Digital Marketer Explains MLM Vs Direct Sales Pyramid Schemes - The DM Ep.2 Recap

Here's the thing. Here's why I say I got scammed. Number one, the company never had any intention of doing what it said. Right?

Yeah.

He told me he was sleeping on people's couches, and I thought he was crazy. He went from the smartest guy I knew to the dumbest person. I'm like, you gonna wake up next to the Dahmer?

What's up, everybody? Welcome to the DM recap show. This is for episode two. I'm here with Vince Reed, the star of the show, and I'm Mike, the head of production here at the dm. If you haven't watched episode two, watch episode two. We're gonna recap here on this recap show so we can go a little bit more in depth on things that Vince hasn't talked about, stories he, you know, hasn't told on the episode that he wanted to tell but just didn't have the time. So we're here for you. You're the audience, and. Yeah, let's get started. So how you feeling today, Vince?

I'm a little scared for my life.

Why? Why?

Cause the MLM industry, they're mad at me.

Why?

Because I got scammed by one of those companies and.

They'Re worse than Bloods and Crips.

Wait, so, all right, since you brought that up, we're gonna talk about this later in the recap today, but since you brought that up already, are all MLM companies scams? No, I hear that a lot.

Most of them are great companies. In fact, the majority of them are.

So multi level marketing, that's what it stands for, right?

Yep. What I think MLM companies do great is a couple things. They're amazing for personal development, right? I mean, some of the best personal development, like speakers and, you know, training happens in the MLM industry. It's a great place to get started as an entrepreneur, especially if you don't have a lot of money. It's a great place to learn, you know, business skills and entrepreneurship. But it has its limitations. Like every business, I think the problem with MLM is human nature. And human nature is people live their lives avoiding pain and seeking pleasure. So with mlm, they give you the ability to build a team, right? So they're like, hey, Mike, I'm selling this drink, this energy drink that will take 20 years off your life after one sip with down the Berry in some mountain in the Himalayas, right? So go out there and sell it. You're like, okay, cool. And the reason I want you to do it is one, I get Paid when you join. And I get a percentage if you sell. So. So going back to people live their lives avoiding pain, seeking pleasure.

For that to be true, and why it's so true is the reason I really want you is it means if you do well, I have to do less work. Because if you think about, for example, think about all of the e commerce sellers, right? The people with shopify stores, they have juices and berries that they found in the himalayas that they're selling. But they don't have to recruit anyone. They're just out there selling the. The juice.

Right. Direct to consumer.

Yeah. So, you know, if I believe if the direct sales industry, if the mlm industry had the same mindset as individuals who sell products on shopify in the e commerce space, they would do much better. So that's why it gets a bad name. Because you end up focusing on recruiting. Because that's typically how you make the most money the fastest. Because the margins are so little with a lot of the products. That it turns into this recruiting fast. And that's why I think it gets a bad name.

Because that's. That's usually what I hear a lot. And I think that's. You reach a cap, right? If you're going to be doing person to person, Family members type thing like you were talking about in the episode, you hit a wall. But you had a different idea. You wanted to put that online market to people for what you were selling. So, like, what led you to that idea? Like, how did you come up with that? And how did that work out initially?

So, okay, so here's the thing. Here's why I say I got scammed. Number one, the company never had any intention of doing what it said. Right? Like, for example, most MLMs that are selling all the products I've been joking about, Those aren't scams, in my opinion. Cause it's selling something physical. It's like a real thing. Right.

Is herbalife a scam?

I don't really know that much about herbalife. I know they have real products. I think what happens is if the field. If the company consists of the majority of people just recruiting. And the distributors are the customers, that's the problem. So, for example, if you join and you have to buy the product. Cause that's part, like your subscription or whatever, you have to buy a certain amount. And that's what's dictating the sales. I think that's what got them in trouble. Right, Got it. Whereas if there's like, let's say 100 distributors, but they're all selling to 1,000 people each. Then it's more heavily dependent on them actually selling. So to answer your question, I don't know. I want to speak on something. I don't know. But what made my situation a scam was they never had any intention of doing what they said and they were trying to give someone something for nothing. Right. It's kind of like all these people that get mad when they like invest. Like, you ever see those episodes of American Greed? See that?

Yeah.

And they're like, I got scammed. It's like you were trying to get rich for doing nothing. Like, what did you expect? Yeah, you got scammed. But nothing. You can't just make money for doing nothing. Right. So I think that that's where it becomes a problem. Like the company's giving you stock options, telling you that something's gonna happen, knowing that it's not gonna happen. Right. So that's what happened in my situation.

So you kinda saw like the writing on the wall. You kind of had a hunch that things were off with this company.

