In 4.3.3 Showing the avatar .
In section 9 it says:
(a) Make an image called “defaultavatar.jpg” and place it in the
/sites/default/files folder.
(b) Fill in the following empty text:
<?php echo ’’; ?>

As you can see the php looks for the defaulavatar.jpg in /avatars directory. So I guess in step (a) you should indicate that we need to create a directory called "avatars" and place the defaultavatar.jpg there. No?