Topic: MLM – a dangerous marketing strategy (Read 1625 times)

MLM will only work for influencers, and organic ones at that.
I'm a community moderator for one project, and each week we get "influencers" asking us to pay them for exposure.
When in fact, that project has an affiliate program which gives you 2% cash of every sale. We offer them that, showing them that they can make much more with the numbers they say they can get us.

Guess what? no one ever takes us on that offer

The MLM model..
It's  more of a system adopted by  ponzi scheme operators  to me , I can just conclude it a sibling to ponzi scheme scams even though it might not be directly scamming at first ,  I hate anything that deals with the referral system  because you can never know how far you will get placed on their pyramid system, it's more like first come first serve, the lower  part of the pyramid investment are used as payoffs profit to upper part of the pyramid  and little to them back, when it collapses they suffer most of the loss.
Hence, most people are after bonuses ? getting more profits for their investment ( more like greediness sometimes)  so people will continue to get scammed  , most people think they can trick the system and opt out ASAP they make small profit and not know how far they will be dumped on the pyramid plus how long it's being running... research helps too hopefully uninformed gets informed .

It's pretty simple if you examine the incentive structure in an MLM model and what the impacts of the incentives are and there is no way around it.

The biggest problem in an MLM model is the pressure to recruit. It is not the pressure to sell, but to recruit and then pressure the recruits to sell, but they rather want to recruit. This is a vicious cycle to begin with.

But the pyramid structure is a huge one too because what does it lead to when the sale of a product is supposed to benefit dozens of layers in the MLM model? The products are sold for inflated prices and again there is no way around it. The profit margins of those products have to go hand in hand with the number of layers the MLM model is supposed to benefit. But this is an interesting one:

The MLM model could be relatively flat with very high requirements to achieve the next level. A flat model gives the impression that the way up is not too far, but if the requirements to get there seem unrealistic, recruiting won't be successful. If the model consists of a dozen layers but the requirements are relatively low, it motivates new recruits but the margin has to go up exponentially.

Either way the biggest problem is time and effort spent on recruiting vs. selling and because this causes distress, people usually start selling within FFF circles, which makes it even worse later down the road.

Many people lose eventually or realize that promises won't become true, hence they leave, which then leads to more pressure on recruiting instead of selling.

The only way to become rich is to be pretty immorally hard on pressuring recruits and shoving products down the customers' throats or to get in early. While getting in early sounds so harmless, it often means you have probably been part of the founders cycle or very close to it and had a plan from day one to run a get rich quick scheme or to skim off profits of the poor dudes joining after you.

The pyramid schemes they are introducing is not really sustainable and it will end up collapsing at the end. Those who are in the bottom will be the victims of this schemes that's why I really don't like the model introduced by this MLM's scam.

I will never forget the famous MMM global which scam a lot of people from the past. That's why its better to avoid any schemes like that since they really cannot get anything from it unless they invite a lot of people and also became a scammer to earn from referrals also from this they help those top leaders to get rich to.

To many scams like this happened from the past so hopefully new investor in the scene would do a research and learn something from history so that this mistake will not happen again in present times.

Exactly! Ponzi and MLM both may have different business models, but most of the time the end result is always the same: SCAM.

Even now and then, we see these kinds of MLM scams happening. I don't know about your place, but we are seeing a lot of these MLM based companies at my place. They would promise a lot of things, but at the end of the day, they would just scam people. I understand that MLM itself isn't bad, but we are not seeing good either. Most of them turned out to be a scam. Rebranding themselves and starting scamming again.

Just take a look at the news below. People lost more than TK/BDT (our currency) 220 billion or USD 2.2 billion. Literally, my friends invested here (MTFE MLM Scam - I told them not to, but they did anyway), and what did they get? Nothing. So, as 1miau said we therefore can say, "MLM goes hand in hand with Scam somehow", which seems fair IMO.

https://www.dhakatribune.com/bangladesh/322956/another-mlm-company-vanishes-with-20-000c
https://en.prothomalo.com/business/lasu2kcsw2

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How is this dangerous? Is educating people of these business models, trying to tell them about the consequences, and showing them the history a bad thing? It is up to the users what he will do, but shouldn't we at least try to make them aware of the good and bad sides of these businesses?

