A few months back, I got an email from Martin Kratz who said that he’s with an MLM called Ignite. The email went a little like this:
“I’ve been doing Ignite for about 1.5 years and have enjoyed their compensation, discounts, and great customer service. Since mlm’s are something that I see you covering, I thought I would message you to see if it might be of interest to you and your wife.
I have never done an MLM before now, and really like how its put together.
When you have a few moments (about 13), the above website is my Ignite Homesite. Please take a look at the video titled ‘Ignite Business Plan’ and let me know your thoughts.”
I looked at his website. The MLM is Ignite, powered by Stream Energy. Stream Energy is an energy company and Ignite is the MLM brand that pushes it. The first thing that I noticed is that they do business in about a half dozen states. I quickly responded back that not only does it not include my state, it doesn’t include a state in New England. So I couldn’t be a customer and the vast majority of people I know couldn’t be either.
Martin Kratz wouldn’t be deterred by this:
“Some of the most successful people involed couldn’t be a customer…it’s not about what you do, it’s what you start…
Look up Randy & Marcie Hedge (DeQueen, AR)”
I looked them up and found they are the 4th highest people in the entire organization and the only one in the top 10 that isn’t from the state of Texas. In fact, there are 27 people/couples on that Presidential Directors page and 23 are from Texas. The other three (who are not from Texas or named Hedge) are also in states where you can be a customer of Stream Energy.
At this point I decided to play Devil’s Advocate and be a bit of a jackhole. I asked if they were the typical case… i.e. this is what people should expect when they join Ignite. The response was, “…they are simply an example of someone, like yourself that could not be a customer. But saw the cost/benefit of becoming and associate and doing the business.”
Then I explained why I asked if they were typical. The FTC requires endorsers to pick typical cases or very clearly disclose what the typical case is:
“Testimonials claiming specific results usually will be interpreted to mean that the endorser’s experience is what others can expect. Statements like ‘Results not typical’ or ‘Individual results may vary’ won’t change that interpretation. That leaves advertisers with two choices:
- Have adequate proof to back up the claim that the results shown in the
ad are typical, or
- Clearly and conspicuously disclose the generally expected performance
in the circumstances shown in the ad”
My hope here was to educate Kratz that he can’t be pitching the Ignite business opportunity by highlighting the very, very few people at the top or the one case where someone living in a Stream Energy is at the top of the pyramid. I’m not sure I broke through to him.
What is a Pyramid Scheme vs. an MLM?
I realized that my FTC endorsement guidelines might fall on deaf ears, so I sent Mr. Kratz another question, “I saw a PDF of Ignite’s Business Plan. It appears as to be a pyramid scheme. Don’t you agree?”
He certainly didn’t agree:
“I don’t agree it’s a pyramid scheme, they are illegal. Plus a pyramid is when only the people at the top make money and when a company makes more $ from people ‘signing up’ then they do from an actual product or service, and lastly, in a pyramid, you can’t pass/surpass the person above you. None of these things happen in ignite.
And if you think about it, every ‘traditional business’ out there could be considered a pyramid…how many janitors, make more then the CEO at a company? :)”
Before we get into the issue that I found with Ignite appearing to be a pyramid scheme, I’d like to address the lack of education that goes on in these organizations. They spend all the time trying to maximize profits, which means having a script or sales plan available for every circumstance. Very few, ever really understand the core business.
I give him credit on two points:
- “Pyramid schemes are illegal”
- “… Plus a pyramid is when only the people at the top make money and when a company makes more $ from people ‘signing up’ then they do from an actual product or service… “
He was wrong about “you can’t pass/surpass the person above you.” More than a few MLMs (Fortune Hi-Tech Marketing for example) have been shut down where you can surpass the person above you. This is not a test that any court or the FTC uses in determining a pyramid scheme.
Then he followed it up with the “Corporate America is a Pyramid Scheme” Myth about the janitors and CEOs. A pyramid scheme requires recruiting to make your money back. He confused it with a simple hierarchical organization. I’ve literally run into hundreds of MLMers who make this mistake. (That’s why I have an article written and prepared for such a response).
These are things that MLMers tell other MLMers to convince people who haven’t done the research to know better.
