to the hype, you would have lost even more money faster. On 10/11/04 Stockwire issued a press release advertising EEEI’s stock. If you jumped in then, you’d be down 84%. On 11/04/04, Capital Investor Forum Growth, suggested that you look at the stock. Had you taken, their advice you would be down 90% right now. A year later, a firm that that continues to pop up on my radar, WallSt.Net issued a press release showcasing EEEI. Had you listened to WallSt.net’s analysis, you would be down 72%.
During this sharp run up, EEEI insiders took advantage and sold out. According to SEC form 4 filings, between 10/19/04 and 11/01/04, Assari Farhad sold a significant amount of stock and options. Given the question marks surrounding the promotional activities going on while he was selling, I thought that it was notable that his form 4 filing reporting the sales, was not filed until 12/04/04.
Perhaps, the strangest part of this whole story, isn’t that someone would want to sell inflated stock, it’s how Mr. Bronfman is going about generating the hype behind this bubble. Instead of the traditional email spam, they have been targeting investors by advertising in respected business magazines. On the Friday, that the Investor’s Business Daily ran their ad, their stock jumped very sharply before seeing heavy selling at the end of the day. IBD should be ashamed of themselves for not researching the company further. Their readers trust them to provide excellent financial advice and yet, they are willing to take money from a reverse merger penny stock, without hesitation. If IBD does not issue an apology, then they have lost all credibility in my book.
So far, the only mainstream media outlet to pick up on GZGT’s innovative marketing attempts, has been Kiplingers. When the company was first approached, they knew something didn’t look right and took steps to warn their readers. Unfortunately, other business publications seem to be more than willing to sellout. Business Week and Forbes have both agreed to run the ads, regardless of how questionable this might be ethically. I would encourage both publications to take a closer look at GZGT, instead of their advertising revenue, before putting the company in front of their readers.
Just because the bulletin boards are the wild west of the investing world, doesn’t mean you still can’t arm yourself with a six shooter. Six months ago, digging through these SEC files would have been much more difficult, but thankfully, the SEC has recently released a full text search feature on their website. It didn’t getting any buzz from the press, but by building the search tool, the SEC has turned over an exponential amount of data to the public. It is a powerful tool and an important development in making sure that the public has access to good data. There is a tremendous amount of information out there, but you need to read it, especially if you are acting on a tip, that someone paid money, in order to give you.
In Mr. Bronfman’s report on GZGT, he says that GZGT’s management has a tremendous track record, but when I look at the track records of the investors involved in them going public, I see a very different picture. Many of the companies that they have been involved with have turned into a pile of rubble, after the promotions die down and the stock has been diluted. If investors want to play with high risk investments, that is OK, but just remember to do your homework before jumping in.
Disclosures - I have no positions in any company listed in this article. To the best of my knowledge, no one that I have ever come into contact with has ever invested in or shorted, any company mentioned in this article.
Over the last year, I’ve noticed a pretty big increase in the amount of stock spam that shows up in my inbox. It’s easy enough for me to delete these and move on, but there are a lot of people who take the bait and get burned on these types of promotions. Normally, I wouldn’t find a piece of stock spam interesting enough to write about it, but today a piece of spam show up in my physical mailbox, instead of my inbox.
This was the first time I’ve gotten stock spam via regular mail, but I have a sinking feeling that this will not be the last. Technically, I can stop people from emailing me, but because they pay the cost to send the letter, I can’t opt out of mailings. What is interesting about this particular piece of spam, is that unlike most spam, it was actually targeted directly at me. They probably pulled my name off a list of people who work in finance and are hoping that I will pass on snail mail stock tips, to people I work with. This is shady on so many levels, but it does demonstrate how sophisticated stock promoters have become, in their attempts to influence the market. The article that they sent me contained the customary, this is not a solicitation language, but the big print screams “strong buy” and “short term potential”. The piece is more than a little biased and includes numbers that I can’t seem to find in the SEC filings.
