Month: May 2007

OPW INTERVIEW — May 16, 2007 — Scammers are a proverbial pain in the neck for internet dating and social networking companies. Over the next ten days I’ll list five interviews on your least favorite subject matter.  These will be slow news days while I’m at the Asian Internet Dating Conference. Nelson Rodriguez is CEO of LoveAccess, along with TogetherChristian.com and MatchRanger.

What kind of scamming do you encounter?
Primary scamming comes in three flavors. The first flavor is the typical Nigerian Ghana. Over the last 6 months to a year, they’ve changed tactics. They say they are either a traveling businessman and they’re overseas or they’re a young girl overseas. They befriend people and instantly fall in love with their target. Then there’s the tragic event that occurs. Their mother’s very sick back in the States and they don’t have enough money to go travel back or they were coming home from work and they were mugged and had their rent money stolen and they’re going to be thrown out by their landlord.

The second set of scams is where they’re basically trying to find targets for mail drops. The scammer will make up some story where they are traveling abroad and they have an important package, something happened (e.g. their laptop failed) and they need to get it delivered, and they need someone they can trust that can sign for it and forward it over to them wherever they are. (The merchant ships the laptop before discovering the purchase was made off a stolen credit card. The forwarder sends the laptop on to the scammer in Nigeria, etc. The forwarder may be liable for the laptop).

Then there’s the Russian mail order bride scammers, which fall into two distinct groups. There’s the one set where a girl will string “x” number of men along at one time, befriend them, talk to them on the phone, instant message them, then  the tragic event occurs where they need some financial assistance. Then there’s actually a second set which is quasi-legitimate. There are actual dating agencies in Russia who charge top dollar, I mean ridiculous amounts of money, for these Russian women to find them American men. So basically the girl comes down to the dating office and signs up for whatever service and the agency then goes and floods all the dating sites with their profiles to get the correspondence going immediately to their Yahoo or Hotmail addresses. So the girl pretty much doesn’t know anything about where this person was contacted. They go to the office, because most of them don’t even have computers, open up their Hotmail account and they correspond back and forth. So the dating agencies in Russia use our dating sites to basically spam everybody to try and get a few leads for these girls.

The majority of scammers are just looking for money. And then the other form of abuse we encounter, which is not a scam per se but still a problem for us, where our site is used for credit card verifications. What happens is, they want to buy something at a Best Buy or Circuit City or something and these guys need to make sure that when the transaction goes through its perfect the first time around. So they’ll basically just run credit cards on us first before they go make their big purchase. This is a problem for us. We end up voiding the transaction if we catch it in time but the sad part is there’s no mechanism to be able to report to Visa or Mastercard or Amex that this is a very suspicious transaction and we believe that this credit card could be compromised. There’s no recourse for it. So there is no repercussions for them to use us. That’s really problematic because if we get enough of those we could lose our merchant account.

Have you encountered much in the way of affiliate scamming?
There’s always some scam they’re trying. And even the affiliate scamming guys have gotten really, really good. Before they would just go at it with a brute force method and all of a sudden make 500 accounts in one day. Now they’ll make 2 or 3 accounts every day and they’ll spread them out over the day. The CPA’s that we have to pay these days is very significant. Any affiliate program we use we pretty much have to assume we’re going to have to write off 10% to 15%.

Is that worthwhile for them?
Yeah I mean look if you make 10 profiles a day you know its $40 a day in commissions times 30 and, especially overseas, $40 a day turns into a lot of money. So like I said it’s not that hard, it takes a matter of 2 minutes to make a profile and they’ve gotten very, very, very good at doing it.

How much worse has scamming gotten and how serious of an issue is it?
I don’t think the levels have really changed much. It’s always been just a part of the business that you deal with. But as a percentage of the business as a whole it’s actually very small. You figure maybe 5% or even less of the profiles are fraudulent but that small percentage causes a lot of headache because in order to catch the 5% you have to scan the 95% to make sure everything is good and that’s what adds to all the operational overhead that we get. It’s very frustrating to catch that 5%.

Beyond the financial effects the scammers have, how do they affect your site’s reputation?
Oh it’s terrible. People send us customer service emails, ‘well I’m thinking about upgrading but I don’t know if this person is real or not.’ It’s not good for a business if the consumer isn’t confident what they’re getting is legitimate. Then it becomes very problematic because let’s say the person upgrades and then we catch the scammer, they’ve upgraded and the account they were trying to contact is basically banned, and these people are frustrated. They get very upset and then question anything and any kind of contact throughout the whole site. It leads to a full loss of confidence. If you’re getting let’s say five emails today and three of them are coming in from scammers, any reasonable person is just going to assume that all of them are fraudulent and basically you’re going to sign off the site. It hurts both sides and ultimately we’re the main losers here. It’s definitely a big problem.

We’re offering matchmaking services and doing background checks and that’s been very, very effective in keeping the scammers away. Most of them won’t come through but a couple of them have tried. They still try. They’re very, very aggressive and they’re always looking for new creative avenues.

You have to remember one thing with these guys, this is how they make their living. They have nothing to do all day long except try to figure out how to beat the system, work around it, and look for any holes in the armor. So they have every single advantage while we’re at a complete disadvantage. I’m focused on building services and quality into the site, not trying to figure out how to stop scammers.

How much time does it take from your teams day?
We have one person who manually reviews each and every single credit card transaction. And then we have a couple of people that review every single profile that comes through the system. Like I said, as they get better they slip through. You can only be so proactive and then you have to be reactive and wait for customer feedback. They’ll say, “Hey there’s something with this profile, check it out.” And then you can go in there. We’re always at a disadvantage waiting to react rather then trying to nip it in the butt before it becomes a problem.

How can the industry work together to combat scammers?
We could have some sort of common database that we can run like a hash on say an email address and IP address or something and compare it against the database and say, this IP address and this email address have made 40 accounts on 20 different dating sites today. But still it’s a lot of work. While valuable who wants to spend the money and time to do it.

How high on the priority list should it be for the industry to stamp out this problem?
It’s a daily priority for us. It’s built into operations. Like I said if it affects 5% of the business it’s not that ‘big’ of a problem. But is it a top priority? Of course it is, it always has to be. We have to work Saturday a
nd Sundays because those scammers realize that on the weekends we were staffed less. So they would start working much harder on Friday nights and Saturday mornings to try to get some mileage out ahead of us, until Monday morning. We had to put on weekend people.