Before I get to what I feel is the incriminating evidence in the official PDF, I want to touch on another point that Kratz made: “Plus a pyramid is when only the people at the top make money…”
Income distribution at Ignite
As I’m writing this article (February 18, 2014), Ignite last published their Income Disclosure Statement (IDS) from 2012. Have a look and see if it looks like only the people at the top make money. Let me help guide you through this statistical minefield.
The people who earned an income as a Qualified Director or above are included in the income report. Those who couldn’t reach that level appear to be excluded. It is extraordinarily difficult to recruit people into MLM giving the information available, and a vast majority are people at the bottom who haven’t qualified for anything. For example, when I analyzed the MonaVie, they excluded 87% of their distributors, because they didn’t meet their minimum requirements.
That said, let’s dig into the report. Qualified Directors (again, just a subset who met Ignite’s qualifications for this report) getting an income of, on average, $104.37 a year. That’s 84.66% of these people who qualified.
That leaves 15.34% of the people who qualified for the report getting an income of $104.37 on average. We’ll get back these to 15.34% in a minute…
Let’s focus on the 84.66%. According to the Ignite Business Plan, these people paid a one-time fee of $329 ($299 in Maryland) for tools, training, and support. So in three years (on average), these people will still lose $15 for their hard work. The PDF doesn’t go into details about the tools, training, and support that the $329 gets you. In fact, the support and training in an MLM organization should come from the upline. These “top of the pyramid” people are paid extremely well for it, so why should Ignite “double charge” you for it? My thought is… “because they can.”
It gets worse… a lot worse
The business plan has an Ignite eSuite package of $24.95 (let’s call it $25) a month. That’s $300 a year… very close to 3x more than these distributors make in a year. It is “optional”, but it sounds like the one I wrote in detail about in my ViSalus article. Essentially they charge you for:
- “A replicated website branded with your personal information” – In other words something similar to Facebook where you have no control of the presentation and, in most cases the information. You can sign up for a Tumblr account and get a “replicated website branded with your personal information” for free. In fairness, Ignite is going to spend a small amount of money to tailor the experience its audience, but think about it… Should every Ignite distributor pay this continuous monthly fee to help them sell Ignite’s product? As Harper’s Magazine said, “They couldn’t have it all because Mary Kay’s business model (like that of any multilevel-marketing enterprise) is designed primarily to profit from, rather than enrich, its workforce.“
- “Success on Demand, a motivational online publication” – This would be comical if it didn’t harm Ignite distributors. Even ViSalus gives the physical magazine to its distributors. You should click on that article to read on how the magazine is about pushing MLMs and getting kickbacks from MLM companies. It looks like Ignite saved a few dollars and negotiated an “online version” vs. a print version. Either way, the magazine promotes MLM (and is paid to do so) and hides its MLM affiliation with the generic and legitimate sounding “Success” name.
- A “Message of the Month” audio CD from “top money earners and top executives of the company” – I’m a little surprised they actually ship a CD vs. a downloadable MP3 or a podcast. Once again, Ignite is going to charge you for to hear from people in your upline and the company executives? Shouldn’t this be free?
- The “Power Center” back office system – From the brochure: “You can see how many associates you have, how many customers they have, even what level they’re on and you can view your commissions right in your Ignite Power Center.” So in other words, if you want to see how your business is doing… how much you are earning… you need to buy this “optional” package.
It’s been well-documented that over 99% of MLM distributors lose money. The first thing that the company (or the upline distributors) is going to say to someone losing money who isn’t buying the “optional” package is… “Well that’s part your problem right there. You don’t have the company website or business analytics.” Now you know why I put “optional” in quotes.
The end result is that it seems to cost $300 a year, to earn, for an overwhelming majority of the people, $104.37, a year. And you pay $329 to get in on this “deal.”
Now Kratz was saying that in pyramid schemes only the people at the top make money. Admittedly not “only” people at the top make money, but the definition of “top” is arbitrary. The Executive Director level is the only one on that income disclosure statement that pays a living wage… and it consists of 0.18% of people who qualified to be included in the report. That’s 18 people out of 10,000… not very good odds. One of those people earn as little as $3,292.20 a year. So even if you beat the overwhelming odds, it isn’t like you can count on that much money.
