TelexFree Compensation Plan v2.0 Review
Despite the repeated claims that TelexFree’s existing compensation plan and business model was “absolutely not a Ponzi scheme”, the company has decided to recently announce some changes.
Likely due to the co-incidental timing of Massachusetts confirming a US investigation into the company and issuing subpoenas ordering TelexFree officials to appear before the SEC this Wednesday, TelexFree’s new plan feels like it was cobbled together hastily.
It’s confusing, it’s a drastic change from the old “invest $289 and get paid $20 a week for a year” plan and most people aren’t going to get it first time around.
After seeing the plan released in Portuguese last week, I’ve held off publishing my own analysis till an official English version came out. I noticed over the weekend several sources have published identical explanations of the new plan so I’ve put together what I believe to be as complete a review of the new plan as currently possible.
I’ve also tried to break it down and present the new plan as cleanly as possible, including what has changed from the old plan. If there’s some points people still aren’t getting, feel free to leave a comment below and I’ll try to further clarify.
Additionally corrections are also welcome. It is noted that for reasons known only to themselves, TelexFree have not provided anyone with official documentation yet.
The AdCentral Investment Scheme
Previously the core of TelexFree’s compensation plan, the AdCentral investment scheme has undergone some significant changes in the new plan.
TelexFree’s old plan saw affiliates invest $289 per AdCentral position on the promise of a $20 a week ROI per position. The new plan first requires affiliates qualify as a “Family” affiliate, which means they have to sell ten VOIP packages at $49.90 each.
Once qualified as a Family, an affiliate earns $100 a week over their first 30 days. After 30 days the fun begins.
After 30 days, in order to keep receiving $100 a week an affiliate must qualify for “AdFamily Plus” status. This requires three things:
- spam 5 TelexFree ads a day (7 days a week)
- maintain at least 5 VOIP customers (at a cost of $49.90 a month)
- recruit at least two affiliates who in turn also have at least 5 VOIP customers, each paying $49.90 a month
As long as this AdFamily Plus status is maintained, an affiliate will receive $100 a week from TelexFree.
Note that if an affiliate does not qualify as an AdFamily Plus, they will remain a Family qualified affiliate and earn $50 a week. Family affiliates must still spam the internet with 5 TelexFree ads a day if they wish to receive this commission.
AdCentral Investment Scheme Referral Commissions
AdFamily Plus qualified affiliates are eligible to receive 2% of what their downlines earn (payable down 6 levels of recruitment), via the AdCentral investment scheme.
Family Recruitment Bonus
When a personally recruited affiliate qualifies as Family affiliate (see above), the affiliate who recruited them earns $100.
For each $49.90 VOIP service sold, a TelexFree affiliate earns a 10% commission ($4.90). This is an ongoing monthly commission, provided the customer maintains their VOIP subscription.
Residual commissions are offered on VOIP sales, via what appears to be a unilevel compensation structure. A unilevel compensation structure places an affiliate at the top of a unilevel team:
Every personally recruited affiliate is placed on level one of the unilevel team, every affiliate recruited by level 1 affiliates is placed on level 2 and so on and so forth down a theoretically infinite number of levels.
TelexFree cap payable levels in a unilevel team to five levels, paying out 1% commission down levels 1 to 4 ($4.99) and a 1.5% commission on level 5 ($7.48).
Note that if an affiliate recruits at four affiliates (I’m not sure if they have to qualify as Family affiliates) within 30 days of joining TelexFree, they are paid an addition 1.5% on levels 6 and 7 of the unilevel. Based on the information currently available, there doesn’t appear to be any other way to open up these two additional unilevel levels.
Previously affiliates were paid VOIP service commissions using a 5×5 matrix, paying out 1% on level 1 (5 positions) and 1.9% on levels 2 to 5 (3905 positions).
A binary compensation structure places an affiliate at the top of two binary teams, left and right:
Recruited affiliates and VOIP subscribers fill positions in the binary, with a pairing system used to calculate “cycle” commissions within the binary.
I’m not 100% sure on what constitutes a paired cycle in the new TelexFree binary, but it appears to be one personally recruited affiliate and 5 VOIP subscriptions (either held by affiliates or retail customers).
For each match of the above qualification criteria (the above requirements must be on both sides of the binary), an affiliate is paid $80. Binary commissions are calculated daily and are capped at $15,800 a day.
