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.
-US Federal Trade Commission (FTC) on Multilevel Marketing, November 2012
A few days ago Empower Network crossed the 100,000 mark for what they’re calling “blogging customers”.
On the surface this sounds impressive and whilst I don’t question the accuracy of the milestone (or try to take anything away from it, well done guys), what I found far more relevant and revealing was a short update published the day before.
In the update CEO David Wood broke down Empower Network’s current blogging platform affiliate to retail customer ratio.
Upon seeing the figures I’d like to say I was pleasantly surprised… but unfortunately that wasn’t the case.
Published on his Facebook profile page, David Wood writes,
I saw someone online saying that Empower Network doesn’t have customers.
Right now, out of our active customers of the blog, 33% of them are customers only.
First and foremost kudos to Wood for revealing this figure. I imagine most MLM legal teams would shy away from publicly revealing that kind of retail to affiliate revenue ratio, but Empower Network continue to demonstrate that they are committed to transparency.
That said there was a bunch of marketing fluff attached to the announcement, no doubt designed to pad out the figure, but that was easily skipped over.
The meat of the announcement was that, at least as far as the blogging platform was concerned, Empower Network has 33,000 or so retail customers (non-affiliates) and 67,000 affiliates. Or to simplify it, 33% retail.
Without even getting into the simplest of analysis, having 33% retail reveals that the bulk of money being generated in Empower Network is coming from affiliates.
As per the FTC quote at the start of the article, this clearly brings us into pyramid scheme territory.
They key here is establishing whether or not statistically, an Empower Network affiliate’s income ‘is based on the number of people (they’ve) recruit(ed) and (their) sales to them‘.
To get it out of the way, it’s wholly acknowledged that you don’t have to recruit affiliates to earn in Empower Network (blogging platform or otherwise), and that’s certainly not the point here.
You join Empower Network as a blogging customer for $25 a month and if you don’t pay that affiliate fee there’s absolutely no doubt that you’re a retail customer.
Looking at Wood’s figures, with only one customer for every 2 affiliates paying $25 a month though, retail is clearly not the core of the business. And before anyone starts on about being a “new company” with “growing pains” or some such, Empower Network are now approaching a year and a half since launch.
As Empower Network’s own affiliates love to parrot, “no excuses”.
Getting back to recruitment earnings, as it stands I can join Empower Network as an affiliate, buy into the blogging platform (mandatory if I wish to earn anything selling it to others (retail or recruited affiliates)), and then receive $25 each month from every affiliate I’ve signed up.
Whether they use the blogging platform, whether I use the blogging platform or whatever either of us perceive the value of it to be is all ultimately irrelevant to what it is I actually did to get paid – recruit new affiliates into Empower Network.
You could make the argument that I wasn’t paid to recruit these affiliates (as the affiliate fee is not commissionable in and of itself), however if these affiliates wish to earn anything – they have to “purchase” the blogging platform.
In doing so, I am then paid my monthly commission so in effect my income is indeed tied into, as the FTC puts it, ‘the number of people (I’ve) recruit(ed) and (my) sales to them‘.
Again, I’m not asserting that recruitment is mandatory by any means but as per Wood’s figures, quite obviously recruitment of new affiliates (and the requirement for them to buy into the system to earn commissions themselves) is how the majority (67%) of blogging platform income is being generated.
And keep in mind, at $25 a month the blogging platform is only the entry-level product tier. With training running off into the thousands of dollars (where the “real money” is as they say), what’s the bet that the retail ratio plummets from 33% to… well, who knows what.
Unfortunately Wood didn’t reveal what the retail to affiliate purchase ratio was for Empower Network’s “Inner Circle” membership ($100 a month) or Costa Rica video series ($2997), just the flagship blogging platform.
No doubt aware of the importance of the retail revenue being generated within the company (whether, due to the Empower Network compensation plan, it’s being gifted amongst affiliates or not is a seperate (but relevant) issue again), Wood closed his ratio announcement with a projection:
Just wait to see what happens to your check this year when customers are accounting for 95% of your income.
Where these customers come from however, given the massive marketing advantage an affiliate has recruiting new affiliates, I have no idea.
As a blogging platform customer, marketing wise you’re being sold on Empower Network’s “domain authority”, pagerank (putting aside the fact that pagerank is individually page specific), WordPress templates and the actual setup of the blog platform itself (WordPress).
The idea being of course that you start blogging about whatever it is you want to promote (even if it’s just information) and having WordPress’ blogging software on Empower Network’s website domain will get you showing up in search engines.
Despite having 33,000+ retail customers supposedly blogging for the above reasons, Alexa accounts traffic to the Empower Network website from search at just 5.3% of the global traffic hitting the site.
What does that mean?
94.7% of visitors to the Empower Network website (including every affiliate and customer’s subdomain hosted blogging service) do not come from search engines.
Further to that, with 94%+ of traffic being directly sent to the Empower Network domain by affiliates marketing the income opportunity, what percentage of the 5.3% of search traffic actually hitting the site is traffic those 33,000 or so customers they have are actually seeing?
The most popular search terms used to land visitors on the Empower Network domain are pretty much all related to the income opportunity itself:
1. “online home business team” 5.75%
2. “empower network” 3.27%
3. “a freedom message for network marketers” 2.60%
4. “stop struggling with your online home business” 2.56%
5. “how to blog effectively” 2.37%
6. “empower network monster unleashed” 2.24%
7. “blooging starts with a niche” 1.92%
8. “empower network a true business model” 1.87%
9. “downline building thre easy way” 1.84%
10. “empower network newbie system” 1.82%
For Empower Network’s retail customers search visibility is ultimately the bottom line. If, as an Empower Network customer, you’re going to just drive traffic to the sites yourself you can do that on any hosted platform (WordPress and Blogger both allow you to quickly set up a blog for free).
Capture pages? $25 once off should get you a decent enough one.
The whole “search engine visibility advantage” the Empower Network blogging platform is marketed with towards customers just doesn’t make sense.
I mean hey, even if a customer managed to generate a significant amount of traffic, does anyone seriously believe there aren’t affiliates keeping track of things like this, ready to hijack the keywords themselves (to generate more traffic to their Empower Network recruitment capture pages)?
But that’s of course precisely why Empower Network’s retail is sitting at just 33%. Why or how Wood thinks this is going to increase to 95% I’ve got no idea.
Especially when he’s making statements like this (Facebook, 9th of March 2013):
I don’t want 100,000 customers, or 1,000,000 customers – I want 1,000,000 affiliates a month to be earning a commission.
Hell, he doesn’t even want customers!
Focusing on affiliates earning money above all else (which is currently happening primarily (67%+ of commissions generated company wide) via recruitment of new affiliates), projecting a 62% increase in retail customers on a system that makes no sense to use as a customer, at least 66% of all commissions paid out being affiliates paying affiliates directly each month and currently fitting the FTC’s own definition of a pyramid scheme?!
That’s a whole lot of “doesn’t add up” right there.
Then again, with sales pitches like this from David Wood himself,
Get to Chicago.
Don’t be a wussy.
Pull out your credit card, and get your blog setup now, for only $25.
it’s clear retail, let alone any demonstratable value needed to attract retail customers, isn’t high on Empower Network’s priority list.