Word of mouth ponzi vs. pyramid
Seth Godin recently discussed Ponzi and Pyramid schemes and how they are used in an online setting. While Ponzi schemes are certainly rife both in the online and offline worlds, they are distinct from Pyramid schemes which are more in the line of MLM (a la Tupperware parties). He points out the self-proclaimed “Advertising 2.0″ company MMMZR which embraces an MLM approach of marketing as part of their revenue model, leaving many people feeling that it is a distasteful approach to online advertising.
One interesting point Seth makes is in regards to pyramid schemes, specifically when it may not have to do with the exchange of money, or if money is exchanged, it is almost a side benefit. He notes that sites like Digg have an element of a pyramid scheme built into the very core of the site’s design. Meaning that some Digg uses can abuse the system in a way to promote themselves, their clients, or issues. And while word of mouth can be used in a manipulative way, could there be an invisible hand that self-regulates these social tools due to our desire to embrace authenticity, while eschewing motives that seem like scams?