Michael Arrington’s sources suggest this is permanent.

That is $33 Million down the drain in research, development, infrastructure for the search engine crawlers etc.

But that is a fair investment… the investors new there was a significant risk, and based on the Crunchbase profile there were a whole load of smart people involved.

To misquote Alfred Lord Tennyson’s poem In Memoriam:27, 1850:-

It is better to have tried and failed than to never have tried at all.

But Leapfish… it is not just investors who will end up losing their money… if they haven’t already pulled their investment out.

Traffic numbers between Cuil & Leapfish are very similar i.e. Leapfish hasn’t gained any traction.

No amount of paid reviews is going to revive a flagging product – Google instant just blows any unique qualities away – before anyone suggests that somehow Google are copying Leapfish, there have been various “instant” type search implementations for the last 5 years and meta search engines are a dime a dozen.

“Boiler room” sales practices – an interesting way for a startup to get “funding” from people who in some cases were borrowing money of family member’s credit cards so they didn’t miss the great opportunity to “invest” in a guaranteed listing at the top of a search engine noone is using.

Up until fairly recently you might have thought their traffic was growing… and that that was search based.

However under the surface you have the Leapfish directory http://directory.leapfish.com/

That looks like the search engine traffic (from other search engines) has taken a hammering, and all that is left of their traffic only compares to a mildly popular, though niche blog such as my own.

Mark Kithcart, Director of Marketing whenever Leapfish are criticized comes up with amazing quotes such as:-

Also I think a few clarifications around our advertising model may help. We are not the traditional PPC modeled platform where you rent space and pay per click. We offer advertisers an opportunity to actually register Keyword Positions outright. We do charge a yearly renewal fee, but advertisers are able to benefit from both the traffic and equity side of the Keyword Position as the engine continues to grow over the next several years.

Equity equity equity…

But Leapfish doesn’t grow… maybe the only way it grows is by buying traffic in the hopes of luring in more people to buy keywords that are guaranteed to rank on a search engine no one is going to use… well other than the people who have purchased keywords.

I would have thought there were government departments in the US who were meant to investigate things like this – SEC, FTC etc – maybe the total investment isn’t as large as the Madoff scenario, but people are being hurt in a similar way.
I can’t understand why there would need to be a class action lawsuit against Leapfish.

If you are looking for some indepth research, Matt has a full dossier on Leapfish, and there is mention here of a formal complaint to the BBB & FTC about Leapfish.

Matt’s analysis is actually important to add balance to this blog post because at one time he equated Leapfish traffic number to the amount of people the Leapfish boiler room sales people could call in a day to sell keywords to, many of who would check out the site before hopefully saying no.
It is quite possible the massive drop in traffic displayed in the Alexa graphs is due to a reduction in phone calls.

This blog post is all personal opinion, based upon the limited information I have available and public statements by official Leapfish representitives. I have never been cold called by Leapfish, but then I am a crazy guy living in the middle of the Polish countryside.
I have previously covered another startup by the same founder, Ben Behrouzi called ePerks.com – that website ripped off lots of Real Estate people and no longer exists.
My prediction is that Leapfish is heading in the same direction… the deadpool and I am sorry that so many people may have lost their “equity” investment without the typical safeguards you would expect for such a high risk undertaking.

Update

I knew I should have checked one more resource as for a long time Vlad was monitoring Leapfish though mostly on Twitter where I haven’t been very often in the last 6 months.

He had posted last year on one blog that he was no longer interesting in covering Leapfish.

UPDATE May13, 2010: Things pertaining to LeapFish.com, their founders and management, along with related startups are no longer of interest to me, therefore no further comments are allowed on this post. There are also more reliable sources out there (such as Better Business Bureau) to help you make an informed decision about LeapFish.

However on his real estate marketing blog there have been a few updates to the Leapfish saga, most notably this one covering the Leapfish financial situation.

Staff laid off at parent company
Class action from employees that hadn’t been paid… won by employees, and then DotNext, the parent company failed to pay the award.

My Personal opinion – Leapfish is now a Zombie – the living dead – the search box on the site is about all that is left, a meta search engine that no one uses.
A note for any Leapfish affiliates – if the can’t pay their employees, the chance that affiliates will be paid I would class as slender.
If you are interested in buying lots of keywords, there is this staute on Staten Island you might also be interested in. ;)

I am trying to be a responsible blogger. Over the last few days I have actually spent a considerable amount of time trying to avoid writing this post.
Most of my reviews are generally positive – if a company approaches me for a review and I feel that I have major concerns regarding their service, most often that will be expressed in email and we part ways, hopefully for the company to rectify the problems.