Honestly, if we were trying to get more people into these schemes, that would be dangerous. Apparently we are not doing that. We are just trying to spread some awareness, and it's best to avoid these models. Nobody is losing anything here!  

Ah MLM, the big brother of Ponzi.
I know few people who got big bucks off of MLM's, and suddenly, they just exited and disappeared.
You know the ones, like Herbalife, Amway, Lyoness, and so on.

I think you really need to be a certain kind of person, shamless 1st, to be able to profit from that

I've never been a fan of multi-level marketing (MLM) strategies. Whenever someone introduces me to a referral-based commission structure, I get discouraged. I prefer earning a fair income through direct payment rather than relying on referrals.

I'm skeptical of MLMs because they often prioritize the business's interests over the individuals involved. The model can be unsustainable, as it relies heavily on continuous recruitment. If I don't refer someone in a month, I don't earn money. This can lead to financial instability and even bankruptcy.

I'd rather advise one to work for their money fair and square than get involved in MLMs. However, if it works for you and you think it's a business model you want to pursue, that's okay. Some people prefer to try things out for themselves before taking caution. Whatever works for you is fine, but be very careful not to get hurt.

No but you are kidding yourself.


You are talking Bullshit.
MLM is not scam itself, like stated in my article but it goes hand in hand with Scam and therefore we are best to avoid it.


Wrong, it's a translation campaign led by Porfirii and GazetaBitcoin which have selected my article to be translated.
It's not dangerous at all to translate good articles.




+1

In all fairness, to compare MLM and Ponzi as synonymous is probably wrong. They aren't exactly the same banana. It's one thing to say MLM is Ponzi and quite another to say Ponzi uses MLM.

So, yeah, I agree, there is a thin wall-- not even a wall actually-- that differentiates the two. But that simply means they aren't exactly the same.

The problem, however, is that for Ponzi to become legal, to become a legitimate business, it oftentimes transforms into MLM or use the MLM model. In which case, 99.9% of MLM businesses are now essentially Ponzi. But, again, that means to say they aren't the same.

are you kidding me?

What are you talking about? Are we talking about knowledge or bullshit? In the realm of knowledge, it is clear that MLM is one of the marketing models. However, if you are talking about bullshit then you can say that MLM and Ponzy Schemes often go hand in hand, yes that is true, but scientifically they are different.

So, you have come to the wrong conclusion about MLM and Ponzi. You should explain both in a scientific perspective and not consider them the same. And the worse, you are making a campaign to translate this misinterpretation. This is very dangerous.

Agree to what has been explained here since its common nowadays that there are lots of MLM companies are pulling off their scams. Although we cannot also deny that there are good companies using this system but I guess the warning goes with those companies who usually do fake promises of gaining a lot of money if they are going to get involve and invest some money in their company.

We see so many incident where MLM scams are been pulled off that's why people really needs to be careful when someone opening a discussion about this and say something about that they can earn a lot of money if they put some money on their company and invite a lot of people that will also invest then earn some commission from those people. This is the start of how shady they are trying to pull since those system like pyramid they are trying to run will collapsed soon which is always so bad for new people who entered that system.

As far as I understand, in Ponzi's there aren't any actual products which is being sold, it's just a dummy company, a false investment, and some fake promises!
On the other hard, mlm's can be used as a medium for an actual product which can be sold for profits and gain new recruiters!
But in most of the cases (mostly), it's used for the opposite purpose (scam obviously)! Otherwise mlm itself isn't bad, the people who are abusing it are.

I agree with @PytagoraZ in terms of defining the thin wall between MLM and Ponzi Scheme, they are two different business model.  If we look on the difference of the two, the Ponzi Scheme relies solely on the entry of future members while Multi Level marketing earnings depend on the products sold personally and commission on the product sold by the recruited person or downline.  Ponzi Scheme is an illegal business model while MLM being product-focused make it a legal business.

Anyway, this is a good comparison between MLM and Ponzi Scheme, I believe it is better to hear or know it from someone who is really into the system: https://www.linkedin.com/pulse/ponzi-scheme-vs-network-marketing-whats-difference-tim-sales




Pioneers always get the most benefits, that is true universally.  Even in investment, buying shares, and stocks, those who buy in the early phase before the project develops get the most benefit.

