Twitter’s Biggest Scams Part 1: MLM

Feb 07 2010

Twitter’s Biggest Scams Part 1: MLM

Article one of a five-part series

Have you ever wondered about those annoying followers you get on Twitter promising to whiten your teeth for free, make you rich in the Trump network, or help you attract thousands of followers? I’ve been curious about these folks and how they could possibly make money off these spurious claims.

So, I figured if I was wondering, you might be wondering too. Over the next few blog posts, I’ll try to lift the veil of mystery surrounding these business models. To understand many of these scams, you need to start with the basics of …

Multi-Level Marketing (MLM)

First let me be clear that there are many successful and legitimate “real-world” MLM businesses like Mary Kay, Discovery Toys, and Pampered Chef. These business models rely on independent distributors to sell directly to their friends and families. The distributors profit from the sale of real products and from commissions for recruiting new distributors — so the more “levels,” the more profitable they are.

However, Internet MLM schemes seldom rely on the sale of a physical product or legitmate service. Instead, the Twitter-variety MLM’s primary objective is to recruit new members, with revenue generated from the start-up and “maintenance” costs paid by new members to take part in this “can’t miss” route to riches. The MLM pyramid scheme takes your money and then uses you to recruit other suckers distributors to send their money.

Does it work? Obviously data on a shadowy industry like MLM is difficult to obtain, but an article from wikipedia.org opines:

“The vast majority of MLM’s are recruiting MLM’s, in which participants must recruit aggressively to profit. Based on available data from the companies themselves, the loss rate for recruiting MLM’s is approximately 99.9%; i.e., 99.9% of participants lose money after subtracting all expenses, including purchases from the company.”

Telltale signs of an MLM pyramid scheme:

1) Requirement to “invest” a large amount of money up front to become a distributor.

2) Upfront costs to buy “inventory.”

3) No mention of an actual product or service.

4) Plan designed so that you make money by recruiting new members rather than through your own sales efforts.

Another difference between these web-based pyramid schemes and the traditional Mary Kay-style MLM is that a great deal of it has become automated, which accounts for the sheer volume of annoying tweets we suffer through. The automation tools (or “bots”) they employ make it easier to spread their links more quickly.

In fact, there are lots of websites and even huge conventions dedicated to helping these MLM spammers find new spam-generating automation tricks for clicks.

And here’s a surprise …

People actually do click on the links. URL services like bit.ly allow you to track the clicks of links hosted there, and if you take a look at any one of these spam messages, people are actually clicking on them. Whether they make appeals to the rough economic times or high unemployment, teeth whitening, weight loss, or whatever, there are lots of people who click, even if you and I wouldn’t.

Like you, I get strange Twitter followers almost daily wanting me to sign up for EXTREME WEALTH! In an effort to provide a balanced report, I contacted more than a dozen of these MLM marketers for their perspective, but none of them responded to my requests.

Part 2 of this series on Twitter’s Biggest Scams: The teeth whiteners

Part 3: Building wealth through Twitter follower lists

Part 4: The Trump Network

Part 5: What to do about Twitter scams

Filed in Corruption on social web, economics of social media, ethics, twitter | Mark

15 Comments

By Jim LeBlanc, February 8, 2010 @ 7:42 am

Very, very interesting. I’ve wondered myself about these strange systems but have avoided clicking their links at all costs!!! Thanks for diving into this, Mark.
By Jamie Lee, February 8, 2010 @ 9:19 am

Like Jim said – thanks for clicking the links. I’ve been curious to look behind the curtain, but didn’t want to click myself.

I’ll be interested to read your whole series. These scammers and spammers give us legit online marketers a bad name. Sadly, as channels like twitter become more mainstream, these schemes become more prevalent. I wish there was a way we could go all vigilante on these people – make our digital streets safe for the honest, hard-working marketers out there.

Want to start a posse?
By Mark, February 8, 2010 @ 9:34 am

@Jamie I’ve been thinking the same thing. It’s too bad they have to ruin a good thing. Difficult to balance personal freedom with freedom to spam. Thanks for taking the time to comment!

