Empower Network: 37% sales are retail, not revenue
Consider:
You run an MLM company and offer two products, a WordPress installation for $25 and affiliate training for $1000.
Affiliates pay $19.95 to join as an affiliate, and must either purchase or sell both products in order to receive commissions on the sale of said products to newly recruited affiliates, or retail customers.
And when I say commissions, I of course mean those customers or affiliates directly pay you.
Now naturally there’s an inherent danger within this business model in that if your company mostly consists of affiliates, there’s a good chance revenue wise, all that’s happening is the shuffling of new affiliate money to existing affiliates. Your company takes its $19.95 affiliate fee each month and those in the company just gift eachother.
How is this danger measured? Analysis of the company’s generated revenue.
Simply put, using the above model, if a company’s revenue is 51% or more sourced from affiliates, its functioning as a pyramid scheme. Due to the fact that affiliates are paying eachother directly, it also qualifies as a gifting scheme to boot.
After analysing your business and realising that well below 51% of your revenue is from actual retail customers, what do you do?
Well, if you’re David Wood from Empower Network you put out a series of statistics that you know are probably going to be misread and parroted by the majority of people reading them.
In Wood’s Facebook update, published roughly ten hours ago, he begins by revealing the company’s revenue figures for May 2013:
Some people have question whether Empower Network is actually 100% commissions, because we pass up sales. I wanted to show you our revenue/payout numbers for May:
—————start of numbers————
Total Volume:
5,752,081.80
Less: Non-Commisionable Items:
696,206.80
Total Commissions Paid:
5,055,875.00
————–end of numbers————-
Looks good so far. Empower Network generated $5.7M USD in for the month of May and sans non-commissionable items (fees) paid out 5 million in commissions. Good job guys.
Then, as all legitimate MLM companies feel the need to do, Wood continues, stressing that
Empower Network is not a pyramid scheme.
Commissions are paid on product sales only, and have nothing to do, at all, with recruiting. Most people assume Empower Network has no customers, when actually, 37% of all of our sales are customer only (non affiliate) sales volume.
Sneaky, sneaky.
37% of Empower Network’s sales are retail customers? That, to put it bluntly, means dick.
Remember that hypothetical example I walked you through at the start of this article?
Consider:
I put out a Facebook update informing readers that 60% of sales are to retail customers. What I don’t tell you is that the 60% of retail sales is only our $25 product.
The other 40% of our business is sales to affiliates and includes primarily our $1000 product.
On paper we can state quite succinctly that 60% of our sales are retail, but revenue wise, quite clearly we are still a primarily affiliate-funded company.
If we have 1000 sales generated within the company, that equates to $15,000 (600*$25) in revenue generated from retail activity and $400,000 (400*$1000) generated from affiliates.
$15,000 in retail revenue and $400,000 from affiliates, see the problem here? You can substitute “1000” for any number above 10 (to keep things neat) and given the obvious unlikelihood that a retail customer is going to pay for affiliate training, every time you wind up with more affiliate revenue.
Does the above make us a recruitment-driven cash-gifting scheme? Absolutely. Even though we can still accurately state that 60% of our sales are to retail customers!
Well duh okay Oz, so what did Dave Wood reveal was the affiliate-funded revenue ratio of Empower Network’s $5.7M USD of generated revenue for March 2013?
Well that’s just it, isn’t it. The revenue ratio showing exactly how much of the $5.7M USD Empower Network generated in May 2013 was affiliate-funded is conspicuously absent from Wood’s update.
Nevermind the fact that even if Empower Network was 37% retail revenue it would still be primarily affiliate funded, thus fitting the FTC’s definition of a pyramid scheme:
Not all multilevel marketing plans are legitimate. If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan.
If the money you make is based on the number of people you recruit and your sales to them, it’s not. It’s a pyramid scheme.
You can’t generate affiliate revenue without recruitment, ergo if the majority of your revenue comes from affiliates, indirectly it is sourced via recruitment (newly recruited affiliates recruit new affiliates to generate commissions).
Wood closes out the update by answering a question nobody asked:
Why am I sharing this?
Because I LIKE being honest, and open about what is actually going on.
