YourTravelBiz.com

YTB International (NASDAQ|YTBLA) operates a "network marketing" opportunity under the holding company YourTravelBiz.com, Inc. through owner-affilliate websites offering travel, excursions, and lodging. Participants, who pay a $495 set up fee and $50 per month to maintain an "online travel agency" website,cite web|url=http://ag.ca.gov/newsalerts/release.php?id=1596|title=Brown Sues To Topple Online Pyramid Scheme|last=Gareth|first=Lacy|date=August 05, 2008|publisher=California Attorney General Press Office|accessdate=2008-09-14] can collect commissions for recruiting new participants, utilize the website for their own travel purposes, as well as sell travel packages to others. [cite news|url=http://travel.latimes.com/articles/la-trw-travelsuit5-2008aug05|title=Jerry Brown sues YourTravelBiz.com over alleged pyramid scheme|last=Lifsher|first=Marc|date=August 05, 2008 |publisher="Los Angeles Times"|accessdate=2008-09-14] YTB International is a member of the Direct Selling Association. [cite web|url=http://www.dsa.org/press/press_releases/index.cfm?fuseaction=show_release&Document_id=1883|title=DSA Statement Regarding the California Attorney General’s Complaint Against YourTravelBiz.com|last=Robinson|first=Amy|date=August 8, 2008|publisher=Direct Selling Association|accessdate=2008-09-14]

California Attorney General Jerry Brown and former employees sued the company in early August, 2008, alleging it to be a pyramid scheme, among other claims. The Illinois Better Business Bureau and Illinois Attorney General Lisa Madigan joined Brown in investigating the company. [http://www.stclairrecord.com/news/214177-ytb-targeted-in-federal-class-action-lawsuit]

Other YTB subsidiaries include YTB Travel Network, Inc. and REZconnect Technologies, Inc, with which YTB merged in 2004. [http://findarticles.com/p/articles/mi_m0EIN/is_2005_Jan_5/ai_n8683762] [http://www.prweb.com/releases/2004/9/prweb162804.htm] The company is based in Wood River, Illinois. International subsidiaries operate in the U.S., Puerto Rico, the Bahamas, Bermuda and Canada. [http://www.secinfo.com/d12TC3.t2Gq.d.htm]

History

J. Lloyd "Coach" Tomer, his son Scott Tomer, and Kim Sorensen launched YTB in 2001. The company's business model of selling websites to work-at-home travel sales agents has been the same since its inception. Growth was slow until 2004, when YTB's creators bought controlling interest in a related company, increased their marketing budget, and aggressively recruited new members with videos of successful salespeople --- along with material incentives for their best performers.cite news|url=http://www.stltoday.com/stltoday/business/stories.nsf/business/story/7ef3275c5fbee143862574b600121327?OpenDocument|title=YTB sells dream of prosperity, but some say it is a nightmare|last=Logan|first=Tim|date=August 31, 2008|publisher="St. Louis Post-Dispatch"|accessdate=2008-09-13] In 2007, 73% of YTB's revenue came from the sale of YTB websites and monthly fees, with a further 10% from the sale of marketing and training material to members. 14.5% came from the sale of travel. [cite web|url=http://ag.ca.gov/cms_attachments/press/pdfs/n1596_civil_pleading_ytb.pdf|title=California v. YourTravelBiz.com, et al: Complaint|date=August 2008|publisher=California Attorney General|accessdate=2008-09-14] The company's success led to a $25 million new headquarters in a rehabbed Kmart building to accommodate it's rapidly growing staff. [cite news|title=Travel company will expand its headquarters; YTB International will spend $25 million to rehab a former Kmart in Wood River|last=Logan|first=Tim|date=August 24, 2007|publisher="St. Louis Post-Dispatch"|pages=Business, pg. B2|accessdate=2008-09-14] The number of agents increased exponentially until 2008, when it shrunk slightly:Table
type=class="wikitable"
title=Agents per year
hdrs=Year!!Number of agents [cite news|title=Number of agents shrinks|last=Logan|first=Tim|date=August 15 2008|publisher="St. Louis Post-Dispatch"|pages=Business, pg. B2|accessdate=2008-09-14]
row1=2004!!8,500
row2=2005!!22,000
row3=2006!!~60,000*
row4=2007!!131,0000
row5=March 2008!!138,800**
row6=June 2008!!131,600**:*Source indicates "nearly 60,000". **The second source is for the figures for 2008.

