What isn't MLM

Update: Jason, in his typical I'm-not-wrong style retorts that Squidoo is indeed MLM. Anyways. Why do I bother?

The Calacanis Bullshit Meter just shot through the roof. He calls out Squidoo's referral program and revenue share arrangement as Multi Level Marketing.

Here's an excerpt from Squidoo about their referral program:

2. Refer a friend, get $5. When someone you've referred earns her first $15, you and she BOTH get an extra $5. Find out more here: http://www.squidoo.com/lensmaster/refer

Here's an excerpt from Squidoo about their revenue share.

But now... it's time to start paying YOU. From this point forward any royalties your lenses earn are well and truly yours. (And we're
backdating the start of the first pay period to March 1, 2006). Find out more about how you get paid.

Here's what Jason rants:

Got the note below from Squidoo today. I hate this MLM (multi-level marketing)/referrer program stuff. I know it works, but it feels icky to me. We thought about all these models when we started WIN and found that you're better off finding the best of the best and paying them well to make a "lens" of the web.

Quality folks don't do the MLM stuff. MLM stuff draws the low-rent, scammers of the world (think: the folks you know who join those viatim cults).

To clarify, I don't think that Squidoo is anything revolutionary. It certainly makes it easier for not-rolling-my-own don't-mind-co-branded-websites experts to pull together lists of cool things. (Dave Kurlan has pulled together a great list of resources for sales people.) And there are some network effects that could take over. But, I see expert aggregated lists ultimately being organized through more decentralized methods like del.icio.us, clickstream aggregation, blogging platforms and algorithms, etc.

Nonetheless, Squidoo is the farthest thing from MLM. Multi Level Marketing is when companies task their distributors with recruiting new distributors. Then, the distributors that recruit new distributors generate residual income from the new distributor's sales.

Unlike many people, I don't see anything inherently wrong with this. However, many people have had poor experiences with MLM because there is often more focus on recruiting new people to be in the business then there is in selling the products and servicing buyers. And new distributors are often encouraged to attend events and read books endorsed and attended by other distributors to learn business best practices. This process often requires distributors to spend several hundred or thousands of dollars.

The business isn't for everyone. But, for some people, it is the right opportunity. I did participate in an MLM company for about a year. And I consider it a great learning experience. I learned about the power of positive thinking and a lot of sales skills.

I quit the business because I wanted to invent as much as I wanted to sell. I wanted to invent my own business services. So, for the last 3 years, I've been inventing. In the last few months, I've been making considerable sales. In the next few months, we'll be scaling up our business and taking on new partners and employees. They'll be contributing to my wealth, while they work for an income: The systems we've created will create residual income as a result of other people's work. So, in my opinion, from an ethical and structural standpoint, being an employer is not much different than recruiting new distributors for an MLM company. Jason Calacanis generated wealth on the back of his bloggers, much like an MLM distributor makes money on the efforts of a distributor they've recruited. The only difference is that Jason did it a lot quicker because he invented something new: the blog network. And he was rewarded handsomely after a few years of work when weblogsinc was bought by AOL.

But, many people don't have the drive, time committment or the ingenuity to create a new business that will hopefully eventually scale on the backs of employees. And many people aren't suited working for the man. That's where MLM comes in as a business opportunity that fills a void. So, I would never pass judgement on it as something that isn't ethical or is sleazy. To do so, I think is pretty righteous and arrogant.

On a side note, but quite related, now that squidoo shares revenue with content creators, we now get to see whether my prediction for 2006 will come true:

Seth Godin's squidoo will reach critical mass after it shares revenue back with lens' creators. Lens creators make more than corante's experts. Seth donates company to Catholic church. Crowned patron Saint of Marketing while still alive. Goes back to writing books with other people's contributions. Royalties this time, for contributors. Redeemable in Heaven.

If only saints were chosen through polls...

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