Is MLM A Scam?

MLM, otherwise known as network marketing is a bit of a marmite topic, you either love it or you hate it. Those that love it tend to follow it in what can often only be described as a cult-like fashion. Whilst those that hate it believe it is a total scam where nobody makes any money, and everyone loses.

Today I’d like to dig a little deeper into both of these views and bring you my honest opinion on network marketing.

Is MLM a scam?

What is MLM?

MLM stands for multi-level marketing, although you’ll also hear it referred to as network marketing. At its core, MLM is word-of-mouth marketing. The concept is that instead of spending out on traditional advertising, shops, and marketing, MLM companies allow everyday people to share products and services for a commission. This is just the beginning because MLM companies also allow you to build your own sales team. This means that you can offer your family, friends, and people that you meet the opportunity to also make money by sharing the product or services offered by your MLM company. And this is where MLM or multi-level marketing gets its name from. You see as you build a sales team you earn a small commission of each of their sales, and this can go quite deep.

In MLM opportunity presentations you will often be taught the concept of geometric progression. In its simplest form, it goes something like this,

You get 5 people on your team (5)

You teach those 5 how to get 5 people on their team (25)

You teach those 25 how to get 5 people on their team (125)

You teach those 125 how to get 5 people on their team (625)

You teach those 625 how to get 5 people on their team (3125)

That would mean you would have 3905 sales reps on your team. And most MLM companies will pay about 5 levels deep although some pay all the way down to however deep you can go. Now you can see how if each of those sales reps had a few loyal customers each how things could add up to give you a tidy monthly income. This income is often referred to as residual income, or in other words, you are not trading time for money.

The problem that most network marketers run it to pretty quickly is that they find getting 5 people on your sales team is tough and most struggle to even get one. Richard Bliss Brooke author of The Four Year Career points out that you may have to actually recruit 100, 200, maybe even 500 people to find your 5 team builders willing to stick it out in the pursuit of making MLM work for them.

The success rate in MLM is low, it’s a well-established fact, that even top MLM coaches such as Eric Worre will tell you, the average person in MLM makes a big fat zero.

Hold On, So Can You Actually Make Money With MLM?

The short answer is yes. The long answer is, yes but you probably won’t! Now despite owning and writing a blog called I Think MLM Sucks, I don’t hate MLM, in fact, going back to my marmite analogy you could have probably put me in the lovers camp. However, what I’ve realized is that most people don’t make money in MLM. Whilst I can’t dispute that yes, I personally know people who make an OK income in MLM, in my honest opinion it takes a certain personality, charisma, and energy to build a network marketing business. And as hard as it is, I don’t possess those characteristics and I think most don’t.

You will hear it said that MLM has made more millionaires than any other industry, now I don’t know where this comes from or whether it’s true or not. But what I do know is if it is the case, it won’t be for long. Internet marketing will easily surpass that if it hasn’t already.

Another boast that MLMers will talk about is how Robert Kyosaki, best-selling author of Rich Dad Poor Dad, loves MLM and how Bill Gates, Microsoft man will say how if he had his career over how he’d join MLM.

Now call mean Brenda (oops, sorry it’s not the weekend!), I mean call cynical but surely if it was that good you wouldn’t need you to have your career over to join? It’s not like we get a next time so we have to make this time count, right?

Wait A Minute, Isn’t This One Of Those Pyramid Things?

MLM, is it a pyramid scheme?

This is the question that strikes fear in most new network marketers. And it’s like the rest of the world imagine network marketers riding around in chariots pretending they are in Eygpt.

The truth is that most, in fact nearly all MLM companies are NOT pyramid schemes. Earlier I told you about geometric progression and how you could build a sales team with the 5 who each get 5 method. I agree this does look like a triangle if you draw it out, but this is the only resemblance it has to the dreaded pyramid scheme.

Now I have to confess that whilst I think MLM sucks, I do feel a little sorry for them over the whole pyramid scheme thing, it’s misguided and slightly insulting. You see when you ask your friend, “Hey, is this one of those pyramid schemes?” what you are actually saying is “Holy Cow, have you become a scam artist?”

So where did the whole pyramid thing start and how can you test to see if anything is a pyramid scam?

Whilst there are some very old MLM style companies, MLM only really hit it off big time in the ’70s, 80’s and ’90s. Unfortunately at that time, there were a few rouges amongst the genuine companies, that didn’t have anything to offer aside from the income opportunity. So it would look a bit like someone paying into a scheme where the money was passed up, but you would then recruit people who would pass money up to you, and so on and so forth. It was a load of hot air and it landed people in jail.

Unfortunately, as these rouges branded themselves as MLM companies, MLM as an industry got a bad name. The modern MLM world is highly regulated. Pyramid schemes are illegal in every western country so if you see someone openly advertising a business opportunity, it’s highly likely it’s genuine.

However here is my 5-second test to see if an MLM is a pyramid scheme or not, if the company decided to get rid of the recruitment side of the business and just market their products or services in a traditional way, would they have something to actually sell?

If the answer to this is yes, then you know it’s not a pyramid scheme.

Taking this one step further I would always advise someone not to join an MLM company unless they would buy the products even without the income opportunity. Think about it like this, not everyone will want to start a business and you will still need customers so the product should be worth it in its own right.

Final Thoughts – Is MLM A Scam?