One person earns as much as $2,495,151.88 according to the report. So you have the overwhelming majority of the people earning $104.37 a year (and almost certainly spending $300 a year) and one individual earning nearly 2.5 million. It certainly looks like those at the top make the money, doesn’t it?
But is Ignite a Pyramid Scheme?
No single person can answer that question. It’s for the courts to decide, which can take a decade depending on if the FTC feels like doing its job to protect consumers. The problem is that by the time you get an answer, it is already too late.
Fortunately, the FTC does give some guidance:
“Not all multilevel marketing plans are legitimate. If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is based on the number of people you recruit and your sales to them, it’s not. It’s a pyramid scheme. Pyramid schemes are illegal, and the vast majority of participants lose money.”
What I found in the official Ignite business plan is what lead me to ask Mr. Kratz about it being a pyramid scheme. On page 18 of the brochure (page 37 of the PDF), the company writes:
“So, let’s look at how Ignite pays you Residual Income as you build your organization. Ignite pays you fifty cents for each of your personal customers. That’s $5 every month for 10 customers. No one is going to retire on $5 a month, but this business isn’t about you personally trying to gather hundreds or thousands of customers yourself; it’s about building a team. Watch what happens when you do that. On the first level, you’re paid twenty-five cents per customer, per month. On the second level, it’s 50 cents per customer. On the third, it’s 75 cents per customer, and on the fourth level it’s $1.00 per customer per month. We can all agree that on levels one through four, that is not a large organization in network marketing. But with those customers in place, that creates a residual income of over $1,000 per month. That is significant residual income!”
In my opinion Ignite couldn’t be any more of a pyramid scheme if they literally wrote in their brochure, “Ignite is a pyramid scheme.” They are telling you that the money you earn for sales yourself is peanuts and that you should recruit people and make sales to them to earn big money.
At 50 cents a customer you’d have to recruit 50 customers just to pay off the “optional” Ignite eSuite package. After that you’d still have to sell a lot of customers to get back the $329 enrollment fee.
While the $1000 per month ($12,000 per year) in four levels sounds tempting, from the income disclosure statement it doesn’t happen very often. Why? Because it is mathematically impossible. In their example they show you at the top with a
pyramid “team” of 81 people each with 10 customers. Mathematically, every person can’t have a team of 81 people.
I explained this all to Mr. Kratz and he sent the following image with the message “check this out”:
He was still confusing pyramid schemes with hierarchical organizations. I responded by saying, “That graph seems to designed to purposely create confusion between legal hierarchical organizations and illegal pyramid schemes. It doesn’t address seem to address any of the points about Ignite being an illegal pyramid scheme according to the FTC guidelines.”
That’s the last I heard from Martin Kratz. I’ll send this article to him when it’s published and hope to save him.
Update: I didn’t realize that Ignite/Stream already has a pending lawsuit against it charging it for “racketeering.” My favorite part of the article matches my own finding:
“The lawyer suing Stream and Ignite points to a $329 entry fee to join the sales program and a $29 monthly fee to host a sales website. He says many never make their money back. He cites dozens of sales recruitment meetings in the lawsuit where promises of great wealth were made to hopeful participants.”
paul listman says
Stream is a scam but the SolarCity Ambassador program…that is where it is at. Unfortunately it also is not available in certain states but the structure is legitimate MLM and it is free to sign up with a free website. Plus you actually offer a product that will save the consumer money and create a source of back up power to a residence.
Lazy Man says
I haven’t looked into SolarCity’s program, but I’ve extensively about solar energy and my installation is due to happen in February. I really hope that they aren’t pushing a program to rent solar panels. They can appear to be a savings, but there’s a lot of issues when you don’t own your installation (such as difficulty in selling the home and transferring the rental).
I’m not currently a Stream rep, but soon plan to be. I believe you missed a few things in your evaluation. 1) Reps have the option of paying $25/month for the replicated website. This site allows reps to sign-up customers, track their business and receive info from the company. If a rep is only earning $104/year, they would be absolutely stupid to continue paying for the website because @ $104/year, they aren’t working the business. So, your article is very mis-leading in that fact.
2) I agree that many people become a rep. and do not make money. It should be relatively obvious on all compensation plans distributed, what is required to to earn your money back. If you don’t or can’t do it, that is your fault and not the fault of the company, right?