Product-focused MLM (under the umbrella of direct selling) being a legal thing makes it a saint over fraudulent Ponzi Scheme any time of the day  .

In MLM, the early birds occupy the juicy slots while having others join the pyramid to enrich them. Same is applicable in Ponzi scheme. The notable difference is that Ponzi scheme ends faster when there's no more inflow of income to sustain the system while MLM can go for so long.
If there are things I need to know in MLM that made it a saint over Ponzi scheme, please let me know.

In fact, you explain it well in your topic, when you say that MLM doesn't necessarily mean scam, but that often there are scams behind MLMs.


Perhaps the disclaimer may seem too direct, but I think that it is justified in any case (for those who only read this part of the text, it is a good piece of advice) and especially when the thesis is developed below.

It's not a wrong interpretation. MLM and Scam often goes hand in hand because it is so critical to gain new customers.

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Thanks a lot for your help, translation is added now in my list:

Language	translated by	Title
___________________________	_________________________	_______________________________________________________________________
Pakistan	Adiljutt156	ایم ایل ایم – ایک خطرناک مارکیٹنگ کی حکمت عم

Hello @1miau   !

I am a part of The Alliance of Bitcointalk Translators (AOBT) gang.

I have translated your topic (MLM – a dangerous marketing strategy)  into my local language Urdu ( Pakistan board) and my translation has already been approved by Gazetabitcoin. Please add it in OP list.

Here is my translation link: ایم ایل ایم – ایک خطرناک مارکیٹنگ کی حکمت عم 

Thanks.

Merry Christmas 1miau stay happy and healthy in your life 

This is a wrong interpretation. MLM is a good marketing concept. What is wrong is the ponzi scheme system. I think MLM and ponzi scheme are different things. This is a wrong interpretation

Hello, dear Publictalk792 

Unfortunately, my topic "MLM – a dangerous marketing strategy" is currently not available for translation:


If you want to make a beneficial translation, I'm sure you'll find more interesting topics for translation which can be helpful for your local board like "[TIPS] to avoid pyramid quotes (for Newbies)" or similar.
As far as I know, LoyceV also has a great list here, where you can select from: [GUIDES] on Bitcointalk. Index thread (until there is a dedicated subforum?)

Dear 1miau sir,

I want to translate this topic in my Local Language and want to post it in my local community thread. I seem this topic helpful for my community so I decided to translate this topic. I shall be happy if you will allow me to translate your topic and reserve my seat for this purpose. If you will allow me to I will start my work. I will wait for your kind reply.

Thanks
Publictalk

Well done, it's approved already and I've added your translation to my list:

Language	translated by	Title
_____________	_______________	__________________________________________________________
Nigeria (Naija)	Mia Chloe	MLM na dangerous marketing strategy

Once again, it's nice too have such a topic like warning about dangers of MLM available for our Nigerian community.
My topic is quite "old" already and MLM, like Bitcoinnect for example, isn't very popular anymore but it's always helpful to know about MLM and why it's a dangerous marketing strategy.  

@1miau I intend on making a translation of this post in pigin in my local board so I am officially asking to reserve a slot.

Translation is now ready in my local board.
Here is the link ; MLM na dangerous marketing strategy

Sorry for bringing this thread up again. This reminds me of MMM some years ago in Nigeria but most of us have learned the lesson after it crashed. MLM makes people believe that they can get rich by joining them but in reality, very few people make a significant income from MLMs. However, it's also worth noting that not all MLMs are the same. There are some that have more ethical practices than others and there are even some that are legitimate businesses. It's therefore, advice able to do your own research before getting involved with any MLM service. As usual, I request to make a translation of this thread on Nigerian local board using pidgin language. The rate at which MLM (ponzi to be precise) is growing in Nigeria is alarming and it's our collective responsibility to create awareness so people can stay away from this platforms or whatever they are called.

Many people get trapped with MLM because both sides:
- They are lazy to learn, and investigate to find really good companies, projects for their investments.
- They are greedy and want to get rich fastly.

On the sides of scammers, they provides exactly what lazy investors are looking for:
- High ROI
- Easy method to get rich
- Huge passive income with limited initial capital
- and more.

I don't have any words to protect lazy and greedy investors because they deserve their losses. I believe if they read the topic, they will still fall into MLM traps again.