Fair enough. Now I have no idea if I’m one of the “3 un-informed critics” Wood refers to in the update (who “just don’t get it”), but nonetheless I’m going to call Wood out on his provided figures and statistics:
Dear David Wood,
If you’re genuinely serious about being honest and open then please reveal what percentage of the $5.7M USD in revenue that was generated in May 2013 by Empower Network was sourced from affiliates.
No marketing BS or waffle hype, just a straight-up percentage number will do.
Love,
Oz.
If and only if Empower Network’s generated revenue is being primarily (majority) generated via retail customer sales is the company not simply an affiliate-funded recruitment scheme. No ifs or buts, that’s the bottom line.
We’ll keep you updated if Wood makes any follow-up announcements. Till then, please don’t waste mine or anyone else’s time running around the internet proclaiming that 37% of Empower Network’s revenue is retail, when it clearly isn’t.
37% retail, hmmm?
That still means MAJORITY of the sales are to its internal members. And if most of the sales outside are of the peanuts variety (the $20 things) then the revenue ratio may end up being less than 10%.
Which brings up an interesting question or analysis…
If they took in 5.7 mil, and paid out 5 mil in commission, but they claim to be 100% commission company, that means they are charging some hefty fees and whatnot, doesn’t it? 12% sound about right?
Does that give you a ballpark figure on ratio of the high-end vs. low-end items? Hmmm…
Pardon my ignorance on this matter, I am not very familiar with empower network but EN states in their comp plan,
Could it be that these “customers” joined EN because they were/are interested in the revenue part, but are simply not able to make any sales?
I really don’t see why anyone would actually pay for this since wordpress is free anyhow. It would only stand to my reasoning that people join EN in the hopes of earning commissions.
Good point. But at least *they* are making an effort (albeit, a sorta sneaky one) to distinguish between customer and affiliate (unlike Herbalife, who prefers to distinguish between distributor, and “supervisor” instead).
I think the affiliates are joining in hopes of 1) using EN to push their whatever OTHER schemes they are pushing, and 2) if possible, pitch EN to other fellow income seekers, esp. the expensive courses.
That’s a load of bollocks. You pay your affiliate fee you’re an affiliate, end of story.
If EN are counting affiliates who haven’t recruited as retail customers, then the problem is bigger than I first imagined.
That is exactly what I have been thinking.
this is similar to talk Fusion, have more affiliates, customers are few and have 5 years operating, people need to make money
In a way, this is a lot like Herbalife and Amway, in making assumptions on whether their distributors are self-consumers, small retailers, or big retailers. If you only just a little, you’re assumed to be self-consumer, and so on.
Businessforhome which touts itself as offering ‘Direct Selling Facts and Figures and MLM News’ lists the owners of EN, Wood and Sharpe, with estimated annual earnings of $7,056,000. That’s a lot of bucks flowing up to the owners!
I was in EN for a month when it first opened and virtually the whole focus from my sponsor (who was personally sponsored by David Wood) was upgrading and buying bigger training packages and recruiting others to do the same. There was virtually no emphasis on acquiring Customers at the $25 level.
I fell for it for awhile, even made a couple thousand, but came to my senses and realized that I believe sooner or later, the FTC will come knocking. I also realized that I was in constant competition with the owners, who had a huge marketing machine in place. Dave Wood was getting all my pass-ups.
I would be shocked if 37% retail is even remotely that high!
Not all, but some.
A little “some” from every affiliate though (once everyone has passed up) equals a lot. That’s how David Sharpe is able to traipse all around the world on Facebook. He takes a little bit from each affiliate each month.
Whoops- misspoke- meant to say SOME of my pass-ups went to David Wood… my Sponsor got some too. A lot of littles def add up in the sum of reportedly $7+ million a year ( and of course that includes what is generated personally from the Daves’ marketing machine).
Regardless of their affiliate/sales ratio. the IDS clearly states that 99% of that That $5M went to the top 1%.
Whether that be 10 people or a hundred, its a classic Pyramid recruiting scheme in every sense of the word.
That must be what being up front and honest means to Empower Network. Step all over the little guys, get them to invest in overpriced training (which won’t work, because you’re directly competing with them and have much more resources and money), lie to them about how anyone can succeed in this if they try (which is mathematically impossible, but sets you up to blame them for when they predictably fail) and dig your hands through all of your affiliate’s pockets for effortless commissions. What an ethical bad ass.
I don’t see what the point of his bragging is. If a regulator cared enough to open an investigation, they could quite easily shut his entire business down.
