Like me, I'm sure you've seen those bizopp classified ads all
over the place defensively proclaiming the advertiser's
opportunity as "NOT MLM!".  If you're not familiar with MLM
(multi-level marketing or network marketing as it's also known), has your exposure to these ads left you with the impression that there's something about MLM to be avoided ... something that's intrinsically undesirable?  That was certainly the impression I had.  Until I finally got around to finding out about it, that is.
 

Part of the reason for the suspicion with which MLM is
regarded is, I'm sure, simply that there's a lot of confusion
about what MLM actually IS.  In particular, many people seem
to think MLM and pyramid schemes are one and the same
thing.  Not so.  MLM is a perfectly legitimate business model.
That's not to say the industry doesn't have its share of low-lifes. It does.  But, let's face it, what industry doesn't?
 

In this article, we're going to look at MLM: what it is, how it
works, the advantages and disadvantages and who's most
likely to be successful at it.  You never know, you could be
overlooking your best chance for home business success
without even knowing it!
 
 

                                   WHAT MLM IS

Quite simply, MLM involves direct selling of products and services via the personal recommendation and endorsement of independent representatives.  In return for your personal recommendation and endorsement, as an independent representative, you receive a commission on the sale.  It's different from a normal business in that it doesn't have a store-front and you generally won't see the product or service being advertised in the mainstream media.
 

In addition, as an independent representative you'll recruit, or
"sponsor", other independent representatives to also direct sell products and services.  These sub-representatives form what's known as your "downline".  As the sponsor of these independent representatives, you receive a commission on THEIR sale, as well as your own.
 

Similarly, YOUR sponsor, THEIR sponsor and THEIR sponsor
(and so on) forms your "upline".  Your upline (up to a certain
number of levels) receives a commission on sales made by you and by your downline (down to a certain number of levels).
 

I have a hard time seeing the difference between this and a multi- tier affiliate program.  No-one really thinks twice about affiliate programs as a method for earning commissions.  In fact, many of these affiliate programs are the backbone of the businesses of those very advertisers who loudly proclaim "NOT MLM!" in their ads!  So what's going on here?  Why does it suddenly get so scary when we stick an MLM label on it?
 
 

                                      WHAT IT ISN'T

A multi-level marketing program is NOT a pyramid scheme.  Sure, the sponsor receives a proportion of sales generated by their downline, but a legitimate MLM program will involve the sale of products and services with a value proportionate to the amount invested.
 

A pyramid scheme, on the other hand, is merely the transfer of money from one level of the pyramid to a higher level.  There is nothing of value the transferor (the person making the payment) gets in return for their money other than the right to collect money from those lower down the pyramid.  Pyramid schemes are illegal for this reason.  They are nothing more than an unproductive transfer of wealth from the lower levels of the pyramid to the higher levels.  Notoriously, only the highest levels of the pyramid receive significant amounts of money.  The pyramid inevitably collapses in on itself before the lower levels can reap their share of the harvest.
 

You have, I'm sure, received those emails that would have you put $5 cash in an envelope and send it to the name on the top of the list you're given in the email.  You then remove the top name from the list, add yours to the bottom and forward the email to 10 of your nearest and dearest.  EVENTUALLY (read "never"), when the email has been distributed widely enough, it will be YOUR name at the top of the list and it will be YOUR mailbox receiving all those $5 bills (yeah, right.  What's Santa Claus bringing you this year, boys and girls?).
 

This is a classic pyramid scheme and it IS illegal, no matter what the email says.  Participate in these schemes at your own risk ... don't say you haven't been warned!
 

Beware also of pyramid schemes thinly disguised as MLM
programs.  These are schemes where there IS some product or service sold, however, it is of a grossly disproportionately lower value than the amount of money that must be paid to participate. These are programs where the product or service is thrown in purely in an attempt to keep the program just this side of legal. Don't participate in these sorts of programs.  Most, if not all, are also illegal.
 

As you can probably appreciate by now, the right MLM program can be an ideal type of business to run online, what with the fabulous advances in communication offered by email and the web.  Unfortunately, however, this is a double-edged sword. The fact MLM is an ideal internet business is the very thing that attracts the unscrupulous and tarnishes the reputation of MLM in general.  So be on your guard.   BUT don't allow the actions of a few (or even many) to rob you of the chance to participate in something that may ultimately lead you to legitimate home business success.

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Elena Fawkner is editor of A Home-Based Business Online ... practical ideas, resources and strategies for your home-based or online business. http://www.ahbbo.com