If it was a bad idea the first time around, it’s probably a bad idea the second time around too. Mike was harsh on AGLOCO, a variation of the failed AllAdvantage pyramid scheme from a few years ago, when he wrote about their launch. He was right to question the business - they’re closing down. The following email was sent to at least some AGLOCO members:

We would like to update you on the status of AGLOCO’s operations. We continue to believe in the AGLOCO concept, but our revenue is currently not sufficient to give Members a meaningful distribution. And though there are increases in membership, the resulting revenue is not enough to support operating costs. As a development team we are unable to continue to use our savings to fund the operations. If any Member would like to pursue continuing the operations of AGLOCO, you may contact us at agloco1@live.com .

We would like to thank every Member for supporting our effort to bring a piece of the Internet directly to the user. We hope that we can find a way to keep the operations going.

AGLOCO is the reincarnation of AllAdvantage (complete with some of the same founders), a Web 1.0 company that paid users for viewing advertising through a toolbar. The founders, who blamed the stock crash in 2000 for the AllAdvantage faiure, claimed they’d get it right this time around. In particular, the ability to highly target advertising would allow them to generate enough revenue for a sustainable business.

Apparently they were wrong. AGLOCO joins the TechCrunch Deadpool.

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We don’t always slam a company just for taking a new spin on an idea that didn’t fly in the bubble. But if the founders of the new company were part of the old company, and the business model looks a lot like a pyramid scheme, and they are saying publicly that the only reason it didn’t work the first time around was because the market crashed at the wrong time, we’re going to take a very hard look.

AGLOCO is all of those things, but it may be a good idea anyway. First spotted (and trashed) by Liz Gannes at GigaOm, AGLOCO looks to be very similar to a service called AllAdvantage that was a high flyer back in the day, just before crashing badly in the stock market burst of 2000. AllAdvantage paid users to surf the web by showing them advertising related to what they were viewing online. AllAdvantage also paid referral fees for new members that a user recommended to join. The company raised $200 million in capital and reportedly paid out $100 million to members.

AGLOCO is a reincarnation of AllAdvantage, although the founders are trying to spin a different story. Like the previous company, AGLOCO asks users to disclose personal information and install a toolbar that rests at the bottom of the browser screen. The key difference is that AGLOCO is also reimbursing a portion of affiliate fees earned from ecommerce sites when users make purchases, and they have a multi-level payout scheme where users can get part of the fees generated by referred members, plus new members that those people referred, down to five levels (this is why it is being called a pyramid scheme). It looks like AGLOCO is also offering stock in the company to users.

Matt Marshall has a long post that he wrote after interviewing some of the fifteen founders. They argue that the model will work this time because advertising targeting technologies are better, and the affiliate model will add additional revenue.

They may be right, and there is certainly nothing wrong with trying. If they can get enough people actively using the software, and the advertising market doesn’t implode, my guess is they will have a success on their hands. AGLOCO isn’t going to make the world a better place, but it may be a profitable business.

What doesn’t impress me about the company is that they are still telling stories about the last time around. In particular, co-founder Jim Jorgensen talks about a blowout party the company held in 2000, where the Grateful Dead played and the guest list included President Bill Clinton, John Doerr, Frank Quattrone and others. Not a humble way to start a company, or to convince people that they won’t make the same extravagant mistakes this time around, too.

No word on when AGLOCO will launch - keep an eye on their home page.

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