Yeah, I could tell. Especially when I saw the founders had literally just did the same thing like a few years earlier.

With the pump and dumps. Yeah, with the pump and nums. Cause you had a developer friend, right, that you brought on. You were selling, was it?

Yeah. So we would like, he would build a landing page of people in the company that was like personalized. That was better. Because the company, like all of them, they don't give you very good marketing materials.

Right.

So people would pay. We'd build it literally manually, one off products. It wasn't a system like click funnels. And that's kind of what was happening. But he was take to make one. I mean, he got it down to where you could just copy. I don't. I'm not a coder.

Sure, sure.

He could do it in like 15, 20 minutes. He could get one made. The hardest part was like the domain issue and the traffic. We didn't really account for all the traffic because we were paying for that. We were hosting it. So. But it was, you know, you live and you learn. But this guy was one of the smartest guys I've ever met. He lives out of New York right now and he followed the stock market. In fact, he was the first person that I ever knew that stayed at an Airbnb.

Really?

I thought he was crazy. He's like, yeah, I'm going out of town, I'm staying on somebody's couch.

What year was this?

This was man.

Late, like 2000s.

Oh, wow.

Yeah.

Okay. So this was, like, just super young, first starting out.

Yeah. Yeah. This is way back. Yeah, we're way back. We got a lot more coming.

This was. This was, like, before it was seen as, like, normal, right?

Yeah. He told me he was sleeping on people's couches, and I thought he was crazy. He went from the smartest guy I knew to the, like, dumbest person. I'm like, you're gonna wake up next to Dahmer. Did you. By the way, did you see Dahmer?

I didn't see that show.

The sickest, craziest, most disturbing thing I've ever seen.

Yeah.

But I couldn't stop watching it. Kind of like the dm kind of. You can't stop watching it.

First of all, you said that you were. They brought you on to go on these webinars to teach other people within the company how you're running these ads. Right. And you said that it was as if Zuckerberg brought you on to Facebook and told you to teach everyone on Facebook how you're doing this. It was that, right?

It was. So it was a social network. Like, that was the company. It was a legit. Wasn't good one, but it was. Right. So they brought me on, and I would. And at first, no one else was able to bring on new people. So the rate in which I was bringing people in, in fact, the videos still exist. I'll show you guys after. Every week, I would go and do a video, and I would show my growth. So I would. So it would be like, this week, I have. I brought in 150 people. The next week, I brought in 300. And I would. People like, how the heck is this guy, one guy, doing this? Right? So of course, the company owners, they're like, you need to come and teach everybody else how you're doing this. So they brought me on to these webinars, and then, you know, I wasn't using the material, the marketing materials as the company.

Right.

Because I knew digital marketing. And then that's why we started selling the pages.

Got it. Okay. So then after you.

After you figured the company.

Yeah. And after you left, you figured all this out. It's like, all right, there. You know, they're.

I left. And then like, within, I think, six months, I never saw. I didn't see the company.

It just dissolved.

And, you know, maybe they. I didn't. I know they didn't go public after that. I don't think they did. I think the growth just fell off but they were, like, selling. They would create a product, like, every week they'd be like, there's this new energy drink. And they'd, like, send a link out to, like, imagine, like right now if Mark Zuckerberg came out with Zuckerberg power drink, right? And Zucks, Right. So everybody on. Everybody on Facebook just clicks the link and buys, Right.

That's crazy.

So that's how they were. And then they would give a percentage of the field who would buy they. All sales, if you were at a certain level, would get a percentage of those sales. And that's how they kept everybody happy while they were trying to figure out. Figure out what the real purpose was, which was they were going to pay us off. The ad revenue.

How many people were there in that?

Like, I mean, it grew pretty big. I mean, there was definitely probably 10, 20,000 people on the platform. I mean, that wasn't like a. Anything closer, but for a company that fast. And I think I had at least 90% on my team.

Wow. Yeah.

And there was very little money, people watching. Did he make, like, a. No, because the whole point was I was coming, right? The revenue's coming, so we're getting all these people, and the ads are going to display. My projections were going to be. Were crazy, like, the ad revenue that I would have got. But I knew that it was just every month. Every month is going to come, and it never did. So they would just launch a product, and I'd get paid a couple hundred. Like, people would buy. I get paid off of that. But it was never more than a couple grand. Like, if that happened.

Let's go back a little bit. When you were mentioning.

Like, your first mentor, first mentors.

Can you go a little bit more in depth on, like, how you met. You know, how that come out to be? Because some. Sometimes people would ask, all right, I want to find a mentor. I know I need to find one to help me on, like, my specific thing that I'm doing, but it's not that easy. It's not like you're just walking down the street and they just pop up, hey, how's it going? Be my mentor.

