What is Multi Level Marketing and why are many Doha residents hopping onto this trend?

By: Mohamed Eledrisi

What is a pyramid scheme? Is the business opportunity you’ve been offered real or a scam?

You wake up one day and you make your way to your university, gym session, or your job. You get a phone call from a friend telling you about this online business and how it makes you some real nice extra income. He doesn’t want to give away too much about the business so he tells you to meet him at a coffee shop so he can show you the “business presentation”.

The scenario you’ve just read is how multi-level marketers get in contact with their friends in order to recruit them to work with their companies. But is this “business presentation” you’re going to listen to, a scam? Or is it real? In order to answer this question, we must first rewind back in history and see where the word “Pyramid Scheme” or “Ponzi Scheme” came from and figure out what it means. 

The term Ponzi Scheme was named after Italian swindler Charles Ponzi. He was a big scammer in Italy in the 1920’s and was going to be thrown in jail for his actions. He then realized it was dangerous to stay in Italy, and made his way to North America. He roamed the US for a while, going from city to city, till he ended up north in Montreal, Canada. He worked for an Italian bank in Montreal and slowly went back to his old ways and tried to forge signatures to get access to money and cheques. He eventually got caught and thrown in jail for 3 years, before deciding to later move back to the US where he found the key to his financial freedom. 

Charles Ponzi came up with a fraudulent investing scam promising high rates of return with little risk to investors. This fraudulent scheme ends up  generating returns for early investors by obtaining new investors. So the whole scheme is based on using new investors’ funds to pay the earlier investors, meaning if people stop investing, the scheme will collapse.

Multi Level Marketing is a “business model or marketing strategy in which the distributors’ income includes their own sales, and a percentage of the sales group they recruit, which is commonly known as their ‘downline’. Customers can also sign up as a distributor to sell the company’s product”

A pyramid scheme is a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products. As recruiting multiplies, recruiting becomes quickly impossible, and most members are unable to profit; as such, pyramid schemes are unsustainable and often illegal. 

Our techtalk team came up with a list of questions to help you figure out if the business opportunity you are being presented with is a scam or worth taking.

1. Has the company been around for more than 7 years?

Over the years it has been harder and harder for pyramid schemes to last for a long period of time, especially since they have been banned in many countries around the world such as the US and the UK. The 7 year mark in the world of business always proves that a company has bypassed all legal and technical issues and is an important factor in proving whether a company is a pyramid scheme or not.

2. Is the majority of your income coming from recruiting people, or is the main source of income based on an actual service/product?

Any pyramid scheme company depends on recruitment as its main source of profit. The product that the company provides, is at many times considered an “imaginary” product, meaning that the real cash flow of the company is not through the product or service being sold but instead literally just through people joining or “new investors”. This is the main reason why pyramid scheme companies end up going bankrupt or disappearing. 

     3) What country is the business you’re being offered based in? 

The reason this question is so important is because as mentioned before, pyramid schemes are illegal in many countries around the world. So for example if you were provided with a business opportunity from a company based in the US, and the company is a public trade US company, this would mean that it’s being monitored by the Federal Trade Commission and Security Exchange Commission. In simpler terms, this means that the company is being watched by the government and would totally get shut down if it didn’t comply with these government regulations.

In conclusion, there are real Network Marketing/E-Commerce businesses running in Qatar that you could make real extra income from. Statistics tell us that most people that do join these companies don’t achieve financial freedom or being “rich” but a good sum of people do make a stable income through these opportunities. Make sure to do your research before taking any business opportunity, and always ask people who have been through the experience beforehand.