He’s even admitted he’s running a pyramid scheme that’s stolen millions of dollars and that he doesn’t have 51 percent retail. All of the rapid recruitment will make the “company” collapse much faster. He probably doesn’t even have an exit strategy for when this implodes.
It just goes to show that the industry doesn’t care to regulate itself. If the so called “leaders” had boycotted this “business”, it never would have ballooned up like it did. Does the world really need another high profile cash gifting pyramid scheme? Friends don’t lead friends into obviously fraudulent businesses.
Unless there’s a commission to be made, of course.
The EN hype reminds me a lot of what went on with Zeek Rewards. I am grateful to Oz for this site and exposing Zeek for what it was early on and now EN.
It was amazing to me the seemingly smart savvy people I know who got into Zeek and I see the same happening with EN. I directed numerous Zeek followers to this site but was told I was crazy, in most cases! I’ve tried to reason with a couple of EN folks but they are ‘blinded’ by the big bucks.
David Wood was well trained in Amway tactics… one of which is baffling people with BS at late night rallies. He does the same in live videos late late at night with EN. Get em fired up and they’ll buy and buy and buy because they want to be a bad ass and not a wussy! Would be funny if it weren’t so stupid and sad.
Wood’s exit strategy is that he will most likely have millions tucked away in offshore accounts and he lives in Costa Rica. Does CR extradite US citizens? Hmmm.. David may not even be a US citizen any more.
Forgot to add – Wood is doing the same now with live events held around the country. Wouldn’t be a bit surprised if they go on until the wee hours as well!
A series of ‘expose’ articles about Amway about a decade ago talked about this practice of ‘brainwashing’ people late at night when their brains are most susceptible. Sad…
I told you in a previous empower story that I believe empower counts unsuccessful affiliates (ones who haven’t made a sale in the past 90 days ) as retail customers. I believe this is even more likely based on further thought.
If you read their documents they always sort of say that inactive affiliates would be counted as retail customers.
There is absolutely no reason to do that unless they are playing games to make their numbers look better: because they actually know who is in active affiliate and who is a true retail customer – true retail customers don’t pay the $20 per month affiliate fee.
Fwiw, I also think they may be playing games with the definition of inactive. Inactive doesn’t appear to mean not getting commissions (although most in actives no doubt aren’t getting any), but no haven referred recently.
If I’m correct, even Wood himself could be classified as inactive and therefore retail, if he hasn’t made a recent referral himself, even though he is receiving thousands in pass up commissions. This last paragraph, is of course more speculative than the previous ones.
@Sunny, That was their plan from the beginning. Soak it until it runs dry and then start another scam. The thing is though, they might have the law knocking at their doors very soon.
They will be real badass’s after spending some time in the pen with the big boys.
Len Clements has published a detailed Empower Network Review, republished on MlmHelpdesk.com. It’s very detailed, covering almost all aspects of EN (I haven’t finished reading it yet, and I started reading 20 minutes ago).
http://mlmhelpdesk.com/len-clemments-over-at-inside-network-marketing-takes-an-inside-look-empower-network/
He has, among MANY other things, analysed the customer to affiliate ratio. But he’s also using many perspectives (“it can be A, it can be B or it can be C” type of logic). Affiliates and customers are the same people.
ALL new recruits will be defined as “customers” when they are recruited, so they will always have a group they can define as “customers” (e.g. if 100 people join in June, SOME will upgrade in July, some will upgrade in August, some will upgrade in September, and so on. Some will not upgrade at all. Some will drop out rather quickly. But they will ALL count as “customers” for minimum 1 month.
I believe they also will be counted TWICE, first as customers and then as affiliates in the month they upgrade to affiliates.
Len Clements wasn’t very impressed by the training either. It needs to be completely recreated from scratch (in his opinion).
All in all, the review wasn’t very positive. It points out that the ones trying to teach others are the ones not mastering what they are trying to teach, other than in typical “cheating activities” like manipulating statistics and how to mislead people.
It’s not pointed out directly, but it’s being reflected in most of the review, e.g. in how the training material is described. When people are talking about “120 hours of audio tapes”, and start calculating the time you have to waste each day listening to them rather than pointing out the value of doing it, they are not very enthusiastic about it.
