This article was first published in 1999. It is re-published here as an historical record for information purposes only.

Why Internet-related MLMs are more hi-risk than hi-tech

©1999 by John Counsel

I promised you an explanation of why I’ve been so opposed to Internet-related MLM ‘opportunities’ over the past 4 years.

There are two primary reasons.

1. Deception

“If it walks like a duck and talks like a duck…”

There are some VERY questionable “opportunities” out there on the Wild, Wild Web.

The ones that trouble me most are the self-perpetuating Internet marketing “systems” that simply sell you a web site designed to sell others an identical web site for selling others an identical web site that sells an identical web site (and so on and on and on).

Most bear strong similarities to chain letters and pyramid selling schemes where the product is either spurious or merely an attempt to legitimise a scheme in which the real money is made for recruiting, NOT the sale of a truly substantive product or service.

EXAMPLE 1: Chain letters, including the notorious “Edward L. Green” letter, and the “Self-Help Co-operation Program” (aka “Mutual Assistance Program”), usually offer a series of “information reports” that you purchase from the five or six people listed at the end of the letter. What you receive are usualy poorly-reproduced, umpteenth- generation photocopies of a single page, the sole purpose of which is NOT to provide information (it’s either barely legible or of dubious value), but to legitimise the scam by creating the ILLUSION of supplying a “product.” These scams are illegal. They contravene most anti-pyramid selling laws around the world.

EXAMPLE 2: You’re referred to a web site that, in very compelling language, skillfully-written, promises you riches beyond your ability to conceive when you buy a web site just like this one (for prices ranging from $29 to $50,000 — yes, $50,000!) and recruit people into the system to sell web sites that are simply copies of this one (but with your name and contact details, etc.)

Oh, yes… you receive access to all kinds of educational material about the internet, and you may even receive free server space and a template-style or “cookie-cutter”-type web site building facility, plus marketing and promotional support to sell your program, all of which can be had FREE from hundreds of sources on line… and, somehow, this spurious “product” is supposed to legitimise a blatant system of “reward for headhunting”?

Can someone explain the essential differences in principle between these two examples?

One is just a hi-tech (well… maybe not all that hi-tech) reincarnation of the other. Their target audiences are the same… the ignorant, the inexperienced, the naive, the desperate, the lazy, greedy, gullible or just plain foolish, sucked in by the lure of “get rich quick” promises for little or no time or effort.

Regardless of any highly-emotional rationalisations to distract you from the truth, or to make you feel all “warm and fuzzy,” such as “we’re going to save the world’s children” or “we’re going to bring e-commerce within the reach of everyone,” the reality is still the same:

“You can dress yourself up as a legitimate business and call yourself something you’re not, but a pyramid is still a pyramid, and pyramids are illegal,” — Jodie Bernstein, Director of the Federal Trade Commission’s Bureau of Consumer Protection.

http://www.ftc.gov/opa/1999/9912/2xtreme.htm

On the other hand, opportunities which are legitimate, vertical marketing systems for distribution of genuine products, and which offer opportunities for part-timers to earn extra income, have a definite place in the free enterprise system. As always, though, you need to be sure of the motives of the seller.

Do your due diligence. ALWAYS.

And listen to your HEAD, not your heart! This is BUSINESS.

2. Limited Opportunity — Low margins, fast-changing technology

Apart from any legal or ethical concerns, the other problem with technology-based MLM businesses is that they suffer from three major threats:

a. Rapidly-changing technology

b. Hyper-competition

c. Low profit margins because of a. and b.

No sooner does someone come up with a new angle on internet or telecommunications technology and finally puts it into place, than someone else comes up with a newer and better one.

WARNING: If any technology-based opportunity begins recruiting and taking money BEFORE its system is firmly in place and PROVEN, give it a H-U-G-E miss… you can safely conclude that your cash is going to fund their research and development!

This alone makes them illegal in most countries, because they’re really taking money under false pretences… they’re not revealing the risk involved. This contravenes most corporations and securities laws. Be prepared to kiss your money and your dreams goodbye.

Internet-related MLM opportunities are failing at an accelerating rate. (For all kinds of reasons, too — not just rapidly changing technology. Some things NEVER change! Nor do some people.)

In any industry or profession where there’s a lot of money to be made, there will be sharks and other predators and parasites waiting to feed off people’s ignorance, naivete, greed, fear, laziness, gullibility and bone-headed stupidity. (That’s where you refuse to listen to anthing but what you WANT to be true, regardless of the F-A-C-T-S — including recent H-I-S-T-O-R-Y.)

Read these FREE Special Reports:

• Commodities, Utilities and Network Marketing
  
• Why Telecommunications “opportunities” are unsuited to MLM

Ironically, the fact that they exist in such large numbers in network marketing is actually PROOF that it’s possible to make very substantial income — or they wouldn’t bother hanging around!

Your best defence?

• Education.
  
• Knowledge.
  
• Common sense.
  
• Rational, objective analysis combined with a dash of healthy scepticism.

Crunch the numbers (the REAL numbers, not the voodoo numbers!). Do the math.

And if it doesn’t add up, don’t join. Give it time.

There’s NO SUCH THING as a legitimate “ground floor” opportunity. All anyone using that ploy is REALLY saying is this (to get you to act out of fear of loss, without thinking):

“The sooner you get in, the more money you’ll make.”

Of course, what they’re not saying to you is this:

“Get in now, because this thing is going to get LESS attractive.”

The other thing they’re not saying is that they expect to do better than you! (After all, they were in before you.)

Legitimate MLM opportunities actually get BETTER with time. You can afford to wait a little for this new glamour deal to prove it’s not a flash-in-the-pan.