When I do write something negative, most often it is about specific features which if rectified, will make the product offering significantly better, or on occasion it is to offer differing opinion on a hot topic that is being extensively debated, and I will link through to differing opinion.

This is an ugly tale I don’t know every aspect, I doubt anyone does, but I have clocked up hours of research in writing this article, and it represents the truth as far as I see it.

I haven’t taken the opportunity of contacting ePerks or iHype directly – this article is not about their services, but primarily the way they have poorly handled their contact with the bloggers which has a significant bearing on how their newest offering, iHype will be accepted by the blogging community.

ePerks

Vlad is a regular reader. He was hired to write a review of ePerks on his real estate blog through Sponsored Reviews and since then he has been in a long battle of cease and desist letters and legal threats.

Whilst his original post doesn’t appear to be online any more, and I didn’t read it in the first place because I am honestly not interested in real estate in the US (and my wife would gladly tell the world how little interest I have in Poland in anything to do with the house), from what I have read in a number of references, the article was generally positive.

After Vlad published the article, he received a number of comments that were generally negative about ePerks.

What does a smart honest blogger do in such a situation? In my opinion as he has already written a largely positive review, it is well within conventional practice to publish a followup article possibly expressing the views of one or more of the comments he received on his previous post, and encourage his audience for more feedback.

That is exactly what he did, asking with Eperks is a Gem or a Scam? which he posted on August 10th.

The title and his emphasis in the post suggest that his first review was largely positive, and that the negative views had been expressed by his readers.

What followed were well over 160 comments on the post – over the last 24hrs I have read the whole thread, some parts of it multiple times.

At some point the comments turned into a running battle between a number of anonymous commenters plus one person who claims to be an employee of Eperks.

There may have actually been previous comments on the thread that Vlad determined were in some way dubious as is hinted from his comment @ 2007-10-18 02:17:54 (Vlad doesn’t have permalinks for comments)

Steve are you reading the comments or you just here to spam as were other ePerks employees?

Look ,these agents feel they were mislead, it’s not like they are buying company’s shares on Wall Street. They have purchased the service and ePerks failed to deliver. How can you blame them for criticizing ePerks?

Just a few days previously the conversation had changed from people complaining, to contemplation of action, with the entry of Sergio Gala stating that he had complained to the BBB.

Around the 30th October “inguru” showed up, along with “Benjamin” an employee of Eperks. I don’t know whether Benjamin is in actual fact Ben Behrouzi the Founder / CEO of ePerks.com

In January 2008-01-22 02:07:03 another commenter, “john” joined the conversaion and started making claims of unfair portrayal, doing “research” on Vlad and making threats.

Inman, among other top real estate blogs covered Vlad’s legal problems in March

I am not going to take a position on whether Vlad should have written the followup post, left the comments open, or continued reporting. One of the biggest dangers in interpreting events at this stage is hindsight. Another danger is for the views of your community, in the way of comments to sway your own opinion.
In many ways it is a good thing, but to an outside observer not all the information is available, as we will see…

Attack Of The Shills

Vlad aluded to various ePerks employees commenting on his blog under various different names. How could he tell?

It was actually something quite simple, IP addresses, but unfortunately those are not make public, and making IP addresses available to the public could be looked on as a privacy issue. Avinash wrote about IP address privacy concerns 6 months ago – I didn’t respond at that time but I have a very good memory.

Vlad also recently added the following statement to the top of the gem or scam post.

But lets step away from Vlad’s blog post for a while, and take a look at what has been happening on other sites. After all, there have been accusations that Vlad is in somehow biased, as are anyone offering him a shoulder to lean on.

Whilst ePerks deal with Real Estate, they also deal with car sales (no car salesman jokes please)

There was a very interesting conversation over on Yesterday’s Trucks

Here is a long screen capture of the comment thread which does have a lot of legitimate commentary from people I have seen in other discussions about ePerks. I have highlighted the comments that are of real interest.

Ray S. 11-30-2007 16:52:17 76.206.0.161
Lisa 12-27-2007 16:55:36 76.206.0.161
MARY 12-14-2007 08:47:44 76.206.0.161
benjamin 07-03-2007 12:47:12 76.206.0.166
Charles 11-30-2007 16:37:10 76.206.0.161

That is the order they are displayed in the link I used, I haven’t quite worked out how to get a threaded view, though with close examination it appears that some of the comments are replying to each other.