YTB laid off 17 employees in late August, 2008, stating the move was part of a reorganization. [cite news|URL=http://www.bizjournals.com/stlouis/stories/2008/08/25/daily112.html|title=YTB cuts 17 positions|publisher="St. Louis Business Journal"|date=August 29, 2008] asof|2008 the company's revenues are $44.8 million. [cite news|url=http://money.cnn.com/news/newsfeeds/articles/prnewswire/200808151540PR_NEWS_USPR_____NYF073.htm|title=YTB International Announces Financial Results for the Second Quarter of Fiscal 2008|author=PRNewswire-FirstCall|date=August 15, 2008|publisher=CNNMoney.com|accessdate=2008-09-14]

YTB have stated they are considering replacing their referring travel agent business model with one based around franchises. [http://www.marketwatch.com/news/story/story.aspx?guid=%7B3FB57004%2DFF72%2D400D%2DB904%2D50B9074C0BDC%7D]

Pyramid scheme accusations

Critics, including California Attorney General Jerry Brown -- as well as former associates suing the company, allege that its operation is a scam and a pyramid scheme. Brown sued the company for $25 million in early August 2008, charging unfair business practices, false advertising, and operating a "gigantic pyramid scheme that is immensely profitable to a few individuals on top and a complete rip-off for most everyone else". [Kelsey Volksmann (August 5, 2008). [http://www.bizjournals.com/losangeles/stories/2008/08/04/daily11.html Brown sues over alleged pyramid scheme] , Los Angeles Business from bizjournals.] Brown found that in 2007, only 38% of members earned commissions on travel, and those who did earn a commission made a median income of $39, less than the monthly fee for a YTB website. According to the "St. Louis Post-Dispatch", SEC filings showed that the company's three creators earned more than $2 million in 2007, a dozen salespeople earned more then $800,000, and dozens earned more than $100,000. The "Post" quotes Brown's lawsuit as indicating that 45,000 sales reps earned an average of about $90 in 2007 and of their 200,000 agents, 125,000 earned nothing and 37,000 earned less than $39.

Several former agents filed a class-action lawsuit — seeking to include more than 1,000 of their peers — around the same time, alleging the company to be an illegal pyramid scheme. The lawsuit says that the company "claims to sell travel services, but said company's main business is inducing others to become travel agents".Kelsey Volkmann (August 11, 2008). [http://www.bizjournals.com/stlouis/stories/2008/08/11/daily14.html Former agents sue YTB International] . "St. Louis Business Journal".] YTB responded by stating that it intends to "vigorously defend the case". Illinois Attorney General Lisa Madigan, after her office and the Illinois Better Business Bureau received more than 150 complaints about the company, partnered with Brown's office in his state's investigation of the company. The BBB indicated that 80% of YTB revenue came from new agent recruitment, with agents earning an average of $111 per year, almost $400 less than the initial $499 sign-up price. [Kelsey Volkman (August 8, 2008). [http://www.bizjournals.com/stlouis/stories/2008/08/04/daily87.html UPDATED: BBB received 90 complaints about YTB, Ill. AG received 70] . "St. Louis Business Journal".]

Several current YTB reps have characterized the complaints from former agents as from those who didn't spend enough time attending to their business. "We are proud of our business model and how our operations are conducted in an ethical and transparent way," said chief executive Scott Tomer. "We also are wholly confident that our business model will withstand scrutiny, and look forward to setting the record straight in court." [Tim Logan (August 8, 2008). [http://www.stltoday.com/stltoday/business/stories.nsf/0/D161A4BA9E78CBE68625749F0012C1AB?OpenDocument Illinois launches probe into YTB International travel company] , "St. Louis Post-Dispatch".] YTB was also investigated in both Rhode Island and Florida without legal action being taken.Fact|date=October 2008

References

External links

*http://www.yourtravelbiz.com/archives.html
*http://www.ytb.com
* [http://www.ytbi.com/investor/YTB Investor relations] - information about the company
*http://www.stltoday.com/stltoday/business/stories.nsf/business/yourmoney/story/6770b91bbdafd510862574bb00093adc?OpenDocument