Most confuse Multi-Level Marketing with ponzi pyramid schemes, frankly speaking both are very identical, at times it becomes difficult to separate one from another. Many ponzi schemes are running disguising as an MLM. As you know the famous and great structure of pyramid, it is narrow at the top and becomes wider at the bottom, same is in MLM and in a ponzi scheme, the commission distribution is highest at the top & decreases at the bottom. People at the top make big money and it decreases as we go down and same is with a ponzi scheme. I know we are not hear to discuss about how money is distributed in both but to know the real difference between them.
Existence of ponzi word came from Charles Ponzi. Who in early 1920, ran a ponzi scheme successfully. Later, he was put behind bars, when investors did not even get their invested money.
Ponzi schemes are presented to people as a Multi-Level Marketing opportunity. Where one has to invest certain amount and recruit people under them, so that one could also make big money like their uplines. Ponzi schemes pay emphasis only on the recruitment of new people. Basically there is no product to sell. It offers earning fast money by singing up more recruits.It’s like Ram’s hat on shaym’s head, and then Shyam’s hat on Vijay’s head & also promises a certain return at the end of day that too without working. Whereas in Multi-Level Marketing, the emphasis is totally on selling of products or services and after ever successful purchase, the commission is distributed among recruiter and uplines. People who join MLM create demand for the product and through multi level marketing company products are sold directly to the people that too without any future commitment of returns on the money.
People should refrain from such ponzi schemes at all cost, there are selfish people, for their own benefit, might harm you. As we all know there are no short cuts in life to become rich or unless we hit a jackpot at a casino.