VentureBeat

In April, we wrote about Montreal company Weblo, and we called it somewhat of a pyramid scheme.

It lets you buy virtual domain names, for example www.LosAngeles.com for a few bucks (even though the domain name is owned by someone else on the real web), pretend you own that city and then sell off properties there to the fool who comes along to bid on it. Your incentive is to recruit others to do so. Everything in the real world exists in this virtual world of Weblo and is for sale.

Apparently, some investors have differed from our skeptical view, and think there’s real value in such a site. It got $3.3 million in a second round of VC funding from VantagePoint Venture Partners.

Weblo’s original funding, which we hadn’t reported, came from Richard Rosenblatt the co-founder, chairman and CEO of Demand Media and the former Chairman of MySpace.com and CEO of parent company Intermix; Fred Harman, the managing partner of Oak Investment; Matt Hill, the chairman and founder of eForce Media; and William Woodward, the managing director and founder of Anthem Venture Partners.

According to the release:

There are no 3-D fantasies in this world; just the real world and real money are involved. Weblo is about a virtual world where thousands of people are investing real money to buy virtual cities, states, properties and celebrities. A virtual copy of every real city, state and property is up for sale with over 9,000 cities worldwide and 4,000 in the United States being sold.

An owner of a city or state will collect a percentage of all transactions, including memberships, within their territory. California sold for $53,000 in real money, Texas Sold for $23,000 and New York State sold for $19,350.

Aside from owning properties, cities, and states, the 36,000 Weblo users are also managing celebrity profiles of their favorite stars for free and earn money in doing so.

In response to our original article about this being a pyramid scheme, the company responded saying it it does not consider itself one. Here’s what the spokesman said:

There is no downward link and the governors and mayors do not recruit members. Weblo is more about paying our members for user generated content. That is the market we go after.

Yesterday, we wrote about the latest wave of Internet pyramid schemes.

We failed to mention Montreal’s Weblo, a company that sells you virtual domain names, so you can buy www.LosAngeles.com for a few bucks (even though the domain is owned by someone else on the real Web), pretend you own that city, and then begin selling off towers and other properties in that city to the greater fool who comes along to bid on it. It boasts other ways to make money.

By owning a city, you become a “major” and earn a 0.5 percent surcharge applied to every transaction in their city, so like other pyramid schemes have an incentive to get others to sign up. You get more revenue if people visiting choose to “rank” your site and if you update your site at least weekly. You’ll get a percentage point of membership fees from members who register in your city, 1.5 percent of purchase price on properties in your city, and a whopping two percent of all ad revenues on your site. (Weblo milks 98 percent). And like all good pyramids, there’s a hierarchy. If you become a “governor,” you get even more revenue. You can even become President.

There’s a video demo of the site here, created by Robert Scoble: