Intelius is trying to dip its toes into the public market again. Last year we wrote about their business, which combined for-pay people search information with a post transaction marketing scam. After purchasing people information, users were encouraged to take a survey for $10 cash back. In reality, if users clicked yes the $10 was never mentioned again and they were signed up for a nearly impossible to cancel $20 monthly credit card charge.
The IPO never happened. But last week the company quietly filed a new registration statement with the SEC, indicating their attempt to try the markets once again.
Little has changed with their business. They are still selling people information that you can find on other sites like WhitePages.com for free. And during and immediately after the transaction, users are asked if they want $10 cash back. If they click yes, they are signed up for a $25/month credit card subscription.
Consumer complaints continue to flood the company. 1,159 consumer complaints have been filed with the Better Business Bureau in the last 36 months. There are another 214 complaints on RipoffReport. And they have had to deal with class action lawsuits in both Washington and California. And that’s just the tip of the iceberg.
The company even acknowledges that complaints are getting worse. From the registration statement: “Over the past two years the number of customer complaints has risen more rapidly than the number of transactions.”
The company had revenues of $123 million in 2008 and $74 million in the first three quarters of 2009. Net income in 2008 was $12 million.
Without the post transaction marketing scam, the company wouldn’t be profitable. 2008 PTM revenue was $33 million, or about 27% of total revenue. And that percentage is increasing – For 2009 so far, PTM revenue is $22.6 million, or 31% of total revenue.
In my recent test searches I found that Intelius was charging even when there was no data (which you don’t see until you pay). And when the data is available, in all cases I was able to find it elsewhere for free.
Intelius is not a business. It’s a huge toxic scam from start to finish.
Hate companies like this. How are they still around?
even moreso, why are they allowed to register to go public?
Any company is allowed to register, doesn’t mean it will be approved.
Wrong Naveen Jain linked at the bottom of the post!
The guy you linked to seems way more innocent
than the Intelius founder.
oops. lemme fix that.
hay mike
does zynga have something similar where you can fill out a form and get play money..isn’t this a scam too since it is going after the younger teen market and making bank of it
They don’t have any lawsuits?
they have lots of lawsuits.
A class action suit was filed against Intelius in Washington state on Oct. 19th. We reported on the suit yesterday, as well as some of the other details coming out of the most recent IPO filing.
There is also a class action suit in California, filed in August.
John Cook
TechFlash.com
This would be the perfect short ala Vonage if it went public. I doubt it will see the light of day in the public markets given your post Arrington.
Michael you must either be the smartest guy on the web or you’ve got to be missing something.
The only reason why I say that is that you peaked my interest enough to glance – not read- their filing. They have big time banks backing them. If they are as bad as you say this would not be the case.
It is an ignorant yet fun comment to say the banks will work with anyone for a buck, however it just isn’t true.
Also just my opinion that offer doesn’t appear that bad to me I get that crap on almost every ecommerce site I visit. Maybe you could get a bigger monitor so it won’t be below the fold.
it’s not clear what they do is legal, which is why AGs have investigated them. All the banks really care about is if its generally legal and if they get their fees. If you read the risk factors carefully, most of this is disclosed.
disclosures from the registration statement, which have been updated substantially since last year after my initial post. I’ve also bolded some of the more interesting stuff:
Our operating results depend significantly on advertising revenues that we generate from a single advertising relationship. Losing this relationship could harm our operating results.
We generate most of our advertising revenues, which represented 27.7% of our total revenues in 2008, from a single company, Adaptive Marketing LLC. Adaptive Marketing can terminate or modify this relationship with little notice and there is no guarantee that we could establish a comparable new relationship with other companies on a timely basis, if at all. If our relationship with Adaptive Marketing were to terminate and could not be replaced, our operating results would likely be harmed due to the significant profitability of this relationship. Similarly, if the manner in which that company advertises its services on our websites is changed so that fewer customers accept the offers, our financial results could be harmed. For example, new government regulations could require revisions to the advertisements or marketing methods it uses, possibly reducing the number of our customers who accept the advertising offers. In addition, our ability to increase or maintain advertising fees from our advertising relationships primarily depends on the number of visitors to our websites and the number of customers who transact business with our advertisers. We must increase traffic and transactions in order to increase our advertising revenues.