Basically you won't get paid anything until you manage to convince a number of people (victims) to invest in the scheme. After all, its from them the actual money is coming from... That's how you recognize them. Most won't let you quit right away (after you invested) and give you a refund. I knew one that allowed refunds but only for 24 hours.., i guess to comply with local laws (somewhere, often NOT your country, but some fiscal paradise).

The very early ones to enter and leave might be the only ones able to cash something, but it depends on the life of the MLM. I read some estimations say about 8% can profit, so 8 in 100 people will gain at the expense of the other 92 who will lose all.

How long they last? Until someone or group finds out and convinces enough people its a scam; then it bankrupts. Similar to a bank run (and fractional reserve banking is similar to a Ponzi scheme). Basically it lives and dies by word of mouth.

IF its a business that uses some MLM style marketing, but the main income comes from selling actual products or services, then you should research further. If you are selling soaps and get a commission for each one sold but you also manage to recruit people to sell them and earn like 1% of their cut for each sale they do, its still the soap that is making most of the profit, not the people joining to work under you and expand your network.

Sometimes they are very clever and blurry the lines, its not always easy to recognize. You might think they are earning their main profits with another (actual) business when in reality they are doing pure MLM. Sometimes they happened to have another business but secretly isn't doing well, or they buy an actual business (possibly failing) and try to combine it with MLM to give it a decent facade.

MLMs can be recognized in a lot of things all of which relates to commissions on the top of the pyramid. They mostly refer it too level 1,2, 3 and so on commissions that even if the top of the pyramid hadn't recruited someone below him he will still earn from him. With the endless possibility of earning a lot of MLMs fail as they will always run out of money to pay the top users back. And to top it all there is really no business happening new members are just paying of the old members and that how the cycle continues.

Except that in working a daytime job, you are still somewhat secured from getting fcked over and that they don't take something from you except your time and your effort, though it somewhat resembles a ponzi scheme in its level of organization. Also, working under a corporation, big business firm etc. is perfectly legal in any books, and that the workers are protected by a multitude of corporate laws in every government. MLM is an okay business model, only if the people running the operation really sells something that provides for their underlings, but if not, then there's really no point joining these schemes as 99% of the time they are scams.

That's how most MLMers roll; they'll find random friends/ victims on social media, invite them for some chit-chat and eventually introduce the model, sometimes by bringing in their upline(s).

I was an ex-MLMer and their meetings mostly force you to do anything for the sake of bonuses.

I think that the most obvious giveaways about these MLM schemes is their promises of passive income. How you can be able to get one referral, and they are able to refer even more people which can all be traced back to you and if they invest into the scheme, you're able to receive dividends.

This is never a sustainable business model. None of these schemes have ever survived past the point where they don't have sufficient funds to pay back previous investors with new investments anymore, and the owner decides to exit scam, since MLM is highly synonymous with pyramid/ponzi schemes nowadays.

I do see this mistake made very commonly by beginners who think this is a viable investment option. You simply never invest in anything which the underlying fundamentals does not generate any profit, but rather recycles money through the system. It's far too risky to even touch MLM, and you may even be accused of wrongdoing if you promote one.

I remember a meeting I had attended they took me to an expensive restaurant, they were wearing expensive suits and speaking sophisticated English, all was going well till they said it’s a tree model. I took my bag and left I warned the guy who was with me saying these guys will scam, but that poor chap believed them as he had got few paycheques from them. A year later I read in the newspaper how their scam was busted, and they went to jail while I was sipping my hot chocolate like I always do.

Moral of the story a tree based model is a big scam, they’ll dangle the carrot in front of you to bait you and then you’ll be beaten by the stick when it’s busted, earn less money but never loose money in such scams. A popular scam of this type is those Hyip sites and those sites which have level based earnings never put your money in there, even if people are getting paid never do it.

 *Disclaimer I lost a good fortune in those hyips and level based earning schemes, hence I’m biased against them but if anyone wishes to go ahead and loose their money by all means do it*.

Do you mean referral links? It's similar when you compare that both are free advertising by the existing user and therefore he is interested in geting referrals. MLM is much bigger because the referrals of your referrals etc. still get rewards.
But in general agree, many ICOs use it and it's always recommended to keept that in mind when you get over a referral link that the person posting it is interested in getting you in. Don't trust, verify  
Good point.

