Consumer Alert: BigBook Direct

4/9/1998: In a press release, GTE announced that it has purchased the BigBook domain name and trademark. There was no indication of any change in the operation of BigBook Direct, although the BigBook Direct ads are no longer on the BigBook web site.

BigBook Direct is the direct sales division of BigBook, which claims to be the leading online yellow pages provider in the U.S. Judging by its press coverage, it would appear that BigBook has made its mark on the web.

BigBook is now offering a multi-level business opportunity allowing independent consultants to earn commissions for selling local businesses services offered by BigBook Direct, such as web sites. Persons desiring to become BigBook representatives can start with a minimum $50 cost as an independent representative, or can start with the Managing Consultant Training Kit for $349.

A Confusing Business Opportunity

Reading the description of the compensation plan, one might be led to believe that you can become eligible to receive commissions and bonuses on your downline only by purchasing the "managing consultant training kit" for $349, because if you don't purchase this, you are merely an "independent consultant" and as such, you do not receive any income from your downline.

But this is just a case of imprecise terminology on BigBook's part, because in the same web page, BigBook uses the term "independent consultant" to mean different things:

someone who pays only $50 to work the BigBook opportunity
someone working the BigBook opportunity who has not gathered at least 5 retail customer points
anyone who is working the BigBook opportunity

MLMs that want to be Pyramid Schemes

Many so-called multi-level marketing businesses today are thinly-disguised pyramid schemes. They violate some of the tenets of remaining legal, through such practices as allowing purchases for personal use to count towards a quota, or they offer recruiting bonuses. Here's how the BigBook Direct program appears to avoid these problems:

Does BigBook Direct pay for recruiting new participants?
- No
  BigBook Direct pays a fast start bonus for selling the managing consultant training kit, and only when the recruit makes a sale to a non-participant within 60 days.
- Yes
  The required sale to the non-participant shows that they are paying for recruiting:
  If you make a minimum qualifying sale yourself, your earn just $20 plus $4 per month. This could end after just one month, so you might earn as little as $24 from such a sale.
  But if you recruit someone as a Managing Consultant and then give that sale to them ("assist" them with the sale, as described by BigBook), you earn $100 immediately.
  In this case, you are paid more for recruiting someone who makes a sale than you would be paid for making that sale yourself, which is tantamount to being paid for recruiting.
Do you need to buy the managing consultant training kit to participate?
- No
  All people working the BigBook opportunity receive the same commissions and bonuses whether or not they purchase the training kit. The free web site and materials included in the training kit are not needed to work this opportunity effectively.
- Yes
  How will you explain to a potential retail customer that you don't have a BigBook web site for your own business?
  And how will you explain to a prospective recruit (whom you would like to recruit as a managing consultant) that you didn't personally need the training the training kit, but your prospective recruit does?
  And if you end up recruiting only independent consultants (i.e. not managing consultants) who themselves are likely to never recruit any managing consultants, you can never move beyond the level of Qualified Consultant.
Do purchases made for personal use count toward the quota required to be a qualified consultant?
- No
  Qualifying sales must be made to people who are not working the BigBook opportunity.
- Yes
  Although the compensation plan is not clear on this issue, it's largely a moot point whether or not sales made to participants can meet the quota requirement. Under the laws of various states, such purchases are disqualified because people might make the purchases themselves in order to be eligible to receive income from downline sales, which could result in a program with no significant retail sales, i.e. a pyramid scheme.
  Participants can get around this prohibition too easily, by offering to pay for the web sites of friends and family. It isn't necessary for quotas to create this problem in an MLM -- it all depends on how the quota is structured.

Similar to Other Plans

While some other businesses have similar programs that would be likely to be considered illegal under various state and Federal laws, this offers little assurance for participants in BigBook's program. Incredibly, BigBook recruited the former vice president of operations for AdverWorld, an MLM-based Internet advertising business that the Cagey Consumer previously identified as having several problematic characteristics that would cause "pyramid" to be an appropriate label.

BigBook's chairman, Kris Hagerman, claims that the people brought in with previous experience at AdverWorld were hired because of their experience at selling web sites... yet a cursory examination of web sites hosted on AdverWorld would have shown that credible web sites were few and far between on AdverWorld. If the ability of these people to sell web sites was the basis for hiring them, then it would seem that nobody at BigBook bothered to look at the web sites they had sold.

Straighten Up, BigBook!

BigBook Direct may have a bona fide product or service to sell, but they have evidently decided that their compensation plan will be more attractive if income from retail sales is paired with income generated from sales made to participants themselves.

But BigBook should be looking to make money for itself and for participants in its business opportunity from income generated through bona fide retail sales, not by inducing participants to sell other participants an expensive training kit. If BigBook Direct really believes in the value of their retail offering, they would have no need to do this.

The potential for individuals to make money hawking BigBook Direct web sites exists, but for the moment, the Cagey Consumer urges people to avoid this opportunity just as it would urge people to avoid any opportunity that is based in significant part on income made from sales to participants.

Multilevel Management [Red Herring, 9/97]
BigBook Revisited [Red Herring, 12/97]

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