Multi-level marketingMulti-level marketing (MLM) (also called network marketing (NM)) is a business model. It is a form of direct marketing. Typically, independent business owners (IBOs) are associated with a parent company in a contractor-like relationship. IBOs receive remuneration for shopping within their own business, for selling products and for expanding their network of people doing the same. An IBO receives a percentage of the profits generated by the network of all IBOs introduced to the system by him or her, and also of the profits generated by the people introduced by those IBOs, and so on. Rewards are tracked with a point system, where the points represent the volume of products sold through the IBO network.
Multi-level marketing has a recognised image problem, because there is not always a clear distinction between legitimate network marketing and illegal "pyramid schemes" or Ponzi schemes. Nonetheless, many legitimate NM/MLM businesses operate around the world. See Companies for more info.
Critics contend that some companies produce revenue primarily by attracting new participants, as opposed to selling products. Amway (the world's leading company in network marketing, with annual turnover exceeding USD $1 billion) in particular is often criticized for the fact that it generates considerable revenue from selling instructional and motivational materials to its participants. The company was indicted by the United States Department of Justice, but was acquitted.
One of the most successful companies in MLM history is Excel Communications, a $2 Billion-plus Dallas-based company founded in 1988. The top money earners for Excel, such as Paul Orberson, Phil Mims, and Chuck Hoover, are among the highest earners in the history of MLM.