Internet advertising approaches are changing, and if our customer base or technology does not evolve to meet the needs of our advertising relationships, our advertising revenues could decline. In addition, our advertising revenues have fluctuated in the past, and are likely to fluctuate in the future, due to changes in the online advertising market, including extreme fluctuations in online advertising spending patterns and advertising rates.
Internet advertisements may be used to distribute viruses over the Internet. If this practice becomes more prevalent, consumers may become less inclined to click on online advertisements, which could adversely affect the demand for Internet advertising and our revenues.
Because we are a consumer-oriented company, customer complaints and occasional adverse publicity are an inherent aspect of our business. If we fail to manage customer complaints properly, or incur substantial adverse publicity, our revenues and operating results may be harmed and our stock price may decline.
A substantial majority of our revenues are derived from sales of information services to individual consumers, including approximately 3.8 million transactions in 2008, and from post-transaction advertising to those customers. In order to promote repeat customer activity and the value of our brand generally, it is important that we provide a good customer experience, including how we handle customer complaints. We could be subject to consumer complaints if we fail to maintain our customer service at acceptable levels, if our services do not meet consumer expectations, if we are perceived as not providing fair refunds, if we are subject to a data security breach, or for other reasons. Over the past two years the number of customer complaints has risen more rapidly than the number of transactions, and the steps we have taken to reduce the number of complaints may prove to be ineffective. Sales of our Identity Protect subscription service, and post-transaction advertising of other subscription services, appear to be the focus of many customer complaints, and our efforts to reduce the incidence of complaints may also reduce our revenues from that service and our advertising. Dissatisfied customers may also deny payment for services through their charge cards, increasing our chargeback rates and our costs of doing business. Customer complaints may also lead to adverse publicity in the press or popular blogs and websites, and may lead to regulatory investigations and potential legislative or regulatory reactions that may impact our business, reduce our revenues or increase our operating expenses. For example, adverse publicity about our post-transaction advertising practices led to a reduction in our post-transaction advertising and to changes to our business model, including a greater emphasis on direct sales of our Identity Protect service. In addition, we are subject to ratings by consumer advocacy organizations, such as the Better Business Bureau, which could be adversely affected by negative publicity and customer complaints. Finally, from time to time we incur negative publicity related to our founder and chief executive, Naveen Jain. If we do not manage adverse publicity adequately, our brand and revenues could be harmed and our operating expenses could increase, harming our financial results and stock price.
Our corporate image might be impaired as a result of negative publicity about our use of personal information in our service offerings, which could cause a corresponding drop in our stock price.
Public sensitivity to the disclosure and use of personal information may create negative reactions by investors and customers to our business practices. Public concerns regarding data collection, privacy and security may cause some potential customers to choose not to purchase our services, which would inhibit or reverse the growth of our business and negatively affect our stock price. Any perception that our services might invade consumer privacy, even if our practices are in compliance with applicable law, may subject us to adverse publicity and could affect our business and the price of our common stock. Publicity by politicians and regulators threatening legislative or administrative action could adversely affect our business or the price of our common stock, whether or not the threats materialize.
Piqued your interest. Your interest was piqued, not peaked. It was not pushed up to the top of a mountain.
Is what he’s doing actually illegal or immoral? It has been a while since you talked about him and they seem to still be going strong.
definitely immoral. on the border of illegal.
The high tech image on his homepage looks like it is also from 1996
hahaha that looks like a complete joke
“… they were signed up for a nearly impossible to cancel $20 monthly credit card charge.”
Citibank and other credit card companies let you generate a virtual CC # with a predefined limit and expiration date, and it can be instantly cancelled to boot. I think using the straight-up CC # these days is insane.
” They are still selling people information that you can find on other sites like WhitePages.com for free.”
last time i checked you cant find people’s emails on whitepages.com
i didn’t see emails in the reports i purchased. do you?
Regardless of whether Intelius offers email addresses, you can still find people’s email addresses on plenty of other sites – for free. 123people.com comes to mind since they have gotten almost everything wrong about me except for my blogs and my email address. The fact that they screwed the rest of it up is not a testament to how bad they are but to how good I am, since I go out of my way to not offer a lot of clearly identifiable information to the Web.