3) The ultimate test is whether or not you make more money on a rep signing up under you or on you and them selling the service (or product). There are bonuses for getting reps in the business, which if you only look at the year in which the rep joined, you would make MORE money from the bonus of them getting in the business than from them selling the service. However, over time, the residual from the service sold to customer would FAR exceed that of the initial bonus.
You pick & choose what you want to see and write a misleading article based on your obvious bias. However, your comment “In my opinion Ignite couldn’t be any more of a pyramid scheme if they literally wrote in their brochure, “Ignite is a pyramid scheme.” They are telling you that the money you earn for sales yourself is peanuts and that you should recruit people and make sales to them to earn big money.”
You may not have been told the entire compensation plan so I can’t fault you for that. However, the real long-term money is in the residual from the monthly customer bill payments for the service provided. However, as a marketing strategy, it’s not very attractive to potential reps to say that if you stick to it and continue working it for a couple of years, your long-term residual money could get to be quite measurable. The bonus keeps you interested and excited and the residual builds while you get those bonuses.
Yes, there is a class-action lawsuit and who knows what freakin’ money-hungry lawyers & the government will decide. However, I believe by running the numbers, the proof will be in the pudding. But in the meantime, you & lawyers will give legit MLM’s and the industry as a whole, a black-eye.
Lazy Man says
while the company may claim that it is “optional” to pay $25 for the replicated site, it “de facto” isn’t. It’s well known that over 99% of people lose money in MLM. Everyone coming in is going to be losing money right off the bat.
When someone says, “I’m losing money at this! I should get out,” the first thing that everyone in the organization (since pyramid schemes depend on keeping people recruited and paying in) is going to say, “Well you never committed yourself because you weren’t working with the tools… you need to pay the $25 a month for a website.”
You essentially said it yourself, if they are making $104 a year they aren’t “working the business.” If you aren’t “working the business” you shouldn’t care about this article anyway. It is assumed that everyone reading this has the intention of “working the business.” However, as stated above, 99% of those people who sign up as reps to “work the business” will lose money.
It’s some kind of “option” to run a business without the tool that in your words “allows reps to sign-up customers, track their business and receive info from the company.” How is it possible to run a business without signing up customers, without tracking and analytics, and without receiving communication from the company?
The point stands that the company should not charge representatives $25/mo. for the replicated website. It’s exploiting the salesforce, plain and simple. It would be like Microsoft charging its employees for access to email necessary to do their jobs. It would be like them charging rent for their cubicles, and billing them for IT support.
If you think any of this is normal you live in crazy MLM world, not the real world.
I think your comment is very misleading in representing the $25/mo. as optional… just before you explain all the critical services it provides.
Rick said, “2) I agree that many people become a rep. and do not make money. It should be relatively obvious on all compensation plans distributed, what is required to to earn your money back. If you don’t or can’t do it, that is your fault and not the fault of the company, right?”
Nope, it is the fault of the compensation plan. The failure is baked in the mathematics. It is consistent with every pyramid scheme that the few of the recruiters at the top make the money and the bottom people lose. This is explained very well with diagrams in this Seeking Alpha article about Herbalife.
Rick said and quoted me, “You pick & choose what you want to see and write a misleading article based on your obvious bias. However, your comment ‘In my opinion Ignite couldn’t be any more of a pyramid scheme if they literally wrote in their brochure, ‘Ignite is a pyramid scheme.’ They are telling you that the money you earn for sales yourself is peanuts and that you should recruit people and make sales to them to earn big money.’
You may not have been told the entire compensation plan so I can’t fault you for that.”
I have not been “told” any of the compensation plan. I read through the publicly available document that I cited. It was an official Ignite document. They pretty much came out to say that you won’t make money getting customers that it comes from recruiting. I suggest you go back and read WHY I wrote my quote and review Ignite’s documentation that I cited. If I’ve misread the documentation, then you CAN fault me for it, but so far no one has said that I’ve misread the documentation that I quoted.
MLMs continue to give themselves black eyes with compensation plans that promise losses for 99% of the salesforce and then trying to put the blame on them (as you did.) MLMs continue to give themselves black eyes by gouging its salesforce for basic functionality that should be provided for free. I’m a software engineer, I know it doesn’t cost them $25 a month per person to add a new representative into the database.