Yeah. So here's the thing about mentorship. You can buy your way in to a mentor or you can produce your way in. Right. At the end of the day, if you want to connect with anyone, just help them make more money. I realized that early on. I realized if I could help them make more money, then I was going to be good. And I'll talk about that actually, a little bit in the next episode. But so my first mentor, he was successful in a direct sales company. And he was, you know, at that time, not a lot of people knew Google Ads, right. How to do it. So he was running ads on, and he would show up on every direct sales company. And when I'm speaking of direct sales, in my mind right now, I'm differentiating direct sales from MLM. MLM's a little bit less to get in. You can get started in MLM for like, 200 bucks, 500 bucks. Direct sales is typically 2,000 or 5,000, and you get much more of a commission when you sell it. So that's the difference between. With direct sales. So he was showing up on every one of those companies. Not the MLM companies, the direct sales companies. So when I got the system and I realized I didn't even know there was that many. I didn't even know what MLM was. I just thought it was direct sales. So then I got. And then I found out about mlm, because the system that the second mentor who was teaching me all the marketing, basically started teaching me the difference between buying and shopping keywords.

Okay.

And that's when I came up with the idea to literally create an ad for every single one of them.

Got it.

And when I say every single one of them, I mean every single one of them. If you search for a company back then, you found me, and I was teaching you lead generation.

So that, wow, that's powerful. Okay. So then you. You found. I guess you can consider him your first mentor. You. You mentioned before we were recording, like, you found, like, another. Someone else came into your life as, like, another mentor.

No. So that was him. So the first one was a direct sales guy. So then I ran horrible ads, and I asked him if he knew someone else. And then he introduced me to the second mentor who had the system that was $49 a month. And that guy became kind of like who I consider my true digital marketing mentor. Now, I've had a lot of other mentors since then that are amazing.

Yeah.

And you know, who've really taught me how to make, you know, a lot of money. Right. He taught me the basics of marketing. But knowing how to market does not mean you know how to grow a business or how to make money. Like, remember what I showed you yesterday on the board?

Yeah.

Like, I knew none of that back then, but I knew how to run ads.

Got it. All right. Cause, you know, you knew the basics. But there's a lot more in tangent.

There's a lot More?

Yeah. Okay.

But I'm gonna expose it all on the DM.

You got your first commission. Was it $6?

Yeah, a little over $6.

Right. And was that aweber or what was it?

Yeah, I said aweber. It was an aweber. Someone signed up.

Okay, someone signed up. You got that first commission. How did that feel?

Best feeling ever. Never forget it. Describe that it made it real. Because, I mean, you're trying to make money. You know, everybody talks about couch money and making money and the thing that's crazy about business. I'm sure if you're an entrepreneur and you're watching this, you have a business idea and you're like, I'm gonna go put a post on the Internet. And no one buys it. At first, you can't understand why everybody doesn't see what you see. Like, how come everybody's not buying and why is this so hard, right? And then what happens is when they don't, you start to doubt yourself. You start to say, oh, I'm not a good entrepreneur. You know, you start to make excuses out that person's famous or they have more followers. There's a lot of people that aren't famous that you don't even know about right now, making a million a month. That's true. It's not. That's not real. The difference is, it's. It's human error. When I say human error. You, me, whoever's out there as the business controls the business. And it's up to you to make the right decisions and do the things necessary to generate sales.

So why do you think that so many people get discouraged with running ads? Because you hear a lot. Oh, okay. I just put up an ad, but it never worked. And I'm never running ads again. So, like, why is that?

Well, one, they try to test with a small amount of money, right, to see if it works. And right now, especially today, because the cost of advertising has gone up so much, small sample size, size of ads don't. Won't give you enough data to actually see a result. So you're making a decision based off of not a lot of evidence. It'd be like, you know, which I'm assuming happens, but it'd be like going out on one date and just being ready to marry somebody after one date.

Got it.

It's not enough.

Not enough.

You got to go on three dates to find out if she brushes her teeth. Every time you go on a date, it's important, you know, if she puts makeup on, you know, if she farts in the cart, though. Oh, they fart. And they're worse. They're way worse than guy farts, too, by the way.

What?

Yeah, you're just disgusting. Oh, way worse. I'm serious, too. Oh, wait.

Where humans happens.

But my wife never farts, though. I just want to put that on there. She. She never farts.

I think we're. I think we're pretty much gonna wrap this up, because we're wrapping it up.

Mike, we've given them too much already, all right?

We don't want to give it too much.

Go watch the episode. If you missed it, watch the episode.

It's good. It's a good one. You'll enjoy it. All right, we're out later.