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MLM Scams And Pyramid Schemes

Let me start bluntly by saying I personally hate programs full of hype that promise the moon and never deliver anything more than smoke and mirrors. The thing that baffles me the most is, no matter how many times people hear or read the old adage “it’s too good to be true”, they STILL fall prey to these scams.

There isn’t a day that goes by where I don’t see someone in a forum flogging some crappy program promising you’ll retire in a year or make 30k a month within 30 days, if only you pay out X amount of dollars. Total BS.

The sales page blinds you with images of flashy cars, huge mansions and fat stacks of cash, but what you actually end up with is a dent in your wallet and being a slave to that program owner by recruiting other suckers into the program under the disguise of an “opportunity”. (By the way, I own several cars, including a Porsche, but I didn’t get them through ANY program. I worked hard online, the right way, to earn what I have.)

So, how do you tell a legitimate opportunity from an MLM scam or pyramid scheme? Please read this informative article by MLM attorney Kevin Thompson, as it sums up some very interesting points you should consider before joining anything: http://www.scribd.com/doc/17733330/Legitimate-MLM-or-Pyramid-Scheme-How-can-you-tell . You should read it VERY carefully and learn from it. Knowledge is power, after all, right? I’ll offer my thoughts on the topic below, but all references in quotation marks are from Kevin’s article.

While I’m sometimes blown away by the lack of common sense some people show with what they do online, it really boils down to greed and/or desperation. People WANT it to be true and they NEED the money, so caution gets thrown out the window. They will spend $97 on a product that claims they will make 1000’s, even if the sales page itself isn’t clear or makes no real sense. I read a Clickbank sales page last year that was a mile long, claiming you would get rich the easy way and never have to worry about bills again. It tugged at the heart strings with images of poor, desperate people and told of how bad the economy is and how you can rise above these problems affecting everyone. The interesting thing to me, though, is that after an hour of reading through all the hype, sad pictures and vague “proof” there was NO indication of what you were actually about to buy…seriously! Was it a program? Ebook? Software? Keys to the kingdom? Not a clue, yet the greedy and desperate bought whatever it was in droves, as it had a very high gravity score at CB. It’s the magic beans everyone is looking for. Unbelieveable!

While there are legitimate opportunities, they involve working on yourself more than other people. The MLM scams and pyramid schemes, on the other hand, involve recruiting others into the “opportunity” itself to do better. As Kevin says “If the compensation plan requires you to recruit other participants in order to advance up the pay scale, it’s a factor to consider…Or is success described in terms of the number of distributors in your downline i.e. if you get x people below you, you can earn $y. If advancement is explained in terms of recruitment, it’s a factor…An easy example is with forced matrix plans. If a plan is 5 x 5, the only way to advance to the next level is to fill the first level by recruiting 5 active distributors”.

A legit business sells products to CUSTOMERS…not to each other in the business, and that’s one of the biggest factors the FTC looks into when determining what is legit and what is a scam or pyramid that should be dismantled. So, a legit company must have product to sell to customers outside of the opportunity to be legal, and training materials (including your own personal sales website the program gives to you upon joining) do not count because they are not sold to customers, and only distributors use them, so “it’s illegal if the company is paying commissions on the sales of training materials”.

Many of these scams also inflate the prices of whatever products they do sell and ask their recruits to buy them as part of the requirements to keep your “business” in good standing in the program. Kevin recommends asking yourself “If there was no income opportunity associated with this product, would I still buy it as a customer?”. For example, if a store sells cheap pens for $1 each to real customers visiting the store, then it’s legit, but if they sell the same pens for $10 each, and only the store staff is buying them and they get a bonus compensation for recruiting other staff to buy the overpriced pens, then it’s an opportunity only to get scammed.

A real example I noticed recently is for a program where the “product” is way overpriced traffic. It sparked my interest because I sell traffic myself, so I looked into it further. I’m not going to mention the program name because I don’t want to help advertise it, but it might sound familiar to you. They sell 1000 visitors for the high cost of $10 (2000 for $20, etc), which is far too much. If I charged that much I’d hang my head in shame, as the going rate is $2-5, the higher range being for extra factors, like targeting, control panel, etc.

With that program the product itself is overinflated, but people are pushing it because of the income opportunity. I’ve never once seen anyone posting about the program for the product itself, because most people have the common sense to know it’s overpriced, but it’s the “opportunity” to make money that people push, simply to recruit others into it. Also, the program used to be called something else, but changed after only a short time online…yet another warning sign. Legit businesses build brand name recognition and trust over time.

Normal affiliate marketing is fine, where you have an actual product to sell to consumers. I do very well myself selling online game guides to gamers, as an affiliate AND as a vendor. That’s an example of a legit way to earn money online, but the rampant MMO scams are steering people in the wrong direction and hurting the overall potential for those people to really earn a living online, like I do.

As Mr. Thompson puts it: “When fraudulent schemes masquerade as legitimate companies, it affects the reputations of all companies in the industry.” It’s sad to me because I know first hand what it’s like to be conned online, but I also know that you CAN legitimately earn online, if you do it the right way and stop believing the hype. Are you up for the challenge???



4 comments

  1. Anonymous says:

    Hi u really owned several cars including a Porsche? no kidding?!

  2. Asmodeus says:

    I prefer sportscars. Although my Honda is fun to drive, my Porsche is easily one of the most well known cars in the area, as it's been modified for racing, so it tends to stick out from the crowd 🙂

  3. Unfortunately the type of person at risk of falling for this crap won't take the time to read enough to save them from the greed in their eyes that is blinding them.

  4. Anonymous says:

    Wow..pls don't mind me asking..how much approximately are u earning from ur online business??

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