The newsletter is published by a company called growthstockguru.com, they are touting a penny stock named Guangzhou Global Telecom (GZGT.ob) In exchange for promoting the company, they received $25,000 in cash. If you take a closer look at GZGT, you’ll see that it shares many of the same characteristics, that you find in typical pump and dump operations. The company was only recently formed through a reverse merger. After the merger, over 75% of the company is still controlled by insiders. The company also has the right to issue another 15 million shares in order to raise capital.
There has been an aggressive ad campaign in business magazines and websites, promoting the company. Last week, Thomas Anderson wrote a scathing article, warning investors that this bubble is being driven by advertising and stock promoters. Despite his admonishment, not everyone has listened, the stock traded another 4.5 million shares today or about a third of it’s float.
All it takes is one quick look at their SEC documents and you can tell that they are in trouble. The company has already had it’s first run-in with the SEC and was forced to go back and amend an 8k filing, after they failed to report that they had fired their auditors, over a disagreement on a going concern letter.
In the newsletter, it touts the potential for 200% - 500% upside growth (in months, if not days no less ), yet at their current valuation, they are already worth $107 million, which is pretty expensive considering that they only brought in $15,000 of net income over the last quarter (yes 15 THOUSAND, not millions.) At these prices, I’m not sure what will drive the stock to a half a billion dollar valuation, but something smells fishy about this one.
If investors want to speculate on penny stocks, that is up to them, but to do it without even considering the risks involved is just plain stupid. This company raises so many question marks, it’s crazy and yet they’ve still been able to create a market cap of $100 million with party tricks and cheap promotions. It’s a mystery to me, why someone would invest in a company while someone is going through this much trouble trying to sellout, but it’s clear that this stock spam must work, otherwise we wouldn’t keep seeing more of it.
Over the last few years, Google has become essential to how I surf the web. Whether it’s their minimalistic advertising or their superior search results, Google has become a daily staple in my internet diet.
Last year, I signed up for Google’s personalized search program and after a year using the program, I’ve got to give it mixed results. This program has been a little bit controversial, because it allows Google to tie your search results to a unique profile.
Overall though, I don’t tend to worry too much about Google abusing this power and having access to filtered personalized search results, along with trend analysis on my queries, more than makes up for the small piece of my privacy that I have to give up.
In looking through my search stats, it wasn’t surprising to see TiVo and Netflix as my top two most requested results, but I was shocked to realize that I’ve searched Google over 22,000 times, in just the last year alone. The bulk of these searches were made during prime time television hours, which I found to be a little bit surprising. I’m not sure what it can tell me about my internet usage, but with 15,000 of my search queries coming during prime time hours, it highlights how much of an impact TiVo and the internet have had, on my television watching.
While Google’s personalization technology has largely improved my search experience, there is still quite a bit of room for improvement.
What I like about Google’s recommendations, is that it learns which sites I have a bias towards and will rerank my search results, according to my own personality. The downside to Google’s personalization program is that there is no way to tell Google, when they get a search woefully wrong.
The more powerful that Google has become, the more that people have tried to game the system. Whether it’s blackhat SEO tricks or coordinated Google bomb campaigns, it’s important to remember that Google’s results aren’t always unbiased. They can give a higher weighting to sites that you have already been to, but there is no way to tell them when a site is really search spam.
There are a lot of times that I am searching and an About.com article will pop up near the top. Now I know some people like the site, but I think About.com has to be one of the most worthless places on the net to find information. It is an ad factory that is highly dependent on Google for their profits. Google should give me a nuclear button that I can hit, that would permanetely ban About.com listings from any of my future search results. If enough users started banning a site, they could adjust their alogrithm to take into account the liklihood, that the result was really search spam.
Google’s About.com results are so bad, that someone actually took the time to write a Greasemonkey script, that will strip out the About.com results from Google, at the browser level. While this does offer me a way to remove About.com from my internet life, it’s really not a mass market solution and it doesn’t solve the countless other lame search results, that pollute what you’re really looking for.
