Digital marketing has grown rapidly in the last decade.
So fast, in fact, that a lot of rules don’t really exist. Recently, there was an anti-trust hearing that the major technology players testified in. What it revealed is that the majority of people outside this space of digital marketing have no idea what is going on or the practices involved.
Everything from data-scraping, to anti-competitiveness, to stealing information, to outright fraud.
Of the many phrases thrown around in that hearing, one rung a bit louder than others: “The only shop in town.”
When I think about the new world of digital marketing, this is certainly true. Even when the rules for marketing and fraud on the internet don’t exist yet, it’s true.
It’s clear and undeniable to those that are cognizant of their existence.
Namely, when you look at marketing platforms for The Motley Fool or The Raging Bull, you’ll find that it is the same recycled content pushing the same theme at the same price point. These places will tout slogans such as “Millionaire trader reveals top trade each week” or they’ll display a graph showing that their advice has led to a 30,000% gain over the S&P 500 tracker.
These could be incredible platforms of financial illumination. Instead, what we have are unverifiable sources and charts like this one:
Recently, authorities have been paying attention to the business practices revolving around these companies. Specifically, Online Trading Academy, which has been running an “investment training scheme” for some time, according to the FTC. Their training programs have cost as much as $50,000, and they have collected more than $370 million from consumers all across the United States in the last six years.
Like The Raging Bull or The Motley Fool, Online Trading Academy misrepresented many things, fraudulently displaying that they had a “patented strategy that anyone can use to generate substantial income from trading in financial markets”. The injunction seen here has now frozen many of the assets that are owned by Online Trading Academy. This is all happening in real-time, as the injunction was placed on April 7, 2020. Companies like The Raging Bull and The Motley Fool are everywhere, however. And they’ve been everywhere for some time now. Everything from Quora, to Yahoo!, to Google’s search results, to Youtube. These are all organizations benefiting from the massive advertising revenue provided by them.
The irony in this kind of marketing is the laziness and lack of thought.
In a landing page that’s since been inactive for The Motley Fool, it’s titled:
The article mostly talks about how “renowned investor David Gardner reveals his next great stock idea”.
Which is ridiculous, namely, because you wouldn’t have purchased Amazon in 1997. It nearly went bankrupt in the next five years.
Everybody can see Amazon’s meteoric rise to stardom today. It trades at over $3,000 a share.
But this marketing slogan wasn’t one based on prediction. If it was, David Gardner could have easily understood that the CFO’s accidental decision to pull a loan off European investors before the dot-com bubble saved Amazon from the grave. In many ways, that was the catalyst to eventually create Amazon Web Services which kept Amazon afloat for nearly 20 years now. In shorter words, you wanted the year to be 2002, not 1997. And that’s just the tip of a large set of marketing fraud and laziness.
The idea behind marketing campaigns like this is that they’re run completely unregulated and unchecked by any authority. That’s starting to change now, but companies like The Motley Fool or The Raging Bull don’t help the average retail trader at all. They’re not intended to. They’re intended to sell subscriptions on the idea of success.
The basic underpinning is simple: If you are so successful at picking a portfolio of equities that could generate 30,000% over twenty years, why are you selling that information to the public as some form of a charity?
The Federal Trade Commission is starting to realize this, and they’re catching on. The internet is a big place with many areas that still remain ghostly, ethereal, and fast. They’re frequently deleted and reappear at a moment’s notice. These companies don’t exist with the intention of sticking around to help their customers. And the gargantuan technology companies don’t really care whether they are misinforming the public on a massive scale.
Online Trading Academy, for example, had a clause in their subscription, which the FTC described as “using standardized contract provisions that unlawfully inhibit customers’ ability to review and share information about Defendants and their services with law enforcement agencies and others.” This meant that if the users decided to stop using the product or ask for a refund, they couldn’t share their review of the service or product with anybody on the internet or with law enforcement.
If the provision sounds like an illegal stoppage of your freedom of speech, that’s because it is.
Real investing is boring, and real growth is slow.
Nobody wants to push these slogans, particularly because they won’t sell. Shadowy companies like the ones mentioned above will exist simply because the dream sells well to those who believe it. These companies know that they can screen stocks over a span of a few minutes to find any company that’s skyrocketed in the last two decades, and then turn that into a marketing campaign to sell to hundreds of thousands of people.
And the campaign is largely unchecked and unverified. If you look at data from the biggest institutional fund managers today, you’ll find that almost every single one of them trail the S&P 500:
The longer the length of the existence of that fund, the more difficult it was to stay on top of the S&P 500.
This is where it’s easy for any company to write an advert online about their massive wins over the stock market. Even when it’s a lie, there is an invisible understanding that they provide massive advertising revenue to the platforms they run under. In that sense, the company selling that advertising real estate will turn a blind eye, and as the anti-trust hearing found, you’ll hear phrases such as the following from the richest CEOs in the world:
- I don’t agree with that premise.
- I can’t recall.
- I’m not certain.
- I disagree with that characterization.
- I don’t think that’s true.
Even when the reality is clear.
I’ve seen both The Motley Fool and The Raging Bull on platforms like YouTube, Google, Quora, and Yahoo! for the last decade now.
Either the Federal Trade Commission needs to turn up its heat, or the world of digital advertising needs a rulebook.
And I have a feeling that we need both.