Internet Marketing and Multi-Level Marketing: Same Scam, Different Name


Recently I have been digging into the Salty Droid (you can’t make money online) archives. Salty Droid is an attorney in Chicago who writes about scammers who pitch their wares on the internet. I’ve been aware of the site for a while. But little did I know that Salty Droid has been covering a number of scammers that I’ve had my eye on for a while: Chris Brogan, Kevin Trudeau, Alexis Neely, Sean Stephenson, Mindy Kniss, Darren Rowse, Stephen Pierce, and Yanik Silver. We also have a mutual interest in assholes like Mark Shurtleff and  Crystal Cox.

But what struck me today as I was perusing the archives of Salty Droid is how similar “internet marketing” and “multi-level marketing” are. They take a product which is either non-existent or has very little interest to actual consumers (i.e. third party purchasers, rather than the pushers/distributors themselves) and build a “business” around convincing others to push the same “product.”

Here’s a great explanation of what internet marketing really is:

If anything, Internet Marketing is a form of “pure marketing” that exists often without the complication of an actual product. Rather than develop something useful, Internet Marketers create something out of thin air: likely a worthless e-book, or some sort of coaching session that consists of a semi-regular phone consultation.

So…. You cobble together a crappy e-book or some other essentially worthless piece that will supposedly teach people how to make millions of dollars. You sell it to people who want to make millions of dollars. The way they theoretically make money is by selling the same non-product to others who want to make millions of dollars.

You’ve got a chain of people who all try to make money by telling other people how to make money, despite the fact that almost none of them are making money doing this.

The con is more clearly spelled out:

As we’ve seen, the basic premise of Internet Marketing is straightforward: find customers, sell them useless products, and then send the leads on to industrial strength “boiler rooms” that separate them from what little money they have left. A simple con, it still requires a massive infrastructure to maintain: mainstream media outlets like CNN and the major broadcast networks, and websites like The Huffington Post and Facebook, all play a part in getting the message of Internet Marketers out to a wider audience, either through paid advertising or programming. Google sells AdWords for phrases like “make money fast,” and when unsuspecting consumers use their credit cards to give boiler rooms money, the payment has to be processed through a merchant account.

Does anyone make money? Yes, an incredibly tiny handful at the top of the pyramid make money charging people hundreds or thousands of dollars for the “product,” and convincing them to make follow-up purchases after they question why they’re not making any money. (They must not be doing it right. They must need additional training. They aren’t promoting enough products. They need to do more. With the help of another “product” they must purchase!)

And it is essentially the same with multi-level marketing. There are MLMs with no real product (BurnLounge and YourTravelBiz are good examples), and then there are MLMs with a legitimate product that is overpriced and often has magical properties (such as Mary Kay, Amway, MonaVie, Xyngular, Medifast, Visalus, Herbalife, Usana… the list goes on). The magical properties are hyped to justify the high price, which is high mainly because of the pyramid which requires commission payouts to many levels.

Because the products are so difficult to sell to actual customers at a profit (if you don’t believe me, check eBay and see how many of these products are being listed at less than wholesale prices in en effort to recover part of the distributor’s purchase price), the focus is really on recruiting new members into the MLM.

Distributors market the “opportunity,” hoping to recruit new distributors who will focus on recruiting new distributors. Recruiting is the only way to earn a living wage for almost everyone, yet almost no one earns a living wage from multi-level marketing even when they recruit. (Yes, an estimated 99%+ of MLM participants lose money.) And although commissions are paid out to many levels, and may in total look large, the payouts to individual distributors are extremely low. (For example, numbers released by Medifast showed half of “active” health coaches made an average of $24 per week in commissions.)

Along the way, distributors are required to make minimum purchases in order to maintain their positions in the pyramid and/or move up. Those minimum purchase far outweigh the commission almost everyone makes from their downline, and the lack of a real retail market means those products most often will be unsold or sold at a loss.

But you want to keep moving up in the MLM, right? There are people (a very, very few at the top of the pyramid) who are making money. You must just not be doing it right. You need more training and more tools. You need purchase extra products to meet “production goals” that are required to move up. Put in more of your own money now, it will pay off in the long run after you get to the top of the pyramid. (So ridiculously unlikely.)

Internet marketers (gurus!) and multi-level marketers will tell you THIS IS NOT A GET RICH QUICK SCHEME! They’re right. It’s a get rich NEVER scheme. Unless you’re one of the charlatans listed above. (Or in the case of some of the above, they’re not rich or successful either, they just pretend to be!)

