The Internet Banner Network (IBN) Scam

By , December 29, 1996

(December 29, 1996) “Fool me once, shame on you. Fool me twice, shame on me.”

The Internet Banner Network (a.k.a. “Internet Billboard Network” and IBN) started up shortly before the Commonwealth Network (CN) came under attack for sudden changes in its payment rules, and after the Internet Link Exchange (ILE) successfully established a network of web sites willing to exchange banner ad displays. Starting in July 1996, IBN sent email to web sites that were displaying CN or ILE banners. IBN’s pitch was its promise to pay member web sites one-half cent for each and every banner ad impression, without exception.

IBN’s email “pitch”: IBN’s email solicitations misrepresented and distorted information about CN and ILE. I will reproduce some of these claims in detail because they are extremely relevant in examining IBN’s later actions.

IBN’s claims about ILE: In email on August 1, 1996, company owner Dave Pasternack wrote:

“The ILE has a nice idea but it simple doesn’t work mathematically in theory or in practice. If a web site earns 50% of their traffic as advertising credits and gets a 1% click through (which is the REAL average for non targeted placement) then they are going to ad 1/2 of 1% or .5% to their current traffic as growth. That means a site that gets 200 hit per day will earn 100 ad impressions and that will result in 1 new visit.”

While Mr. Pasternack’s analysis is logical (given the assumptions), ILE’s average click-through ratio is actually about 3% (33:1). Of course, some web sites have much higher or lower click-through ratios, depending on the theme of each site and the design of each banner ad, but it is and was unfair for IBN to assert that ILE’s click-through was 3 times lower than it really was. IBN’s decision to focus on claims about the low-click-through ratios in ILE’s network will probably prove its undoing when lawsuits against the company come to trial.

IBN’s false claims about CN: Mr. Pasternack also wrote in the same message, about the Commonwealth Network:

“The only thing that’s a little devious about them is this “unique impression” thing. Let’s face it. Most people are misled by it. In fact, not only is it misleading but it’s grossly unfair. We all know that they are selling impressions and not unique hosts. They are only paying the site for the first page visit and getting the rest for free even though they are charging the advertisers for them. How could this be fair? The site owners generates the traffic and doesn’t earn a dime for 90% of it. I believe Commonwealth knew this would be misunderstood (tough to measure if understood) and work toward their benefit at the expense of the site owner. If I was a site owner on Commonwealth I would revolt! So their .75 cents per host is in reality 1/10 that per impression.”

This was a misrepresentation of CN’s payment rules at the time — although ironically, six days later CN announced changes in its payment rules that established the very policy IBN attributed to it (although the new counting rules apparently resulted in declines of only 10% to 50%, not 90% as Mr. Pasternack claimed). Later, on September 16, CN agreed to once again pay for every unique page impression, although it reduced its pay rate for ad space it could not sell (see separate evaluation of CN). In any event, CN actually paid its affiliates the amounts it promised — something IBN has not done.

IBN’s Promises: Mr. Pasternack wrote to me, on August 1:

“Let me now say why I think the IBN is the most fair. We simply pay .5 cents per impression.

In its solicitation email, IBN stated that it would pay for more impressions than the Commonwealth Network, because IBN would pay for multiple banner views if a user re-loaded the same page multiple times, or if the user viewed the same ad on several pages at a single site.

However, when IBN sent out its banner-ad code for web sites, the code used the same link for every page — and therefore, the second and subsequent banner views were loaded from the browser’s cache and hence were never counted by IBN. It took over a week for IBN to provide information on how to modify the HTML banner code so that each page would load a fresh banner; even then, multiple views of the same page by a single visitor were only be counted once.

During August and September, IBN’s ad network carried only a single advertisement: a “Free Newsletter” advertisement promoting another project run by the same company. IBN stated that this was a paid advertisement. Of course, the display of a single, unchanging advertisement was guaranteed to depress click-through ratios, since people visiting multiple web sites carrying the same ad weren’t likely to click the banner again.

IBN’s promise to pay a half-cent each for unlimited advertising impressions, at the same time that CN was changing its rules to reduce payments, sounded “too good to be true,” and many webmasters hesitated to join IBN’s network. However, after some webmasters reported receiving small checks in September for August ad displays for IBN, many more web sites joined the Internet Banner Network during September.

IBN Breaches It Promises: In mid-October, IBN sent email to many (perhaps most) of its participating web sites, announcing that they would not be paid. The reason given was that the sites had a “click-through ratio below 1%.” IBN told another webmaster his click-through ratio was “well below average” with “only” 1.36% and therefore he was being paid only half the agreed royalty ($498 instead of $996 for 199,284 impressions). IBN only counted 500 of 10,000 ad displays at another site. One webmaster said he was cheated out of $4,500 for 900,000 adviews; another reported plans to sue IBN for thousands of dollars in unpaid royalties.

IBN “changed the rules” retroactively, imposing a “click-through ratio” requirement on web sites, after promising payment for every ad display regardless of click-through ratio. IBN even cited click-through ratios of 1% or less as a reason to join its network! Then it refused to pay web sites that performed exactly as IBN predicted!

I have repeatedly asked IBN to comment on these matters, both by email and by telephone (I even spoke with Dave Pasternack personally by telephone), but they have refused to comment.

Note: As of December 1996, IBN reduced its payment promises: it now promises one-quarter cent per ad display, and reserves the right to cancel any site due to “low click-throughs” (but no guidelines are given — apparently, the company can decide to cancel a site with a 10% click-through ratio and pay nothing, even if the site generated millions of adviews and hundreds of thousands of click-throughs).

A webmaster or advertiser would have to be a complete idiot to do any business with the “Internet Banner Network.” The company has defrauded many webmasters of thousands of dollars. Don’t do business with these con artists.

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