Let’s take a look at multi-level marketing, a money-making scheme that has been going on for many years already – one that has been looked into by governments, investigated on, shut down, yet still managed to come back with only slight variations.
Amazingly, it is still able to lure and fool people, though many have been claiming to have fallen to its traps already. To fully understand why multi-level marketing is still among the most attractive side-hustles ever, let’s investigate it thoroughly.
Having extended their tendrils already to various continents all over the world, MLMs have preyed upon first-world countries in Europe, and to the third-world countries in Asia. The founders of these prominent companies are getting richer by the minute, as they relentlessly recruit people into their ranks.
They promise you quick, easy riches, but from a statistical standpoint, there are a lot of losers compared to winners within their network. Also known as network marketing or pyramid selling, schemes that fall into this category often revolve around the idea of recruiting people and selling products.
The Controversial Case About Vemma Nutrition
In 2004, a company with that name launches a marketing program that they claim is a “life-changing opportunity.” They boast about methods of making people earn a full-time income for just part-time work.
Vemma’s offer is open to anyone. Regardless of your work experience or educational background, you can join their cause of making their company grow while at the same time, amass some decent earnings yourself.
To start earning, there are only 2 steps that you need to do: buy their liqui-nutrition products that worth $500-$600, and recruit 2 other people like you who might be interested to do the same. In just a few months, Vemma Nutrition was averaging around 30,000 new members each month from various places all over the globe.
It was an immediate golden age for the company. The company itself, as well as its pioneering members, became very rich in a manner that’s too speedy for them to analyze. But then, there came a problem.
Although the company has accumulated around $200 million of annual revenue by 2013, the majority of the members were reported to be earning less than what they’ve paid in. These members grumbled heavily via word of mouth, and on the internet, that’s still considered a very young digital avenue then.
Because of it, Vemma was accused of operating a pyramid scheme, a common type of business deception in which people are encouraged to join and recruit others as well. Initially, the founders would urge a group of people to buy in and promote the scheme.
Such people will then recruit others with the promise that they will earn portions of the money that those people will bring into the company. Of course, the founders will also take their share. The pattern will cycle on and on for each group of new members as the recruiting and taking of commissions keep on happening.
Naturally, those who were the very first to join are reaping the most benefits. Without really working that hard anymore, their wealth is piling up, while it takes harder and harder for the new recruits to cope up.
While it’s true that pyramiding can really make people earn a lot, the problem lies in the fact that as the network increases in size, it will be more difficult for new members to make money. This is because the number of earners is growing exponentially.
Why Pyramiding Doesn’t Really Work
Let’s get into the mathematics of how it works. Let’s say 1 person recruits 6 people, and each of them recruits 6 more. We can them have 36 people already just in the 2nd batch of the recruiting process. By the 3rd batch, there would be 216 people within the network already.
If we keep on doing the same calculation up to the 12th batch there would have to be more than 2 billion people already, which must recruit a total of 13 billion people in total. Knowing full well that there are only 7 billion people in the world today, we can say that pyramid schemes are really bubbles that could burst and disappear pretty quickly.
By the time that the recruitment reaches that 10-12 batch, it is the point where around 80% of the members lose all their money because apparently, they couldn’t find any more people to join the network. Consequently, even those who were the earliest to join lose some money too, although they may have gathered substantial wealth already along the way.
Sadly though, pyramiding schemes are still legal in many countries. They can be very hard to detect mainly because they appear disguised as gifting groups, investment clubs, and multi-level marketing businesses.
What makes them even harder to combat is the fact that it’s really hard to distinguish pyramiding schemes from multi-level marketing businesses. Much like Mafia gang lords appearing as philanthropists in society, MLMs present themselves as legit marketers, selling actual products people can really use.
If a friend of yours is urging you to join an MLM company, you should weigh your options very carefully. While it's true that you can really have the financial freedom you've been dreaming of having, never forget that there are more losers than winners in that field. Exercise great caution and think about what you are about to do deeply.
Mostly multi level schemes are scams , when they collect lots of money from their user or subscriber they quit off. in the startup these schemes are paid for there own marketing and promotion. This is a realty of Multi Level Network Industry.