But indeed what internet marketers and MLMers are selling to you IS a get rich quick scheme. It will just never work for almost everyone.

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19 thoughts on “Internet Marketing and Multi-Level Marketing: Same Scam, Different Name

  1. Joel Ungar

    Interest read Tracy. I recognized two of the names you categorize as scammers – Chris Brogan and Darren Rowse. Have you written about them elsewhere?

  2. N H

    We should always keep our eyes open in the world, especially in the world of ANYTHING being sold online.

    However, you’re article seems very one-sided. It does not explain that there are, in fact, real people offering real services (coaching, mentoring, online marketing etc) that do help people create viable businesses in whatever industry they are an expert in…

    For instance, as a forensic accountant, you could potentially offer education online to a broader audience to educate on REAL scams, not people who are taking their own gifts and sharing them in a way you don’t approve.

    Alexis Neely, for instance, is someone I have been following for about 6 months… I’ve listened on many of her calls and found a great amount of value in what she shares… Her programs do teach more than just how to “get rich quick” but shows entrepreneurs how to set their businesses, whatever kind of business they may be in, up for success from the beginning, a step many business fail at which causes their demise.

    I’d consider doing more research on the people you are hurting in this article. I don’t know them all, but you’re off the mark on the two I have experienced first hand.

  3. Tracy Coenen

    Alexis is an absolute joke. She is a complete failure professionally, and possibly in life too. Why would you take ANY sort of advice from her? It can’t possibly be good advice. If she knew what she was talking about, why would she have multiple failed businesses and a gigantic bankruptcy?

    But you’re right: If I were to offer products online, they would be legitimate. None of this warm fuzzy bullshit which does nothing but make people poorer. I would not be selling “internet marketing” like these people.. I would be selling something real.

  4. N H

    Wow. Those are big words from a profession. A absolute joke? A complete failure. These sound more like personal attacs.

    Again, I cannot speak to Alexis Neely directly or defend her because I truly have no idea if she is a scam or not.

    But your response brings up a whole other issue… Failing businesses are hardly make for a failing human. As I’m sure you’ve heard/ read/ researched, there are few successful entrepreneurs (or presidents, or CEO’s, or human beings for that matter)t that have not failed greatly prior to getting to ther ultimate success.

    And in regards to bankrupcys. Thank goodness I’ve never had to file for one, but again, how many well-known, successful leaders do you know who have had bankrupcies???

    You response made it clear that you are indeed in the right business of putting your energy into finding, trapping, and annihilating the repuation of people you truly have no real personal information about.

    Whoever hurt you in your life did a doozy…

    Take it easy on the innocent.

  5. Tracy Coenen

    There is nothing personal against Alexis Neely, there are just facts. She is swindling people out of their money, claiming that she can teach them how to be successful business owners. Yet she herself is unsuccessful at owning a business, as evidenced by the failure of her businesses and subsequent bankruptcy filing. She is purporting to sell something she knows nothing about.

    The point is that people who are paying Alexis are being swindled.

  6. Timothy Cleary

    My personal experience with Alexis Neely:

    I was suspicious also because her personality and mine are wildly mismatched. However, contrary to Tracy’s assertion, she did run a successful solo estate planning practice before getting into coaching, which is where (apparently) things went badly for her financially.

    My interaction with Alexis has always been marked by mutual respect, despite coming from different places emotionally and spiritually.

    I was being coached by her system for several months and found great professional and financial benefit therefrom. Just one of her techniques continues to make me 1 to 2 thousand dollars more on each estate planning engagement. What she helped me refine was the perceived value of what I do for clients.

    In the estate planning market today, too many lawyers suffer from the perceived commoditization of what they do for clients. Recasting that in one’s own mind and practice and then proceeding with confidence with prospects that you prescreen to appreciate the way you practice is neither trivial or common. She’s very good at that.

    There are other estate planning attorneys out there who continue to use and benefit from her systems (Client Engagement and Client Service). I think her systems still have value and so do these other attorneys.

    Alexis has always been a devotee of Dan Kennedy’s marketing systems, which always involves a money-back guarantee period that is reasonable if you’re actually applying what’s she’s teaching. So it seems to me that the risk is on her systems and for the buyer to actually use them. I’ve never heard of a failure on her part to honor that guarantee, if the buyer has been honest about using the systems as directed.

  7. Tracy Coenen

    My opinion is unchanged. These “marketing systems” are almost always a complete rip-off.