It may seem like, by running the numbers, that the “proof will be in the pudding”, but the proof is in the pudding of 99% of everyone failing in MLM… over and over, year after year, in each of them. The public companies sometimes release distributor numbers and they rarely grow exponentially. They’ll fluctuate depending on the phase of the pyramid scheme (initial growth, plateau, or implosion), but you’ll never see what they promise people of “You recruit 3-5 and they recruit 3-5…” etc. through 5 levels. If that were to happen, the whole organization would be growing 600 times every time they got a new person, because they are just “working the business.” It doesn’t happen.
You probably shouldn’t dismiss the lawsuit so easily, especially if you read the FTC’s guidelines. You could find all your hard work ended overnight through no fault of your own. I don’t know why anyone would want to be a business that could disappear overnight like that.
As a stream qualified director, I can honestly say that I too was ripped off.
I managed to make my 3 points necessary to become a Qualified Director however, what they screwed me over in was the fact I did not make their deadline to get paid a quality bonus and I was super dependent upon that money.
Let’s just say that stream is a quality pyramid scheme and anyone stupid enough to buy into this foolishness is blindly following these cats.
It’s sad that the FTC will not do its job aqua kind prosecute these moron but I have a feeling that the judge presiding in that case is friends with the CEO of ignite or has influence with them.
I was driving down the road today (in Houston, Tx), and in front of me is a Black Mercedes with a license plate tag that said “Ignite Top 25 Earner” and “Paid for by Ignite”.
I was curious what Ignite was, but knew right there it was more likely than not a Pyramid Scheme. A quick Google brought me here to confirm. Thanks!
Stefan Martin says
I just left Stream Energy – the main reason is that its nothing more than a scheme to take our $24.95 a month for a website that I can’t do shit with. I pay $299.00 for a website on wordpress that can make me more money than Stream ever will. I hope anyone reading this takes my advice and DOES NOT join Stream Energy. You will waste your time and money – Goodluck – FYI if you want to make money open a small business – work 40 years and pray you can retire – otherwise you need to work for the man!
Sarah Childs says
I Love Stream!! Talk is cheap, until you try for yourself. So why try and discourage somebody else. Not happening!! people want and get what they want. Not by somebody elses opinion. Best in the Country.I guess if a person is speaking on behalf of other Electric companies then his or her job is to get on social media and assume. if you are not interested then do you, and you alone, because it’s not your decision to make, concerning other people’s decisions.
Lazy Man says
What is this word soup Childs? Clearly Stefan Martin tried it himself and explained the problem. Yes it is his opinion, but that’s the point of the comments. He’s certainly not speaking on behalf of other electric companies. And he certainly isn’t making other people’s decisions.
Not only is it almost mandatory and insisted by them to use their webhosting “options”, but you are not allowed to promote on your own or create your own website for sales.
I never took the bait on this corrupt and advantage taking company, but know others who have. Out of the 4 or so people they lasted from one month – roughly four months. Two are great sales people and positive business persons, but the negativity outweighed the plus’s far too quickly.
You can lead a horse to water, but can’t make them drink. You can warn someone from jumping into a pond, but some still will even though they can’t swim. A sucker is born every day….
People CLAIM they make money. The only ones that do are the CEO’s and higher uppers.
Why is it the only people I’ve seen promoting this are those who “Just heard” of it or are starting off doing this despite the company being around for a number of years. We know zero millionaires affiliated in these companies and everyone still has a second job. All you’re doing is pissing off your friends and family by bothering them week to week about this scheme you’re stupid enough to get into!!!!!!
So what are you comments about Stream going Nationwide with mobile services? Now everyone can participate!
Also I found many lawsuits either had no merit or thrown out of court which the media did not print.. Interesting.
Lazy Man says
Looking at Stream’s mobile pricing, it doesn’t match what you can get at StraightTalk or Cricket. The 3GB data plan with unlimited calling seems to be 58.50 for Stream and only $45 on StraightTalk (even cheaper if you buy multiple months in advance). Cricket does $35/mo. for 2.5GB with auto pay, which is $10 cheaper than Stream with more data.
It’s great that anyone can participate, but no intelligent person would unless they want into get into the pyramid scheme of recruiting others to overpay to subsidize themselves.
