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Why was a scam company able to raise $76 Million Series B?

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Re: Why was a scam company able to raise $76 Million Series B?

#31

Post by tehwebguy »

tisme wrote: post #9

Don't ask for a refund, go to your bank or CC company and charge back the 6 months. That'll hit them where it hurts. Little known fact about chargebacks: the merchant pays an administration fee, typically $20 to $50. Per charge! That is why the smarter scammers refund to everybody who complains, not refunding is plain dumb. This scam has been around for a long time, usually it's adult companies that sell you a 'free'…

I cannot stress this enough.

If the company continues to receive chargebacks claiming fraudulent charges (which this really does appear to be) they will find themselves in a difficult place with card processors.

Some processors drop clients if they crack 0.5% a chargeback rate.

Re: Why was a scam company able to raise $76 Million Series B?

#32

Post by anonymouz »

Ntrails wrote: post #27
jonnathanson wrote: post #8

This business model reminds me of those fly-by-night mobile subscription services from the early 2000s. The ones who'd make you think you were buying a single ringtone, and the next thing you knew, you'd been surreptitiously signed up for a $29.99/month subscription. I remember evaluating the books for one of those companies back in the day. It was wildly successful at the surface level. But if you dipped below the s…

It reminds me more of the book catalogues. 5 books for a pound or something as a joining perk, but you then had to buy a book a month for 6 months or they would automatically sell you the default book etc. I never thought that was a shady business model, per se, and whilst it wasn't entirely intuitive how they worked to a 14 year old, I blamed myself for screwing up by joining- not the company.

But at least the book clubs (at least the ones that I know) make it obvious that you sign up for a membership and have to buy something (monthly or yearly).

This site seems to be entirely designed to mislead you into thinking you're just ordering one item, while in fact you are signing up for a membership.

Signing up for the first one (book club) may be a bad business decision on the customers part, but this second style simply seems fraudulent to me.

Re: Why was a scam company able to raise $76 Million Series B?

#33

Post by brazzy »

tisme wrote: post #9

Don't ask for a refund, go to your bank or CC company and charge back the 6 months. That'll hit them where it hurts. Little known fact about chargebacks: the merchant pays an administration fee, typically $20 to $50. Per charge! That is why the smarter scammers refund to everybody who complains, not refunding is plain dumb. This scam has been around for a long time, usually it's adult companies that sell you a 'free'…

Even worse are scams that look like a free service (doing stuff like horoscopes) but require you to enter an address and then send you a bill for a 12 month subscription, and threatening legal action if you don't - quite common here in Germany. There's actually new legislation since July that requires all online transactions to explicitly say there's a fee right on the confirmation button, otherwise they're not legally binding.

Re: Why was a scam company able to raise $76 Million Series B?

#34

Post by ricardobeat »

reitzensteinm wrote: post #7

So I went through their checkout process, and up until the credit card stage there is zero indication that it's a membership site (I read everything on every page). I've uploaded the credit card section here: http://i.imgur.com/3di93.png It says you'll be billed month per month on the right hand side under the VIP membership program, but I think it's pretty clear that the page is engineered to be misleading. It looks…

Maybe I'm being too permissive, but that screen doesn't look fishy at all. I went through the purchasing/sign-up process, and it goes like this:

    1. create a profile (answer questions on style)
    2. fill in details, click a *JOIN NOW* button
    3. get a "*first month* for 50% off" offer
    4. get to this payment screen
At no point it implies you are buying a single product, there are no "buy now" buttons or calls to action.

To me it's pretty clear that it's a recurring service, like many others that exist for chocolate, wine, beer, socks, razors, etc. The right hand side on the checkout is clear enough, and the skip the month part is there highlighted, not in small letters.

EDIT: apparently this is just the flow after choosing something on the home page. If you choose one of the "special" products or go to the Featured section, it does go through a standard add to cart + checkout flow (http://minus.com/lA7snPkHUHOZR). That is actually terribly misleading.

Re: Why was a scam company able to raise $76 Million Series B?

#35

Post by [deleted] »

robryan wrote: post #14
reitzensteinm wrote: post #7

So I went through their checkout process, and up until the credit card stage there is zero indication that it's a membership site (I read everything on every page). I've uploaded the credit card section here: http://i.imgur.com/3di93.png It says you'll be billed month per month on the right hand side under the VIP membership program, but I think it's pretty clear that the page is engineered to be misleading. It looks…

So the site doesn't force you to join the VIP program? The way it is structured would definitely see a lot of people check it and click through without checking. In my experience stuff we make a lot more obvious than this is plain ignored during checkout.

[deleted]

Re: Why was a scam company able to raise $76 Million Series B?

#36

Post by borlak »

tisme wrote: post #9

Don't ask for a refund, go to your bank or CC company and charge back the 6 months. That'll hit them where it hurts. Little known fact about chargebacks: the merchant pays an administration fee, typically $20 to $50. Per charge! That is why the smarter scammers refund to everybody who complains, not refunding is plain dumb. This scam has been around for a long time, usually it's adult companies that sell you a 'free'…

Also, if 1-2% of your charges through a merchant result in a chargeback, the merchant will drop you completely. However, a good scam company will have a few merchants lined up just for this reason.

Re: Why was a scam company able to raise $76 Million Series B?

#37

Post by [deleted] »

ricardobeat wrote: post #34
reitzensteinm wrote: post #7

So I went through their checkout process, and up until the credit card stage there is zero indication that it's a membership site (I read everything on every page). I've uploaded the credit card section here: http://i.imgur.com/3di93.png It says you'll be billed month per month on the right hand side under the VIP membership program, but I think it's pretty clear that the page is engineered to be misleading. It looks…

Maybe I'm being too permissive, but that screen doesn't look fishy at all. I went through the purchasing/sign-up process, and it goes like this: 1. create a profile (answer questions on style) 2. fill in details, click a *JOIN NOW* button 3. get a "*first month* for 50% off" offer 4. get to this payment screen At no point it implies you are buying a single product, there are no "buy now" buttons or calls to action. T…

[deleted]

Re: Why was a scam company able to raise $76 Million Series B?

#38

Post by nck4222 »

The page clearly says you'll be charged every month. It charges you and applies a credit, implying you can use the credit any time. It doesn't charge you and then not let you use the money.

Is it misleading? Yeah slightly, except it says exactly what will happen with a bright pink numbered list. Did they create the program hoping some people will forget about it? Yes definitely. But, this a common tactic employed by any company with a monthly subscription.

All this outrage is a little ridiculous.

Re: Why was a scam company able to raise $76 Million Series B?

#39

Post by chinmoy »

mgkimsal wrote: post #19
jonnathanson wrote: post #8

This business model reminds me of those fly-by-night mobile subscription services from the early 2000s. The ones who'd make you think you were buying a single ringtone, and the next thing you knew, you'd been surreptitiously signed up for a $29.99/month subscription. I remember evaluating the books for one of those companies back in the day. It was wildly successful at the surface level. But if you dipped below the s…

Those ringtone companies were just promoting ads and whatnot to get people to 'buy' something that made them, on average - what? - $70? If the cost of customer acquisition was, say, $20, they're making $50/head. For many people, having an automated business making $50/customer profit is pretty good. Not every business is 'sustainable' through repeat customers - funeral homes come to mind. However, if the only way to…

These companies exist even today. The have an army of affiliates promoting their offers on all ad networks out there. These companies are paying the affiliates $10-15 for each valid billing info.

Sad thing is, JustFAB seems to be just like these companies. Only it looks good and it is supposed to be a 'legitimate' business.

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