An Early Warning

On this site, we've talked a lot about the positive aspects of Paybuyer's technology. Here we talk about the negatives, as far as we can see them, as silly as that may sound at this stage where we have just a handful of advertisers.

Let's start with an assumption. Assume that Paybuyer's model breaks out and becomes popular like, say, loyalty rewards programs.

Then what happens?

The key thing to realize is that advertisers can use their competitor's names as search terms. That means Paybuyer lets businesses target their competitors' hottest prospects and pay those prospects to view an ad or call.

This ultra-precise targeting of competitors, combined with a significant money lure, can destroy companies.

How?

Imagine a fictional company, Sparkle Window Washing, and assume:

  1. Ten competitors buy "Sparkle Window Washing" as a search term on Paybuyer.
  2. They each offer $10 EV for a call to people who plan to buy from Sparkle.
  3. 50% of people who plan to buy from Sparkle enter "Sparkle Window Washing" into Paybuyer in order to collect EV dollars.
  4. The $10 EV lures those buyers to call one or more of Sparkle's competitors.
  5. Each competitor offers prices below Sparkle's.

Under these assumptions, a sizable percentage of Sparkle's imminent customers may switch and buy from one of those competitors.

The point is: a pack of competitors can intercept and strip away Sparkle's customers.

This type of intercepting already happens on search engines, of course, as businesses often buy their competitors' names as search terms. The problem is that this practice may become far more widespread and acute when businesses can pay their competitors' hottest prospects to view ads and call.

That's a powerful capability in a free market economy. It can lead to increased "economic efficiency," yet if it does, it will also lead to less secure employers and employees.

While Paybuyer is a privacy advance for consumers, the flip side is that it essentially exposes every company's customer list.

The threat is international. When low-cost foreign businesses can easily get hot prospects in any country on the phone, won't higher-cost local companies suffer? For example, will Kohler, mainstay of Sheboygan, Wisconsin, lose customers to international competitors who can pay for the attention of Kohler's top prospects, at just the right time?

And, the problem is compounded if businesses engage in short-term predatory pricing aimed at killing off competitors, which is difficult to prove and therefore rarely prosecuted (see, for example, what Amazon did to Diapers.com).

What's more, the problem extends to potential attacks on individuals. A business could economically track (stalk) specific salespeople. The business could buy any salesperson's name + company as a search term. Then, any hot prospect that the salesperson is on the verge of closing could enter the salesperson's name into Paybuyer and see a pitch like this:

"If you're about to buy insurance from Tim Smith of Prudential we'll pay you $50 EV to call us first, and we'll sell you the same policy for 15% less." Hypothetical (Unethical?) Business

What happens then?

Our best guess is that, if it breaks out, Paybuyer's ability to enable attacks on specific businesses and individuals will have to be restricted by regulation.