I have not seen any information of the rackeetering lawsuit thrown out of court. Please provide information from the court (not some Stream superfan blog) on that and we can review it.
Ryan ORourke says
[Editor Note: This commenter didn’t separate his points into paragraphs. I want to make sure I respond appropriately to each point, so I’m leaving my comments in-line.]
I read this article a while back as I was entertaining the idea of joining Stream as an associate. I, unlike you, went to the meetings several times. I talked to tens of Associates, new and old, and did my research.
[Editor Response: Experts in cults, such as Freedom of Mind have said that MLM is the same. So I read this as, “I’ve been to cult meetings several times. I talked to tens of people who get paid if I join, and I am calling this ‘research’.”]
You sir, do not, and have not.
[Editor Response: The FTC strongly suggests that you consult with an accountant, lawyer who is not affiliated with the plan. I’m not a lawyer or an accountant, but I’m am very knowledgeable about MLM. I was knowledgeable enough to point out the very specific point that shows them to be a pyramid scheme according to the FTC guidelines.]
You stand from afar and throw stones at something that seems risky and out of the box.
[Editor Response: Piggybacking on the comment about cults above, I should give this information MLM Mind Game: Real Life Experience vs. External Perspective.
It is much better to get external experience over the biased people who are paid to recruit you.]
There are too many points to disagree with for a small comment that people will actually spend time reading. I will simply tell you about my experience as someone who ACTUALLY is engaged in this business and has the experience you are lacking.
[Editor Response: I’m studied MLM/pyramid schemes for 8 years now. I have much more experience from a broad level than you.]
Stream allows you to control and operate a full turn key business with an incredible overhead of 24.95 and a one time fee that is half of the bonuses due to you after a modicum of effort. They equip you in real time updates, training every night and day, bookeeping, customer data tracking, and all affiliated paperwork to run your business as hard as you want.
[Editor Response: So you are a saleman for their business and they gave you very basic sales tools (training, bookeeping, customer data tracking paperwork, etc.). Companies that are not MLM do this for free to their salesforce and pay 30-50K a year. I certainly hope you aren’t paying Ignite/Steam on a monthly basis for this.]
EVERYTHING is disclosed to you up front and if you fail this business you have ABSOLUTELY noone to blame except yourself.
[Editor Response: Ahh, the biggest lie in MLM. You have the mathematics to blame. It isn’t a matter of effort, failure is a mathematical certainty… Everything is not disclosed unless they disclosed that 99% of people will lose money.]
I have personally seen hundreds of people change thier lives from broke to hope, dreams for personal and family development met and exceeded, lifestyles that were not possible in any other way achieved.
[Editor Response: Wow, you’ve been to meetings several times and talked to tens of associates. Suddnely the number explodes to hundreds of people? Your comment doesn’t even make sense and certainly doesn’t hold water.]
Hear this folks, you CANNOT achieve the same success in any other way than this. You cannot outearn your boss in your 9-5. This is a one off business. NO other energy company offers what we do in the way we do both for customers and associates.
[Editor Response: Wow, you can’t fail this fast in other business? I would agree. You certainly can’t succeed as shown in the article. Some people can outearn their boss. I have done it myself. You also can’t outearn your boss in MLM. In this case your boss is Ignite/Steam, which calls all the shots in the business.]
Have you looked at what we do for customers Lazy man? We save millions of people money on their normal recurring life essential bills and offer them amenities to those programs that noone else offers,especially the big corporations they are currently paying.
[Editor Response: Umm, yes, read the article about what you do for customers. You do not save them money at all. It is the opposite.]
As an associate, you can help charities earn well deserved and badly needed income without taxing the community on typical time consuming fundraising methods, while saving its supporters hundreds every year.
[Editor Response: Yes, every MLM pitches a Robin Hood to help charities. Save money by not getting involved in a pyramid scheme and donate it to the charity of your choice]
Look up june 24, 2011 article from the WALL STREET JOURNAL highlighting Stream and Ignite as one of the best solutions for your financial future and why this country and the world are at a perfect time for Direct Selling models as a vehicle for people to achieve their dreams.