  8. Randy Risner

    Interesting notion on the Neely bk. If bk is a sign of untrustworthiness then Neely is in interesting company. Many famous people have gone bankrupt: Abraham Lincoln, Walt Disney, Mark Twain, and many others. Bankruptcy is actually a biblical concept. The ancient Israelites forgave all debts every seven years. Perhaps some thought should be given to the casting of stones before they are thrown.

  9. Tracy Coenen

    Randy – The filing of bankruptcy is not necessarily a sign of untrustworthiness. The problem is that Neely has been an absolute failure at business, yet she is falsely telling people she was successful, and more importantly, she is trying to teach others how to be successful in business. In Neely’s case, I do think her bankruptcy filing has some signs of untrustworthiness. But that aside, the bigger problem is that she wants you to pay her to teach you how to be successful, when she herself is a complete failure. But if you still want to give her money, have at it! You have been warned.

  10. Randy Risner

    Could be that Neely is not successful. I do not know. However, it could also be that she could teach people something even if she has failed businesses. I don’t know that either. I am merely suggesting that people not use a broad brush to discredit people unless they absolutely know they are scammers. Again, I do not have enough information to judge Neely in that way.

  11. Tracy Coenen

    I judge the actions of the scammer, not the scammer herself. I’ve seen enough of her scams to know that they are indeed scams.

  12. Karo

    Tracy usually I just ignore people like you who write articles such as yours without any real experience on the matter. But after reading other peoples comments and your reply to them I feel sorry for people who listen to you. Obviously you have some kind of personal grievance against the industry and or the people you mentioned for some reason. I say this because if the people you are claiming to have written this article for to help are sharing personal success stories from dealing with some of the people you have called scammers and you’re still against them then there’s something definitely wrong.

    Some people out of frustrations and or enviousness create blogs (since they are cheap to create anyway) to bash people and home business opportunities. But I am glad some of these people know better than you.

    You should know that Internet marketing is simply a form of marketing. So it can’t be a scam by and in itself. I have experience in both network marketing and Internet marketing and I can say without missing words that you don’t know what you’re talking about. Any legit industry have scammers hiding under the name to promote scams and make money off people that doesn’t make the whole industry a scam. So to be so one sided on the issue and defame people like you’ve done with no real proof and experience only that they have filed for bankruptcy and failed in some business ventures is just completely irresponsible.

    Interview any real life successes you know and all will take you they failed in a few businesses before they found success. Experts are created partly from failures. Each time you fail you’ve learned how not to do things. That in itself is a great value that can be sold to people if the person chooses to. It often take years for people to learn crucial life and business lessons.

    You sound like a very bitter person. You really need to learn how to be happy for others. It will make you happier.

  13. Tracy Coenen

    Karo – I’m sorry you’re confused by this article. I am not saying that marketing on the internet is a scam. I am saying that those who promote a thing called “internet marketing” all by itself are scammers. IF you have a legitimate product and promote it on the internet, more power to you. If, on the other hand, you are one of those scammers who makes money by allegedly showing others how to make money on the internet, that’s the scam. Do you see the difference? I’ll make money by showing you how to make money… when it’s all really just fluff and those paying the scammer don’t have a chance in hell of actually making money.

    I’m not bitter. I’m a fraud investigator. So I spend my life investigating fraud and scams, and sometimes I write about frauds and scams here. I’ve been involved in MLM, and I’ve marketed on the internet, and I actually run a successful business. So I know lots about all of these things, and I am happy to share it with honest people who need the information I provide.

    Multi-level marketing is not a business. Nor is this “internet marketing” sham that I have described.

  14. Accusing people who don’t agree as “bitter” is a frequent denial tactic by people who don’t want to hear the truth. I call it “sour grapes gambit”.

  15. Could it be that the problem is with “marketing” that thinks too much of itself, rather than as marketing other things?

    MLM often touts itself as a different industry, when it’s actually a retail method and thus is supposed to be a subset of retail (and more often than not, it’s a pyramid scheme or at least a close cousin of one)

    This “internet marketing”, again, is just marketing via internet, but when it’s trying to market itself, it turns into an endless chain scam.

    We’ve seen the scams where scammers advertise “how to make money on Internet/Craigslist/etc.” and turns how they do it is by spamming links where you can buy this eBook, which describes the exact thing they’re doing: spam links to sell this worthless eBook / itself.

    It’s the “endless chain” aspects that’s illegal.

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