Just this weekend I was watching a documentary on a MLM scam run by a guy from Spain that took place a couple of year ago (2013..2015). The scammers made their scam work in 78 different countries, making away with 228 million Euros.

What they did, and this was something like the last step in a serious of pre-crypto scam attempts that ended-up turning to crypto for the final act, was create a digital currency called Unete. An investor was promised a ROI of 188% per year. In order to do so, you needed to invest at least 60 euros per month and perform a routine task: copy/paste adds on social networks, investing around 10 minutes per day of your time. The investor was paid in Unetes based on his monthly investment.

Each Unete theoretically had a value of 1 USD, but really lacked any value at all, and the digital currency extent was limited to those that entered the Ponzi scheme.

Yes literally they were fools if they think that they also can make huge profits from this type of marketing.

But will still collapse at the very bottom of the pyramid when the recruits find it hard to get referrals or sell their initial paid products/merchandise and ended up as a "sales agent with a tuition fee" than a marketeer.

By the way, (Overpriced) health products are the number one candidate for pyramiding scams, specially "heath" juices and stupid herb pills which mostly doesn't have a significant heath benefits (like putting a bitter gourd flesh in a capsule).

While there are legit MLMs out there (e.g. AmWay), I just dislike their persuasion and "lies" they churn out to rope you in.

And while we're at it, BITCONEEEECCCCTTTTT!!!

Regarding points 4 about "There is no transparency in MLMs", few MLMs try to deceive user by make their MLMs system open-source or put it on blockchain's DApps to make user think "it's not scam/dangerous if it's transparent".
But the fact that their system is open-source and audit-able doesn't change the fact the risks mentioned on points 1-3 still exist.

I have knowingly experimented with MLM schemes before, because I wanted to understand their business model and also look for warning signs, when they might collapse.    I never recruited other people, because this was just an experiment and I did not want other people to burn their fingers on scams like this.

Some MLM strategies are more legit than others and are actually backed by good products, like Tupperware and some cleaning and health products, so this can be used as a good direct marketing strategy without the Ponzi scheme connection.  

Don't go with the MLM , that is always going to become a scam for some point of time. The money you've earned in MLM were coming from the new investors money.

there are no "consumers or investors" in an MLM, there are only fools and gamblers that are fools. the fools think it is an investment which will give them good profit and the gamblers know it is already scam but are still foolish enough to make the bet and enter it thinking they can beat the system and actually make profit.

MLM is one of the best free advertisement strategy to get more consumers or investors where the people who are at the initial cycle can make money but after that they will become consumers instead of investors.

All MLM (multi-level-marketing) schemes are sure to become a SCAM/PONZI in the future. It's that simple

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This Picture would explain it better through:

Well written OP, Not forgetting MLM is also been used in the ICO market enabling shitprojects raise huge funds even more than the somehow legit projects in the aim of deceiving the general public.
Projects using MLM to hype their ICO are usually shitcoins with nothing to offer except tokens been tradable on few worthless exchange in future. I discourage investing in projects that uses MLM.
No doubt MLM benefits only the early adopters and they need those I call "new fools" to keep the project they're using MLM to promote alive.

Disclaimer: Please don't invest in MLM Systems, you won't get your invested money back. In the following topic is explained why:

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How to detect MLM Systems

When you are searching for good investment opportunities, you might come over a business model called MLM. MLM means Multi-Level-Marketing and is often used to attract new customers. Multi-Level means that existing users are recruiting new customers. For each recruited customer, the existing customer receives a commission of a predefined percentage of the deposit from his referral.

Often there are several levels, where commissions are paid:
When your referral advertises and gets a new member in, you’ll also get a small percentage bonus of his deposit.
That sounds profitable at first, that you get a bonus by recruiting another customer, but if you look further it isn’t very useful and it's a better decision to stay away and don't invest in Multi-Level-Marketing systems.