This is shilling of the worst kind, and it should be the BBB, WOMMA and the FTC taking a looks at ePerks, not ePerks trying to exert legal pressure on a blogger who just provided the forum where events materialized.

But It Gets Worse

Apparently Mr. Behrouzi has stated to Vlad that the IP ranges are unconnected to ePerks though the evidence, not only on the trucks site suggests otherwise.

• The IP range has been connected to email correspondence from ePerks
• The IP range has been connected to comments on Vlad’s blog
• The IP range has been connected to the fake attack on Vlad’s reputation across the internet, on social bookmarking sites, Yahoo answers, and various Wikis.

Yes, even Jaffar Sadighi maligning Vlad’s character has been linked to this IP range

Anonymous

There have been lots of anonymous comments all over the internet but the worst of all are on a WordPress.com blog that seem to have been created as an attempt at reputation management.

The post was written by someone called Michael K.

http://eperks.wordpress.com/2008/01/24/eperks-success-experience-feedback-clients/

Just the URL and Title of the post suggests that it is aimed squarely at capturing traffic from people searching for feedback. Nothing wrong with this as a tactic, but it is important to take a look at all the comments.

This is the real estate industry – the people involved in ePerks are looking for more business. The post is overtly positive as are all the comments.
For me as a marketer it looks like an absolutely ideal place to mention which area codes I might have purchased for ePerks, along with a link to my blog or website, or even just a link to a profile on ePerks.

I have lots of people involved in Real Estate who read my blog – they are certainly not shy of including links when leaving comments, and on occasion some targeted anchor text.

To have a comment thread about ePerks, with 28 comments, and only 2 of them have left a link (one to a totally off topic site might even be just a spammer), is totally absurd.

If someone from WordPress.com happens to feel like checking, without compromising anonymity of the blog author that might take a court order), there is a high chance that a large number of those comments were left from the same IP range.

It would also be interesting to check whether there is shared ownership with this blog that was previously used to attack Vlad

http://vladzablotskyy.wordpress.com/

You see at one time the blog at eperks.wordpress.com was part of the “web of destruction” being used to attack Vlad’s reputation, and the single post contained the following reference.

Whats holding me up is that there is a blog on the internet that seems to hold a great deal of negative comments. In fact I’ve noticed that anyone who leaves a positive comment is either deleted or considered an ePerks.com employee. However I have this feeling that the owner of that blog is making those comments up or they are competitors trying to give ePerks a bad name.

The reason I think this is because the site (go-beyond-mls.com) has 4 or 5 blogs just about this company. Why would any average joe write so many articles on the company if they weren’t competitors? In fact I wrote a comment on the blog and was instantly titled an ePerks employee by the owner, Vlad. This upset me greatly so I have decided to start my own blog about it that will be completely organic. I have no hidden agenda’s nor am I profiting from the traffic generated to this website.

I do not want Vlad the owner of go-beyond-mls.com to post on this blog for I feel and am almost certain that he his somehow affiliated with one of ePerks competitors. I would like to warn all that read both this blog and his that they second take all the content on that site for I believe and am almost certain it may be artificial.

Note: the internet has a long memory, and I was the one who forwarded that quote to Vlad on April 2nd by email. I am sure if legal proceedings do take place, there will be a need to access email and historical records of every website ePerks has ever been mentioned.

As mentioned in the discussion on the Gem or Scam thread, IP addresses can be faked but whilst I am not a lawyer, I doubt Vlad would have to prove that the IP addresses are genuine.

Here is a little excerpt from the defamation FAQ on Chilling Effects

Question: What defences may be available to someone who is sued for defamation?

Answer: There are ordinarily 6 possible defences available to a defendant who is sued for libel (published defamatory communication.)
1. Truth. This is a complete defence, but may be difficult to prove.
2. Fair comment on a matter of public interest. This defence applies to “opinion” only, as compared to a statement of fact. The defendant usually needs to prove that the opinion is honestly held and the comments were not motivated by actual “malice.” ( Malice means knowledge of falsity or reckless disregard for the truth of falsity of the defamatory statement.)
3. Privilege. The privilege may be absolute or qualified. Privilege generally exists where the speaker or writer has a duty to communicate to a specific person or persons on a given occasion. In some cases the privilege is qualified and may be lost if the publication is unnecessarily wide or made with malice.
4. Consent. This is rarely available, as plaintiffs will not ordinarily agree to the publication of statements that they find offensive.
5. Innocent dissemination. In some cases a party who has no knowledge of the content of a defamatory statement may use this defence. For example, a mailman who delivers a sealed envelope containing a defamatory statement, is not legally liable for any damages that come about from the statement.
6. Plaintiff’s poor reputation. Defendant can mitigate (lessen) damages for a defamatory statement by proving that the plaintiff did not have a good reputation to begin with. Defendant ordinarily can prove plaintiff’s poor reputation by calling witnesses with knowledge of the plaintiff’s prior reputation relating to the defamatory content.