The short answer to this is No, MLM is not a scam and there are some very good companies out there. However, it doesn’t change my view that I think MLM sucks. The reason I think this is because after doing it for 7 long years with no results, I know firsthand just how hard it is. And what is especially tough is that when you don’t make any money you end up blaming yourself and getting into a negative rut.

If you are an outgoing, sales type, extrovert then I would say there is a good chance that you could succeed and it may be worth you having a go.

However, it is my opinion that there is a better way to make money from home.

Wait, There’s A Better Way To Make Money From Home?

Make money from home

Absolutely. I discovered that after 7 long frustrating years of making nothing in MLM and feel constantly down, there was a better way of making money from home. And that way is called affiliate marketing.

In affiliate marketing you don’t need to build a team, you try to recruit, tell your friends and family to join your business, or anything like that. And what is even better is that anyone can succeed, there are 80-year-old grandmas doing it!

Essentially you earn a commission through affiliate links, which you can add to your blog, youtube channel, or social media. And it doesn’t have to be spammy, in fact, this article has affiliate links in it. And it’s not spammy, is it? Look back, check out where I have talked about books, I’ve added the Amazon link, and guess what if you buy the book, I get a commission.

The awesome thing about affiliate marketing is once you have created content such as a blog post or a youtube video or social media post, it can bring you in commission at any time.

It’s not unheard of for affiliate marketers to be earning $10000 after a couple of years, now to be clear I’m not saying you will earn that, I’m simply pointing out that it’s possible with a little hard work and consistent effort, but in my personal opinion the chances of success are higher in affiliate marketing then they are in network marketing.

If you want to find out more about affiliate marketing, and get started then I would highly recommend Wealthy Affiliate, it’s where I learnt affiliate marketing, they have a very thorough training programme with click by click training that anyone can follow, plus they give you a suite of tools to create your first website and start earning money online.

>>> Click Here To Open Your FREE Wealthy Affiliate Account

12 thoughts on “Is MLM A Scam?”

  1. MLM’s payout is very complicated to understand for beginners. I was involved in one for a short stint, bought plenty of products, starter kits and stuff but I was never able to recruit anyone. They said I just needed more training but the more I trained, the more stuff I needed to buy, sometimes even stuff that I didn’t need. For me, it was a lot of pressure just to be involved. Funnily, those MLM people who said they would support me throughout stopped corresponding after I left. So much for the support, huh? 

    Reply
    • Cathy thank you for sharing your thoughts, and your point about training is so valid. I too was made to buy into training packages and coaching communities and still never got results. I felt like the more I tried the more I was made to feel I was to blame for my lack of results, and all that did was get me down. Onwards and upwards, right!

      Reply
  2. Totally agree Tom, building an MLM downline is hard work and so much phone time convincing people – who will probably never do anything even if they sign up. You’re right, MLM/network marketing is not a scam; just serious work at a highly personal level and you better be a social person with lots of patience. Will look into the affiliate thing you suggested. Oh hey BTW loved Rich Dad Poor Dad – read it a couple times. 

    Reply
    • Thanks Dwayne, yes it’s tough-going for the serious MLMer out there who has to constantly try and motivate a team of people. That’s what I love about affiliate marketing, it is at least predictable and there is a science to it. I to very much enjoy reading Rich Dad Poor Dad, it’s a book I try to reread every few years! 

      Reply
  3. Thanls for sharing this very informative and interesting article here. I dont doubt that you can make money with MLM if done right, but personally, i dont like promoting anything i wouldnt buy myself and the only MLM products i have seen so far are just selling the chance to make money and nothing else, so in reality its just swishin money around with no real quality

    Reply
    • I completely agree with you on the fact that if you wouldn’t want to buy the product without the earning opportunity you should stay well away! 

      Reply
  4. Hi, this is a great article. I’m so glad I turned down any MLM offers in the past; I just didn’t think MLM was for me. But I was overjoyed when I discovered and learned about affiliate marketing, which is significantly superior to MLM. And yeah, I agree with you that Wealthy Affiliate is the best affiliate program. It is the platform that is teaching me how to build my own online business and make it successful.

    Thank you very much.

    Reply
    • Hey Lionel, 

      Thank you for taking the time to stop by and share your thoughts on MLM. I am pleased that your efforts with affiliate marketing are working out well! 

      Reply
  5. Hi Tom! Big accolades to you for sharing this! I must admit, that you inform deeply! You have mentioned everything there its to mention about MLM! I totally agree to everything! I myself tried MLM once, lol I failed in it! I began to wonder how people did it! I got to understand that the only way you can succeed and create a team, You have to have a “Sweet-mouth” and high ability to interact and convince people! Sadly these are attributes I do not have. So yes! I settled for Affiliate marketing some months ago

    Reply
    • Thank you for taking the time to read my article and reply. It’s a shame really how many of us failed MLMers there are out there! And one common theme seems to be how it makes us feel like we failed. Thank God there is a better way to make money from home and we’ve found it!

      Reply
  6. Thank you for your review about MLM. I learned a great deal about how it all works out. I didn’t understand clearly what it was all about till I read your post. You really inform us well and it is very clear. I am glad to know I chose the right way to make money online and that is by choosing Wealthy Affiliate and affiliate marketing. Fortunately I didn’t spend 7 years!! Again, many thanks!!

    Reply
    • Hey! Thank you for your comment, pleased this article helped you… pleased to say you dodged a bullet! And yes affiliate marketing is 100% the way to go!

      Reply

Leave a Comment