[Editor Response: Hey, that 2011 “article” was an advertisement. Sorry that you got it wrong. Also, it is almost 4 years later… sooooo… how did that “perfect time” work out for those people who were advertised to in the Wall Street Journal. ]
If you are going to go and trash a company you need to be respectful and go to a presentation, and question the people you are hurting by badmouthing something you don’t fully understand.
[Editor Response: What am I not fully understanding again? What *specifically* is wrong with my research?]
The courts are searching for some way to bleed THE MOST SUCCESSFUL COMPANY. Apple has been sued dozens of times. Have you reported that? I see apple products everywhere and I don’t have a problem with them. The biggest and best always get attacked. Its the greedy american way to handle business.
[Editor Response: I don’t think that is true…. and the lawsuits against Apple are not related to MLM/pyramid schemes. The business model is very, very different.]
Read the Texas newspaper article on the case. Stream is up front and standing outside the office ready to speak to anyone and hide nothing. Fail or succeed, thats in your hands, not Stream!
[Editor Response: Since some top distributors are in Texas, let’s focus on an article outside the state and without bias…]
John Fisher says
Nobody should ever pay an exhobitant fee to join and MLM. Easpecially considering that over the last 30 years 60,000+ start-up MLMs have gone bankrupt. Do your due dilligence and find out about a company’s history first, and if you DO join one, make sure it’s on that is debt-free, has been in business more than 10 years, and if there is ANY fee charged, make sure it’s nominal. I compared Stream’s mobile phone rates to my current carrier, and it would take 3 years to make back my investment on the difference between the monthly cost of the two.
Lazy Man says
Yes, spending an exorbitant fee is a good sign it is a pyramid scheme.
However, don’t look too far into a company’s history as a sign of safety. It looks like even Mary Kay is a pyramid scheme and let’s not forget that every regulator agency under the sun is investigating Herbalife. I don’t think either company has debt… so that’s not a sign of safety either.
Jeremy Heady says
I absolutely love reading these types of articles! You seem very educated and informed, but I would like to address a few things if I may.
First of all, I am a full time network marketer and I just recently signed up with Stream as an added source of income, so this may come with some bias.
One of the things I would like to address specifically is the comparison of corporate hierarchies to multi level marketing systems.
The actual statistic for failure in MLM is closer to 97% not 99%. Do you know what the statistic is for failed startups? It’s actually comparable believe it or not. I was in real estate for almost a year as an independent contractor. I spent more than I made. I had a very similar experience with insurance sales. These are both very reputable professions.
The mistake so many people make when comparing multi level marketing companies to corporate companies is just that… they try to compare them when they are totally different industry models. In the corporate world, you get a job with a salary or wage. In the multi level marketing world, you are a business owner similar to a franchisee.
This is a very distinct difference. Most franchise owners don’t make any profit from anywhere between the first year and the third year! Most franchises cost thousands and sometimes hundreds of thousands of dollars just for the franchise fee and MLM companies never charge more than a few hundred if that.
The only difference in those big franchises and a legitimate MLM company is that the MLM company prefers to spend their marketing dollars as payment to their associates who perform well.
Now, I’m not saying every MLM company is legitimate because there are many still that are not. I’m just saying it’s completely false to say the whole industry is a scam.
You of all people already know this because this blog has affiliate ads all over it and affiliate marketing is MLM’s first cousin.
Lazy Man says
Jeremy said, “The actual statistic for failure in MLM is closer to 97% not 99%. Do you know what the statistic is for failed startups? It’s actually comparable believe it or not.”
Cite your sources for 97% vs. 99%. I can cite this source on many MLMs and it matches my own analysis of MonaVie as well as other MLMs. Time to put up your citations to back up your claims.
I also did analysis using statistics from Small Business Administration in this article. If we are very generous to MLMs (using only a 90% fail rate), only 1 in 100,000 successful after 5 years. However, in small business in general, 50,000 of the 100,000 are successful.
It is a monumental difference. It isn’t comparable at all.
Real estate and Insurance sales are do not have FTC warnings about them being pyramid schemes. When they do, we can bring them into the discussion.
Jeremy said, “In the multi level marketing world, you are a business owner similar to a franchisee.”
This is a poor, irrelevant analogy as I point out here. Franchises do not recruit other franchises. McDonalds and Subway franchises make 99% or 100% of their money by selling product to the public and 0% from a pyramid of recruitment. If MLM gets rid of the pyramid of recruiting and turns to a simple affiliate program, we can bring them into a discussion of being a franchise.