So sad to see that they get top billing when you try to do a reverse phone lookup on google.
They always have. I’m not sure how long Naveen has owned Intelius it but I can remember as far back as 2004 Intelius being the first result for any sort of people search, especially in Google, a search engine which just loves them.
Articles like this one are why i really love TC; totally unbiased reporting. Telling the good, the bad and the ugly.
Good Job
++
oh i’d say this is pretty biased.
Yesterday, I received a letter from my bank offering a $5 check.. cool right? Ofcourse, on the back of the check it said, I’ll have to pay $11.99/month for some service from a third party I don’t need. When will I see a post against US bank.
And oh, I never saw a post against Buy.com for giving me $5 cashback for signing up for a service I don’t need after my order was complete.
Just wondering, what do you have against Intelius and Why don’t you put picture of all CEO’s on your posts when you criticize their company’s practices.
Michael interesting thoughts. However as you know, I think you were/are an attorney, that these docs always simply talk about worse case scenarios. I wouldn’t put too much clout in it. Does any one actually read these things anyway?
I dug a bit deeper – ok just a quick Google search -couple of things of interest (at least to me). They’ve won a bunch of awards and were the voted best place to work in their state for what seems like multiple years. Or at least that’s what Google tells me.
Are there other companies that do this marketing? It just seems like I see this stuff everywhere.
Hey Micheal,
I’m still struggling with your article. I have been an Intelius customer for the last few years. I have used their reverse phone and email services for my business. I may be alone on this board but I really like the service!
What makes this advertisement different from what I see on many other sites on the internet? I don’t profess to know anything about how a company goes public. It would seem to me that their board of directors, investment bankers, auditors, legal folks, etc would take issue with the advertisement. It has never been a problem for me. I simply declined it and received my service.
Your article just seems to have an odd undertone.
Sue
@ Sue , i can see what you are saying . But he does not deny the fact that his tone is biased. In my opinion people need to read before they click. Nothing is free . And if you sign up for something with out reading the fine print who’s fault is that? Yours. And as far as “charging for something you can get for free” that argument is very weak. People go to services because they don’t feel like doing things themselves . Simple as that. Some people pay people to laugh at their jokes. If you choose not to do that then don’t pay. What’s so hard about this.
wonder if his son will chime in to defend Intelius this time too… attempted IPO or not, outlook doesn’t look good for the company
Have you ever read Naveen’s blog (it’s linked to in the company profile)? It’s a one-man self-promotional show…really over-the-top bragging/boasting, no doubt written by “the wizard” himself (as in, “I put on my wizard hat”). According to Naveen he can do everything except lift Google headquarters off of Mountain View with his bare hands. If he’s reading this, he’ll probably include that feat in his next update. God himself pales in comparison to the almighty Naveen.
In all seriousness, the guy’s appeal must lie in his charismatic, over-the-top personality, at least in writing, and maybe in person, too. I wonder how “magnetic” such a personality must be in order to make so many people drink so much Kool-Aid.
It would be interesting to investigate how many of companies with these sort of business practices are out there. I had been getting charged for ring tones that I did not even know I purchased by Social Media (www.socialmedia.com). When I finally reached someone at the company I was told it was a “substantial, but not all” part of their revenue. I am still awaiting my refund.
I can attest to at least other companies who pull this shit; drugstore.com and eyes,lips and face.
In both cases, my wife ordered something from each company, after which we started seeing a mysterious monthly $12.00 charge appear on our bank statement. Upon further investigation (calling the phone numbers listed for each bank charge) we discovered we had been surreptitiously signed up for some sort of “discount membership” service. We were never notified of such nor offered opt-out during the order process in either case.
Nice way to piss off your customers, and guarantee that they never come back as well as having them complain about it to everyone who will listen. But apparently, the immediate revenue boost more than makes up for such obnoxious and unethical “business practices”.
-scragg
Naveen definitely knows how to make money and gets the Internet, but he is way short on ethics & humility. I guess that makes him the perfect CEO.
His core team is very loyal and he probably takes care of them monetarily. Money for nothin’ and your chicks for free.