I’m glad that Google is out there innovating and I see a lot of positive benefits to using their recommendation engine, but Google needs to do a better job of harnessing the power of their readers, to help make our search results even more relevant. Giving users the ability to blacklist a site from Google would be extreme, but with the SEO firms able to automate massive amounts of fake content, it is going to take the help of the masses, if Google wants to take control back.
From the first moment it was introduced, TiVo has been feared by the ad guys. For consumers it’s dramatically improves the television experience, but for content owners TiVo and other DVRs have created new challenges for them to address. For decades, Hollywood has made a killing by selling 30 second spots, but as we move to an on demand society, this new paradigm has shifted the balance of power to the consumer and has forced mainstream media to think ahead. Those who can make this adjustment will be met with success, but the advertisers and content owners who refuse to change will be left behind.
Some content owners may view fast forwarding through programs as being equivalent to stealing from the content creators, but I don’t buy that line of rubbish at all. As much as they’d like to belive it, there is no social contract when it comes to television. Viewers aren’t required to sit through the commercials, they’ve just never had an easy way to opt out before.
Advertising may help to pay for the programming, but it’s the content itself that is competing for my attention, not the ad spots. If the content owners really don’t want their customers fast forwarding through their ads, then they need to make their content compelling enough that you are willing to watch all 30 minutes of a show, instead of just the 20 minutes that actually entertains us.
Fusing edgy advertising with good content is no easy task, but the ad agencies and content owners that can pull it off, will be the real winners when it comes to marketing to an on-demand customer. The content owners may wish that the technology companies would keep their paws off of their videos, but now that the power of time shifting has been turned over to the consumer, there is no turning back.
Some ad buyers have already begun to figure out the power of product placement, but it still amazes me that we haven’t seen a single show in the industry completely abandoned the 30 second spot just yet. The first TV show to run without a single 30 second ad is certain to get a lot of buzz, but unfortunately, for far too long, the status-quo has been plauged by it’s own inertia and it’s taken an influx of new ideas and technologies in order to force Hollywood to adapt.
I can’t really speak for everyone, but I know that at least in my case, product placement is an extremely effective advertising tool for a couple of reasons. When I bought my a car a year ago, it wasn’t the Super Bowl commercials that convinced me to buy my Thunderbird, it was smart ad placement in the 2002 season of 24 that made me fall in love with that car.
One of the reasons why product placement is such a powerful marketing tool is that it actually reaches 100% of your audience. While some aren’t as aggressive about cutting out clutter from their TV viewing, I’m a power ad skipper when it comes to my TiVo. I have very little tolerance for the commercials that programmers bombard at me, so if you want to get my attention, you need to embed your commericials in the actual shows, if you even want me to watch.
Perhaps more importantly then just reaching your audience, product placement is also an effective tactic psychologically because people associate the positive feelings they get from watching a good show with the brands that show up in the program.
A good example of how influential product placement can be, is to look at the most recent marketing campaigns for where you purchase your office supplies. In one corner you have Office Depot. They’ve been using a traditional 30 second spot to try and influence people into shopping at their store. Their commercial uses every annoying marketing gimmick out there. They’ve incorporated a jingle into the spot, to ensure that it will stick inside your brain for months, they purchased massive amounts of ad time on the same programs just in case someone may have missed it the first 50 times, and they’ve run the same commercial over and over and over again so that they can beat their message into potential customer’s heads, they even threw in a freaky looking mascot in a misguided attempt to help consumers better identify their brand.
This is the old paradigm, the way things have always been done. It requires no innovative marketing strategy or a rethinking of consumer demand. It represents a general malaise and lack of respect towards the new, more sophisticated time shifting consumer.