@Jim You’re welcome!
By Steve Dodd, February 8, 2010 @ 10:47 am

What’s worse are the number of people who follow the link and send money.
Remember the junk mail (via email, USPS, twitter, facebook etc.) business is all about a getting a very small percentage of responses. 1% of 2,000,000 at $19.95 = almost $400,000!
But, the other part about this are the viruses….and worse. So Mark, if you are going to do this, be sure to have a few good virus and trojan services on your machine!
By Mark, February 8, 2010 @ 10:57 am

@ Steve I am already finding this out! It has already been an interesting week. Just the word “MLM” in a headline is bringing out the spammers!
By Steve Dodd, February 8, 2010 @ 11:07 am

Yup, the more times you follow those links, the more “amazing opportunities “you are going to hear about!
By Michelle C, February 8, 2010 @ 11:08 am

It’s just too bad there’s no way to block all of these people out of Twitter once and for all. That should be the tool someone should make – a spambot detector that deletes them before they even bother you.
By mose, February 8, 2010 @ 11:09 am

Mark? Can you be in my downline?

OK I gota tell ya that is a nice picture for the article – you know you will get sued by this schmuck fer sure. LOL!!

I have no problems with any schemes – it is a natural selection process. People are greedy. Hell, look at that voluntary tax on the stupid called gambling and lotteries.

I would rather have a ton of MLM crap than all the self proclaimed Gurus out there. Oh Guru comes from the Latin = out of work and unemployable.

’Please, Mommy make them stop!’
By Johnny, February 8, 2010 @ 11:24 am

Some years back, I had a “friend” that tried to recruit me into a legal MLM called Excel which “provided” communications services. While it was similar to the Mary Kay type of MLM, I was suprised by how much they promoted the marketing rather than the actual services. Though technically legal, it always seemed shady and I never went through with it.

The thing that made it legal, though, was that there was a central product or service that was provided by the company. Now I don’t really pay attention to the spammy Twitter promos, but if there is no mention of the product or service in the end, aren’t these boys skirting the line of legality?
By Mark, February 8, 2010 @ 11:45 am

@ Michelle — There is such a thing (kind of) more on that Friday!

@Mose — You CRACK ME UP! Hope you are back from your SM hiatus!!

@Johnny — You are correct. Pure pyramid schemes are illegal. But these people are smart enough to know that. There is always SOME kind of “start-up” package they can refer to, even if it’s just a how-to manual of some sort.
By Mark, February 8, 2010 @ 11:46 am

I am getting DELUGED by MLM spammers and am blocking as fast as I can. Geez. What I go through for you guys! : )
By mose, February 8, 2010 @ 11:56 am

Yeah, I am Mark thanks. Had some serious stuff to do in Meat Space (real life). I have taken over as the President of the Direct Marketing Association of Toronto (DMAT) and you will see some pretty interesting stuff there in the next little bit.

I want to thank you for getting my tiny brain workin…

http://mose.posterous.com/i-am-calling-bullshit-on-this-guru-thing

You are an inspiration my friend! Lets see what happens with this little test!
By Mark, February 8, 2010 @ 12:24 pm

@Mose — Congrats, Mr. President. be sure to let me know if there is any way I can support you in your new role!
By Nigel Fenwick, March 9, 2010 @ 5:04 pm

Great post Mark. I’m glad you took the time to do this. Thanks.

Of course, there is a very easy way for us to stop these annoying spam Tweeters – it’s called “unfollow” or even “block and mark as spam”. If you are using a tool like Tweetdeck this is very, very easy to do – right click the avatar image in lower right corner , hover over “user” and click “block & report spam”.

Remember the only reason we are seeing all these annoying tweets is because we are following these people – most likely because at some point we have setup auto-follow.

If we really want to make Twitter more usable I suggest cleaning up the list of people we are following – my current favorite tool for this is http://thetwitcleaner.com/ but I’m sure there are others out there. Since I ran this on my account I’ve been able to keep spammers out of my Twitter stream – I judiciously follow-back people after first looking at their profile and stream.
By Mark, March 9, 2010 @ 6:26 pm

Thanks for the extremely useful advice, Nigel!