Intelius makes a whole industry look bad so keep the heatlamp on them. The problem is compounded because the industry in not well understood and contains many players doing quite different things, but which sound similar due to their use of the word identity.
There are several reliable well-behaved companies in various aspects of the identity industry, including consolidated ID (or shared logon/common credentialing) such as ClaimID.com and DandyID.com, social web ID verification such as ReallyWho.com and Crederity.com, ID theft protection such as LifeLock and many others, ID and background checks from Acxion.com and ChoicePoint.com.
I’ve used them to look up who owns cell phone numbers.. it works, but I am sure the information is available somewhere else.. not worth their prices
One thing I use Intellius for is the reverse phone search. Anyone know of a free site for that?
If you are looking up a number that called you, then you can try http://800notes.com , it’s a free user-created reverse lookup directory. The information is supplied by other users who received same phone call.
Use free AAfter Search to do people, address, and reverse lookup.
There are other companies offering this service like http://www.cisnationwide.com/ and the do offer much more comprehensive service
I wonder if “Sue” happens to work at Intellius…
Reminds me of the fake Yelp reviews written by the restaurant owners.
Do you have proof that the yelp reviews are fake and are written by the restaurant owners? No. Yet you speak as if what you are saying is documented fact. Comedy!
Best quote ever from his site: “Currently, Naveen Jain spends the majority of his time at Intelius solidifying his status as the wizard of the information industry.”
The sad reality of Mr Jain’s world is that greed will continue to perpetuate his ilk. Greed from the VC’s and investors who think they’ll make a buck – regardless of a shaky business model and/or collateral damage that could ensue. And greed from the employees who – despite their better judgment – continue to work for a snake-oil salesman because the carrot hung before them is too good to pass up.
The debacle of Infospace apparently swayed no one….. So no one should throw their hands up in the air when this one blows up.
It’s like what Demi Moore said to Michael Douglas in the movie “Disclosure”: “You put your #$%^ in my mouth and now you get a sudden case of morality?”
Google “seattle times infospace” for the Seattle Times series “Dot Con Job” on Naveen’s billion dollar IPO scam during the last boom.
How Naveen Jain avoided jail is definitely a scandal. Add to that the fact he got to keep his ill gotten millions, and you’ve got an outrage. And now, heading up another IPO to add a couple hundren million more?! my head just exploded!
Okay right now I’m sitting in a chair answering calls for intelius and I have mixed feelings. On one hand I dare anyone to go to the site now,and on the 3rd page after your search is selected tell me the disclosure for regularate vs the promotion rate is not clear and if you select the promotional rate the 4th page is a full page disclourse of the identity theft protection program your signing up for. I don’t see how it can be clearer. On the flip side..people are dumb and they don’t read and morally I don’t think a company should depend on peoples stupidty to make money. When I speak to customers if they call us a scam I don’t refund them, because the fact you don’t read what your signing up for is not a scam. If they come on the phone non combative and say they accidently agreed to or missed the offer then I’m more likely to issue a credit. The fact is 30 percent of my calls are people callin because they noticed they signed up for the free trial and don’t want it. They read the screen. They received the email receipt telling them they have it and they call,take ownership and cancel it.the 60 percent of people who do complain all have the fact they didn’t pay attention in common.so yeah..intelius is messed up for depending on peoples stupidity but people..please stop being stupid..if you read I think the site is great..I’ve spoke with numerous people who have used out site n love it. Yeah u coulfind this info for free thru other means that require more work but like most things you are paying for the ease of gettin the access. Most people could change their oil for free but how many people want to get their nails dirty and do it!?
There have been several online companies that make huge amounts of money recently, as people do not fully understand what they are signing up for. The companies that do this KNOW that they have a “user interface” that is not clear.
My suggestion would be for legislation that defines what layout can be used for purchases. ..for example “check out.” Also there should be very clear online “opting out” at any point without penalty.
Technology is moving so fast, it is hard for people to catch up, and laws that protect the general public take even longer. Hopefully with exposure from articles like Arrington’s, internet companies that are benefiting from online unfamiliarity will be shamed into having more ethical behavior until the rules can catch up.