In the other corner you Staples. I’m not sure whether or not Staples still runs 30 second ads, but I can’t remember the last time I saw one of their 30 second spots. Instead, I actually look forward to seeing their ads once a week, when I’m watching one of my favorite shows, The Office. Each week they make their “commercial” different and fresh by integrating their products into the actual storyline of each show.
In the case of Office Depot, I don’t choose to watch their ad, they thrust it on me. Normally, it’s easy enough to tune this out, but because of their jingle, everytime this commercial runs, it’s impossible to ignore and my stress-o-meter starts heading through the roof. The first time I saw their creepy little mascot hand, I was ambivalent about the spot, but after watching the same ad fifty times, I now get an irrestible urge to start stabbing that freaky thing with a dull pair of scissors, everytime it airs.
While Staples hasn’t used any annoying jingles during The Office, because their content is already engaging, when their ads do show up, it not only creates an impression, but it’s a positive impression because I’m already enjoying the show and I know that the ad is directly supporting a show I know and love. This impression can later be reinforced in a variety of clever ways. For example, after the show where Dwight Schrute “quit” his job at Staples, the company actually went so far as to release a memo announcing that they weren’t very sorry to see Dwight leave their fine company.
This was really smart on Staples part because it not only extended their marketing campaign into other forms of media, but it also reinforced their sponsorship of the show. This in turn, helps viewers to later be on the lookout for the Staple ads embedded in the program.
Now compare this with how Office Depot has supported the marketing message that they are sending. Not only can you not find toys of their creepy hand mascot at their stores, but if you go on their website, they don’t even mention the hand. Given how much money they’ve spent trying to brand this image in people’s minds, you’d think that they’d support the marketing campaign by including it in other forms of media as well.
I’m not sure how much money Staples spent in order to get their ads embedded into The Office, but compared to Office Depot’s efforts, I have to believe that this has been money well spent. Office Depot may have been more successful at getting me to notice their ad and notice it more often, but Staples has actually won my heart by partnering with programs I care about, instead of mentally assaulting me with with programming that I don’t want to opt into.
At the end of the day, by using their annoying jingle to try and force me to pay attention, Office Depot has actually created hostile feelings in me when I think about their brand. Meanwhile, Staples advertising has not only made me laugh, but it actually makes me want to spend money at their company.
When all is said and done, it will be the Staples of the world, that end up succeeding in an on-demand environment, because they don’t hold you hostage for 30 minutes in exchange for 20 minutes of content, they make every single minute count. Some content owners may not be happy with consumers having control over their television viewing, but I’m excited that TiVo is forcing this transformation, because in the end, product placement will make everyone’s television better. It will help to ensure that our favorite shows continue to stay well funded, it will challenge advertisers to think more creativity when competing for your attention, and if it’s done right, it will make your programming more engaging and entertaining.
Shortly after I purchased my first TiVo, a friend of mine wanted to know my thoughts on whether or not he should get a DVR. Like any rabid obsessed TiVotee, I immedietely started gushing over, all of TiVo’s innovative features and about how much of a transformative effect, time shifting has played on my life.
After trying to hard sell him on a TiVo unit for over three weeks, I finally succeeded in convincing my friend to buy a DVR, but instead of going with the TiVo unit I recommended, he went with the ReplayTV 5000. I tried to talk him out of it, but no matter what I said he wouldn’t budge. I showed him the superior interface, I let him test drive my own unit, I tried pointing out that suggestions and wishlists were exclusive to TiVo, I even tried to scare him into believing that Replay would possible stop working, if the company went bankrupt. No matter how hard I tried though, I couldn’t convince him to choose TiVo over that ReplayTV 5000 unit because it had a feature no one could touch. Automatic commercial skipping.
When TiVo first launched, the movie studios completely freaked out over DVR technology. They understood early on, the impact time shifting would play on their revenues and went to great lengths to put a stop to it. Initially, TiVo wanted to partner with the studios, but instead the studios threatened to sue the company, if they even launched their product. Hollywood’s huffing and puffing turned out to be little more than hot air when it came to TiVo, but when ReplayTV had the nerve to introduce automatic commercial skipping, the studios knew they had to draw a line in the sand.
