Scrolling through social media apps like Snapchat or Instagram, one might come across an advertisement for a certain product that could be part of a pyramid scheme.
Pyramid schemes have been around for many years, but the rise of social media has provided small companies a much larger platform to recruit more people. Often times, people trying to recruit will send a message to a potential new member offering them a chance to make money from home and boast their own earnings from the company.
A pyramid scheme is a business model where top-level members recruit new members who pay an upfront cost to the recruiter. New members of the scheme, in turn, recruit members themselves, and a portion of the money they receive from the new members is distributed up the pyramid.
The goal of the pyramid business model is to recruit as many people as possible, so those who join the scheme can make money off of any recruitments below them. In practice, the promises of fast cash can fall short.
This form of business model is illegal in the U.S. and many other countries. In order to disguise an illegal pyramid scheme, many companies use the business model, multi-level marketing (MLM).
The MLM model is a legal and credible marketing technique, and similar to a pyramid scheme in that it’s hard to determine if the business you might be investing in is a legal operation or not. The only difference between MLM and a pyramid scheme is that MLM focuses on selling a product, while a pyramid scheme focuses on recruiting more salespeople.
Successful multi-level-marketing businesses are often times accused of being an illegal pyramid scheme, and sometimes that accusation is proven to be correct.
To Rhianna Lucas, a junior studying business, pyramid schemes aren’t focusing on the right goals regarding their business.
“Pyramid schemes and MLM companies use business concepts, and they have the goal of trying to sell something and make money,” Lucas said. “But they’re not so much doing it in a professional way.”
Lucas believes many small multi-level-marketing companies quickly fail because many people are aware when a person involved in a MLM company asks you to buy their product, it’s ultimately for their own benefit and not yours.
“Most times after you try out the product they’ll try to recruit you to sell it shortly after,” Lucas said. “Which just isn’t professional in the business world.”
College girls are prime targets that can easily fall victim to a pyramid scheme. Often times after a few months of selling and recruiting, the distributor will realize they aren’t going to be making the money that was promised they would make. In an attempt to boost profits, the distributors often convince close friends to start selling the product, knowing full well the friend will not be making the money their own friend said they would.
Ashley Moegling, a senior studying special education, has had many friends join a pyramid scheme.
“It’s really annoying when your friends join one because then they start posting about it constantly,” Moegling said. “I had one girl repeatedly message me trying to get me to join. I had to tell her several times that I’m not interested.”
Because the lines are so blurred between what’s a legitimate business and what’s a pyramid scheme, there are a few things that people should ask themselves before accidentally signing up to be part of one.
Aidan Palumbo, a sophomore studying sociology-criminology, thinks it’s getting old to see girls constantly posting on social media trying to sell a product.
“Everyone knows that, most of the time, it’s a pyramid scheme and a fraud,” Palumbo said.
The old saying holds true in reference to pyramid schemes, “If it sounds too good to be true, it probably is.”