Lot of these defences might apply to Vlad’s case, but most interesting is consent

ePerks Paid Vlad To Write About Them

There a various banking records that ePerks through Sponsored Reviews paid him to talk about them.

Maybe the intention was only the initial brief mention, but bloggers have their own social contracts with their audience to think about, and new details emerge.
It could easily be looked at by a court that follow up posts were an extension of the first, especially as Vlad was fairly good with interlinking between posts.

This is one of the positive aspects of paid blogging, the chain of evidence created that whilst many people suggest that the payment might add bias to any potential review in favor of the person providing funds, it also might provide an additional layer of protection.

Effectively if you get slammed by a paid blogger, you asked for it whether it is the time of the initial review, or at a later date.

Vlad didn’t start the review process, ePerks engaged bloggers to write about them

It might take ePerks some time to realise this, but they have lost this battle… Q.E.D.

There has been a lot of analysis among real estate bloggers, but I feel Trace’s recent article on ePerks destroying their credibility is the most compelling, and worrying for anyone who has invested money in ePerks.

iHype

Time to about circle, it might seem that I am just waffling about ePerks, and that it has no real relationship with iHype other than the owners.

iHype is a paid blogging service, paying bloggers to write paid reviews.

Paid reviews and the companies that offer such services are a core topic of this blog though generally PayPerPost have had more to talk about than other companies.

With paid blogging services in the past, companies have had the option to request “positive tone” for reviews. That isn’t intended as controlling the “voice” of the blogger, forcing them to shill. What it does mean is that honest bloggers won’t accept writing about a company they don’t feel comfortable introducing to their audience.

Unfortunately for companies requesting this option, that isn’t the end of it.

Whilst you might in the past have been able to request only a positive tone, and it would be a little unethical to accept payment to just trash a company blogging is a conversation.

Requesting a blogger to review a company, paid or not is a little like rubbing Aladin’s lamp, uncorking a champagne bottle, or removing a thumb from a dyke holding back the floodwaters.

The truth wants to be free

A blogger can’t legitimately control the conversation (they can give it some direction, though that has repercussions) that happens around what they write. ePerks have certainly accused Vlad of trying to control the conversation through moderation of his comments, but where were the bloggers coming to the defense of ePerks? Surely the blogosphere would be buzzing with blog posts about how wonderful ePerks is from their 1000s of customers, rather than anonymous blogs created for the purpose of shilling ePerks.

Paid reviews companies receive a huge amount of criticism in the blogospere, and one of the things that impressed me the most about PayPerPost, and also competitors such as ReviewMe and Sponsored Reviews was the way that their representatives engaged the blogosphere, opened up conversation, addressed problems in the open, and eventually used that feedback to enhance or change their product offering.

Instead, the iHype founders at ePerks have been using legal threats to silence a blogger

I can’t shake the possibility that my opinion in this might be biased. Behind the scenes I have helped Vlad a little in removing some of the most disgusting attacks on his reputation on sites like Yahoo Answers.

I would have liked matters to be cleaned up in a friendly way before iHype launched, with the ePerks founders having seen the errors of their ways and what effect it might have on their future plans.

I have deliberately not linked to either ePerks.com or iHype.com, I haven’t used their logos, or screenshots of their service. I haven’t created an account with either service, or tested them in any way.

Why?

Because I don’t trust them, or the founders. They don’t deserve even that vague recognition that they are in some way a legitimate site. It is a personal opinion, I will sleep peacefully having made that decision.

As far as I am concerned, and this is personal opinion, iHype can go straight to the deadpool

Michael Arrington might have referred to Ted Murphy of PayPerPost as being “the most evil person in the room”, but ePerks and Ihype founder Ben Behrouzi certainly seems (in my personal and possibly biased opinion) to be one of the most evil people in the blogosphere.

Trace Richardson also has a followup article on iHype, with some other interesting facts.