Previously TelexFree affiliates were paid a flat 40 cent per week commission per recruited affiliate in their binary, and a $20 cycle commission with recruited affiliates matched 1:1 on either side of the binary.
Team Builder Revenue-Sharing
If an affiliate has five personally recruited AdFamily Plus qualified affiliates in their downline, they qualify for a share in the Team Builder revenue-sharing pool.
This pool is made up of 2% of TelexFree’s global revenue (presumably including affiliate membership fees), paid out monthly. Team Builder revenue-sharing pool earnings are capped at $39,600 annually per affiliate.
1K Club Bonus
The 1K Club Bonus pays out $500 when an affiliate personally recruits 4 new affiliates within thirty days of joining the company. Affiliate can only qualify for the 1K Club Bonus once.
Affiliate membership to TelexFree is now $149 annually on top of a $19.90 monthly fee.
Previously annual TelexFree affiliate membership was $299 for one AdCentral investment position or $1375 for an AdCentral Family position (5 grouped investments). TelexFree charged a 20% “renewal fee” after one year on both investment amounts.
I’m not going to pretend that TelexFree’s VOIP service is viable at a retail level or that anyone outside of affiliates participating in the AdCentral investment scheme are interested in paying for it.
Instead, I’ll attempt to address the question on everyone’s mind: “Can I still dump money into TelexFree, spam the internet (or pay someone else to automate the process), and walk away with a >100% ROI after a year?”
As I understand it, affiliates can qualify themselves by purchasing additional VOIP packages. From a compliance standpoint this makes no sense (good luck explaining to the SEC why all your affiliates have 10 VOIP packages in their names), but it is possible and needs to be considered.
So, an affiliate joins TelexFree for $149 and pays their $19.90 monthly fee. They then need to sign up ten VOIP accounts, which is $499.
Ok, bing-badda-boom – spam the internet daily and in your first month an affiliate’s ROI is $400 plus $49.90 in VOIP commissions, with expenses of $667.90. Effective ROI is thus -$218.90.
For month two an affiliate needs to recruit at least two affiliates who each also spend $667.90. They also need to maintain at least five VOIP subscriptions out of the initial ten, so month’s two expenses are the monthly $19.90 fee and $249.50.
Commissions paid out in month two are: $80 binary commission, $24.95 in direct VOIP commissions, $9.98 in indirect VOIP subscriptions (20 subscriptions on level 1 @ 1%), $200 via the Family Recruitment Bonus and $400 in AdCental investment ROI. All up that’s $714.93.
Expenses are $269.40.
With an already negative $218.90 balance, month two results in a gain of $226.63.
This monthly commission increases over the next ten months as recruitment grows downlines and other commissions eventually kick in, but that’s the gist of it. Of course much more is earnt if an affiliate goes out and recruits his or her nuts off, but seeing as most people joined TelexFree for the passive $20 per position a week ROI, that probably excludes most affiliates.
Alternatively if an affiliate doesn’t recruit, they’re looking at continued net-losses of $44.45 a month ($269.40 in expenses minus $200 in ROIs, $24.95 in VOIP commissions and no recruiting).
Any questions leave a comment below and we can work through it. Otherwise as I understand it that’s the nuts and bolts of the old AdCentral investment scheme translated over into the new compensation plan.
One final thing I want to address it that a lot of people are probably asking why this new plan is so messy. The reason is pretty simple: TelexFree’s VOIP service was never meant to be a standalone product. It was always nothing more than a cover for the AdCentral investment positions.
Now with US regulatory scrutiny and the inevitable shutdown in Brazil, TelexFree have had to artificially push VOIP to the forefront. Needless to say those who have used it and anybody who’s analysed the prior business model will predict it’s not going to work.
When you run a Ponzi scheme for two years and then pull the rug out from under your investors, things collapse. Of course little of that probably matters to Carlos Costa, James Merril, and Carlos Wanzeler.
The meta game being played here is that they’ve been skimming who knows how many millions off the top of everyone’s investments over these past two years. Now it’s not so much a matter of keeping the scheme running, but mangling the business model into something the regulators might be satisfied with.
I guess the hope is they’ll be issued a a fine and then just make off with whatever’s left.
The reason TelexFree’s compensation plan makes little sense and will be largely unattractive to the current affiliate-base is that it wasn’t written for them; it was written to keep Merril, Wanzeler and Costa out of jail over the coming months.
And now we wait and see how it all plays out…