Immedietely they lashed out and sued Replay, in order to make them stop. Replay did their best to fend off their legal attack, but eventually their parent company collapsed and rather then let the courts decide the legality of the technology, Hollywood quickly settled the case and resigned themselves to having at least contained the DVR threat.
After Replay found out about automatic skipping the hard way, other companies have been understandably reluctant to provide the technology to their customers. For years, the only way to gain access to this skip technology was to buy old ReplayTV boxes off of Ebay, but thanks to the open source community, there now appears to be a way to unlock automatic commercial skip on any Media Center PC.
Turning on commercial skip isn’t for the mainstream consumer yet, but for those who do spend the time figuring it out, it can add a powerful component to the Media Center experience.
The program itself is customizable and pretty robust. If you are feeling guilty about “stealing” your television, it allows you to adjust the maximum number of minutes it cuts out of each program. You can also program it to strip out commercials and then tranfer those files to a media extender or Xbox.
As it becomes more popular, it will be interesting to see how the studios will react. Suing Replay or TiVo is one thing, but taking on a legal team that has already been up against the Justice department is another matter entirely. The studio’s could always forego the legal route and try to convince Microsoft to shut the leak with more juicy IPTV contracts, but sooner or later it will become an issue that they will want to address.
Hopefully, the studios will end up ignoring it as a fringe threat and let media center fans have their fun, but given how hard they fought round 1, I’m skeptical that we’ll always see skip technology around. For now though, with the help of the open source community, Microsoft has quietely gained a key differentiator in the crowded DVR market and consumers have one more way to enhance their television experience.
Frankly after all of the noise surrounding the original I Love You virus, I’m surprised that we haven’t seen more of this con, but it looks like someone has decided to take advantage of the Valentine’s day spirit, in order to release a nasty worm onto the internet. The subject lines in the email looks innocent enough, but when you open it blammo!, it installs a backdoor program that will turn your computer into a lean mean zombie spamming machine.
While I think it’s pretty terrible that someone would release something that is going to cause so much trouble, I will say that the social engineering on the these holiday viruses is a lot smarter then many of the threats we see. Here you are minding your own business when all of a sudden you get an email from an old flame or someone already in your existing social network. Of course you’re going to be curious as to what it says, but by looking at it, you’ve now just sent it to all of the people in your address book and they are the next to be tempted by the bait. Given the number of email addresses that most people store in their address book, even if they got a minimal response rate, this thing was destined to take off pretty fast. Hopefully, the experts will have this contained pretty quickly, but in the meantime it’s much better to stick with physical Valentines anyway, they mean a lot more and don’t send emails to your ex-girlfriends.
Every now and then, a study will be released suggesting that DVR owners don’t actually skip very many ads. While I can understand why people would want to watch certain programs live, it’s always hard for me to take this kind of data seriously, because it tracks so differently, from my own DVR experience.
or a companion that doesn’t get jealous when I play video games.
that I finally figured out why there was such a sudden rush of TiVo videos on YouTube. Of all the clips out there, this is the only one that I could find, that was honest enough to at least identify that it’s part of the Pay Per Post program. 
), yet at their current valuation, they are already worth $107 million, which is pretty expensive considering that they only brought in $15,000 of net income over the last quarter (yes 15 THOUSAND, not millions.) At these prices, I’m not sure what will drive the stock to a half a billion dollar valuation, but something smells fishy about this one. 
or someone already in your existing social network. Of course you’re going to be curious as to what it says, but by looking at it, you’ve now just sent it to all of the people in your address book and they are the next to be tempted by the bait. Given the number of email addresses that most people store in their address book, even if they got a minimal response rate, this thing was destined to take off pretty fast. Hopefully,