The two Daves’ primary “field of expertise” seems to be about encouraging others to pay for something, so they in turn can make money on it by encouraging others to pay for something, so they in turn can make money on it by encouraging others to pay for something, and so on and so forth in an endless chain of encouraging others to buy into an income opportunity.
Not to take anything away from Clements’ review (I read it in its entirety a few days ago and have watched the accompanying video), but I didn’t really learn anything new from it.
It can pretty much be boiled down to:
Everything that has been said here and discussed previously + Dave and Dave are great guys.
It read more like an academic paper than something that is going to be read by most people. That said I had no issues reading it, it was well written and held my interest over the hour or so it took to digest.
Oh and he “forgot” to ask either David for the percentage of revenue generated by non-affiliates company-wide. He acknowledges this in the review but says he won’t do it now because he can’t be bothered revising the review any further.
Seriously, how do you write a fifty plus page review and miss something as crucial as that?… And then make the choice to not even bother to follow up on it when you realise you missed it?
He covered it indirectly, by analysing numbers and percentages.
Most of the critique were indirect and didn’t really sound like critique, e.g. describing the training material as “repetitive” and describing where and how it had been recorded, and calculating the hours per day you had to spend on listening to it, and similar small details. He wasn’t very impressed by it.
He started to view full videos, but he soon decided to look at samples from them rather than viewing them in full, after the first few. He didn’t find much of interest from a personal viewpoint, neither in the material nor in the presentation methods. It’s written for an MLM audience, not for critics. You’re just the wrong type of audience (he will neutralize other parts than you do).
And instead of using that talent to sell something tangible, they chose to sell themselves to people who also want to sell themselves instead.
Selling something is about selling IDEAS, not products or services. It’s about selling people’s OWN ideas, or selling new ideas that can fit into the perspective they already have. And it’s about SELLING it = make the idea FEEL “acceptable”, “wanted” and “worth paying for”, and about people’s own “perceived experience of reality”.
If you try to sell the reality rather than the “perceived reality”, you will most likely fail in most markets where that factor has importance. People buy stuff because of what they FEEL for it, e.g. about quality, taste and “image”. Brands like Armani, Rolex, Gucci, Louis Vuitton, Gillette, Red Bull and others all try to build up around people’s perceived realities.
Companies will often fail when there’s too much distance between the different “perceived realities”, e.g. JubiRev ONLY managed to attract more hardcore networkers, not the ordinary people (like Zeek did). Wazzub and Rippln attracted people believing in different IDEAS (“free income” and “ripple effect”).
But you will also most likely fail if there’s too much distance between the perceived reality people HAVE and the perceived reality you’re trying to SELL, i.e. if you fail to deliver what they expect you to deliver.
Empower Network failed to deliver what Len Clements was looking for in the training material, but they scored some points in being transparent in parts he hadn’t expected. That’s probably why he avoided certain “tough questions” he normally could have asked, and why critique was made indirect rather than direct.
Aside from the fact that this blog needs to be rethought with EN’s new viral blogging system. The inherent problem with this is article is its citing multi level marketing guidelines when EN is actually not ‘just’ and mlm company. Its a hybrid of an affiliate company and a mlm.
Contrary to the author’s belief, MOST of the revenue that come in from a lot of products on the internet are generated by affiliates. Thats how the Gurus get rich. Theres nothing wrong with that because the affiliates get their cut too but your article’s premise is based on an error. Its fundamentally flawed.
If thats the all affiliate programs on clickbank, clicksure, jvzoo should be shut down.
Lastly, EN’s products are specifically tailored to mlm and affiliate marketers who in many cases are marketing something else already or add EN to their list of products they promote and use the blog to do so. This is different than other mlm opportunities where the products and the marketing system didn’t create a marriage.
In EN its not a pure mlm and the nature of the product demands a different standard.
Just my legal opinion. I’m biased because I’m in it but I think my points are valid.. Ultimately I think the FTC will take a good look at EN and i encourage everyone to always be prepared for the worst.
Build your own brand and own your list you create as these are your assets. EN is slowly changing into a more reputable company and straying from its Get Money roots which is just asking for a FTC slap.
@AC Esq
EN uses a MLM compensation plan that pays its affiliates out over multiple levels. Thus it is an MLM company, period.
Regardless of the blogging system used, EN still needs retail customers.
Affiliates who haven’t recruited and non-active != retail customers, so to date EN have not released their true retail customer numbers.