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Another promise of such shady projects is to multiply your invested crypto in a short period of time. Some MLM projects will also have a special bonus if you invest more money, to offer you faster and bigger returns:

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MLM is very popular in the crypto space because crypto offers high returns and inexperienced “when moon” people are the main target group of MLM. During the hype in late 2017, many Ponzi MLMs used the “when moon” atmosphere to raise money, no matter if the business model was lending or mining, in most cases it was just an empty promise to get people in.
Furthermore, Bitcoin and cryptocurrencies are very complex for new users, and it is quite easy for scammers to fool such people and sell them fake business models as supposedly realistic.


An MLM can be recognized by a pyramid-like structure, if you have several levels of referral bonus and mostly huge returns per day or per month. Well known MLM systems were BitConnect and BitClub for example.

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To sum it up, here are the general disadvantages of MLM systems why you should avoid investments in any case:


1. MLM and Scam match together

MLM does not necessarily mean that a project is a scam, but in most cases it is. This is mainly because MLM is suitable for operators to get many new customers recruited by the existing customers when they advertise for the service. It’s very beneficial for the owner of the platform, since the advertising is made by the customers and also funded by the deposits of new members. So, the owner of the MLM system has zero risk and no expenses for marketing.
If enough funds are collected later, the owners will close the platform and no customer is able to withdraw his money anymore – a so-called "Exit-Scam".

A Ponzi will always come to that point, when not enough new customers make new deposits because the current users are paid out from new deposits of new customers. It’s only a redistribution of money because no profits are generated.

But even if an MLM generates real profits, there are a few things to keep in mind.


2. MLM causes significant costs

If there are profits generated, a business based on MLM will have to spend a significant part of their profits on the commissions that have to be paid for MLM-expenses. Depending on the number of levels and the amount of the individual commissions, this can make up a large part of the profits.
In addition, the profits that have to be spent are no longer available for normal investments, which has a negative impact on earnings for customers. The customers are paying for the marketing here.

Therefore, a legit business model won’t use MLM in most cases because it’s just not profitable for a good development of the company.



3. Only the people who invest early and get many people in will benefit from the MLM

As a result of the affiliate structure, the people who invested early (mostly the founders) and those who referred the most people will benefit the most. These referral commissions are directly financed by the customers who are below them in their downline.
And of course, the owners are always making a profit in MLM systems, otherwise they wouldn’t run them.

Another important point is that the people advertising their projects are very biased when they present the business model. They will advertise the product in a way where it is likely that they’ll get more referrals (and a bigger bonus) due to the affiliate structure. The result is a dangerous dynamic that gives a very biased impression of the product often called “shilled project”.



4. There is no transparency in MLMs

Legitimate projects are always interested in making their business model transparent as a reason that people invest, like how are profits generated, which team is behind the project and how the revenue is split (team / expenses / profits for investors). However, in most cases such projects do not have a multi-level marketing system.

Often there is no transparent structure of the company in MLM projects, in which the operators are unknown or only barely known and the marketing is done by the customers itself. A perfect strategy for the owners to hide themselves but get a huge marketing.

Especially inexperienced people are the target of this marketing strategy by promising them "a new Bitcoin", "Lambo or Moon" or other unrealistic returns.


If the business model a good one, an MLM with clear commissions can be a viable and legitimate marketing measure, but the past has shown the opposite.

Finally, multi-level marketing systems are generally discouraged because there is a very high risk of a scam and even if it’s not a scam, the structure is very unfavorable for customers and only enriching the founders.

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Translations:

Language	translated by	Title
___________________________	_________________________	_______________________________________________________________________
Română (Romanian)	GazetaBitcoin	MLM – o periculoasă strategie de marketing
Nigeria (Naija)	Mia Chloe	MLM na dangerous marketing strategy
India	M47AK16	MLM – एक खतरनाक मार्केटिंग रणनीति
Deutsch (German)	1miau	Eine gefährliche Marketing- Strategie: MLM
Türkçe (Turkish)	mela65	MLM- Tehlikeli bir pazarlama stratejisi
বাংলা (Bengali)	DYING_S0UL	MLM – একটি বিপজ্জনক মার্কেটিং কৌশল
Español (Spanish)	Porfirii	MLM - una estrategia de marketing peligrosa
Bahasa Indonesia (Indinesian)	dansus021	MLM – sebuah strategi marketing yang sangat berbahaya
Pakistan	Adiljutt156	ایم ایل ایم – ایک خطرناک مارکیٹنگ کی حکمت عم

Reserving new translations is currently not available.