In the MLM industry, this is referred to as a pyramid scheme.
No it doesn’t. If you cannot sell the product or service without the attached MLM business opportunity then you have a problem.
No excuses.
Firstly it isn’t an mlm compensation plan. It is a passup plan that seems to the untrained eye to mirror one, but its very unique. Nevertheless I’m not saying it isn’t a mlm, im saying that it isn’t JUST a mlm.
Secondly: “No it doesn’t. If you cannot sell the product or service without the attached MLM business opportunity then you have a problem.”
You absolutely can purchase any of the products without being an affiliate or marketing it. To be an affiliate is a totally separate cost altogether. Do you even know what you’re talking about?
And lastly if you sell an affiliate product online like a wordpress blog and get a commission, does that make it a pyramid?
All EN is is a specialized blog (not the old wordpress one at all) and courses on internet marketing that you get affiliate commissions for selling. If you want to market them yourself you pay a SEPARATE affiliate fee. What aren’t you getting?
What? MLM companies have been using the passup plan since the late 1990s. All the travel companies use it and it was big with the personal development niche earlier in the 2000s.
Cash gifting schemes pass up 100% of the money affiliates pay amongst existing affiliates.
Thus, there is absolutely nothing new or unique about EN’s MLM compensation plan. EN is an MLM company, and that is all that is relevant here.
“Can” is not good enough. Pyramid schemes launch with a retail option all the time, trouble is nobody buys it and all you have is the recruitment side of the scheme being flogged.
Having retail is not good enough (although it’s a start), you have to be able to demonstrate the product/service you are offering is actually selling at a retail level, and generating a significant portion of company revenue.
You can’t sell WordPress, you don’t own it. Neither do EN – so for two years they operated a gifting scheme under the guise of selling something they had no license to sell.
Don’t even try to tell me retail is viable at the upper levels, nobody but affiliates are paying them $1000s of dollars for David Wood videos.
If far more affiliates exist within the company, people are getting paid on recruitment. 100% of the money being shuffled around makes it a gifting scheme.
Whatever they attach to that, be it an inhouse product or someone else’s product becomes irrelevant.
To date EN have not disclosed their true retail figures publicly – they only talk about “customers”, which includes affiliates, non-active affiliates, ex-affiliates, retail customers and non-active retail customers. There’s a reason for that.
Finally you have presented something clearly that I agree with you on. It has to resonate with their own feelings and ideas.
This will change as the release of new products are coming very soon. I love the criticism though. One thing no one can take away from EN is the resiliency and persistence.
People say this say that..And EN finds a way to reinvent and re-innovate themselves to improve on weaknesses and get that much better. Heart of Champs.
Unlike most company owners that throw in the towel when they prick a finger…smh
Yeah wasn’t the blogging platform supposed to have already changed it? Nobody pays for that except affiliates. Any “new” products attached to the movement of money up the scheme will likely be the same.
You’re reading too much into their PR campaign of “underdog” and “badass”. Underdog is a common theme in PR campaigns and used by just about everybody
A quick look at the FB pages of the Davids, Tony Rush, and EN’s own page shows that they have shifted their focus away from being a blogging company and now promote themselves as more of a self-improvement/marketing company.
Sharpe’s posts sort of remind me of LLI. Rush has actually gone quite neutral with most of his posts being just random stuff. When he does mention business/mlm it tends to be generic with an occasional mention of EN specifically. Wonder if he sees the handwriting on the wall and is positioning himself.
The products they have fails to deliver any RESULTS. People does NOT become more successful or skilled.
* I have asked EN members about RESULTS from the training, and nearly all of them prefer to avoid questions like that.
* I have looked at marketing videos an “8 core principles”, and the results from the training were rather poor.
Adding more income opportunity products will probably not make any difference. The existing products were only designed to be IDEAS people could believe in, to make people willing to pay. They were not designed to be useful ideas people would have bought anyway.
Programs like EN will stop working when the recruitment slows down, when the opportunity have failed for most of the participants. Then they will jump ship and look for other opportunities.
Have you got any RESULTS from the training?
I forgot to ask about that in my previous post. The results I have checked so far indicates that most people will gradually drop out of the program after some time (after they have programmed their own minds to become successful, by listening to audio tapes minimum 5 times per day).
Results should typically be about if you have managed to get OTHERS to believe in the same idea.