Jeremy said, “Most franchise owners don’t make any profit from anywhere between the first year and the third year!”
Actually they typically generate profits each month. The investment overall is may be not be profitable, but they don’t start out losing money.
Most MLMs cost thousands a year even if they are free to join. They typically have personal volume requirements of spending $200/mo. or more. They have pep rallies that everyone is encouraged to go to if you are serious. They have training materials. And let’s not get started on lead generation that your website offered.
Jeremy said, “The only difference in those big franchises and a legitimate MLM company is that the MLM company prefers to spend their marketing dollars as payment to their associates who perform well.”
I’ve already shown this to be a boldface lie, but I’d also point out that the MLM company spends their marketing dollars on marketing. Herbalife and LifeVantage spend millions and millions to get their names on soccer jerseys. MonaVie sponsored a race car. All of these companies have seemingly paid off-the-record fees to recruit people with large pyramids to come to them. Then these people fraudulently claim, “If I did it, you can too.”
Jeremy said, “Now, I’m not saying every MLM company is legitimate because there are many still that are not. I’m just saying it’s completely false to say the whole industry is a scam.”
Actually you should read this: Is Every MLM a Scam?. It wouldn’t be completely false to say the whole industry is a scam. It would be completely accurate.
Jeremy said, “You of all people already know this because this blog has affiliate ads all over it and affiliate marketing is MLM’s first cousin.”
Again, don’t confuse a legitimate commission refer business to something that appears to focus on building a pyramid scheme. They aren’t cousins any more than Enron and Coca-cola were cousins.
Thank You for this valuable article about Stream/ignite energy.
I was going to join but I won’t now :)
Chrystal Ann says
I was driving in an Arby’s drive through in McKinney, TX, and in front of me is a Black Mercedes with a license plate tag that said “Ignite Top 25 Earner” and “Paid for by Ignite”. I was curious what Ignite was, but knew right there it was more likely than not a Pyramid Scheme. A quick search at Startpage brought me here to confirm. Thanks!
Scott Montgomery says
I would like to say about the Stream opportunity that most people fail because it is difficult. It takes work, and many people who get in are under the impression it is easy. It is simple, but not easy.The income is generated through the sale of legitimate services. The compensation plan would never work if each associate was required to get thousands of customers on their own. I say if you are willing to treat it like a business and get the right people in your organization (which Stream clearly advocates),it can work. You must be able to manage your sales force. And help them. It’s not for the weak or lazy.
Lazy Man says
It’s difficult, because by it’s very nature you are creating more competition in recruiting people. It breaks the laws of of supply and demand. They have no problem adding salesmen even if there isn’t the demand for sales. Hence failure.
I’ve never said that services aren’t legitimate, but as we we saw with the Fortune Hi-Tech Marketing pyramid scheme even having legit products like Dish TV can doesn’t save you.
I’ve never seen anyone in MLM say, “I warn all my recruits that 99% of them will lose money.” That disclosure is simply never made.
Luther Jackson (Legal Shield) says
Hey Lazy Man, I love your posts and would love to hear your feedback on LegalShield, please. I’ve been with them 4 years and I’ve seen people, who’ve started after me come in and make serious money. I haven’t hit those marks yet but I’m a Lazy Network Marketer. I do try but a lot people are turned off by Network Marketing and it’s hard to market to people. Do you have any advice or thoughts on the company. Thanks and God Bless!!!
Lazy Man says
Thanks for the comment Luther.
Are you trying to sell services or recruit people. If people are turned off by MLM (not to be confused with Network Marketing), you should probably look to another business. It doesn’t seem to be a good way to sell products or you wouldn’t be having problems making money. If you are focusing on recruit people in MLM, it appears to be an pyramid scheme based on the FTC guidelines.
You shouldn’t care about people coming in after you making serious money unless you are intending to run a pyramid scheme. It should be all about selling product. I’d make sure their money is coming from sales from people and not building a pyramid scheme.
A poster here wrote most people fail because it is difficult. It takes work, and many people who get in are under the impression it is easy. Well I was given a sales pitch today. I was told,just sign up for the service & sign 2 people & the checks roll in. I know better than that. I also know these companies make money by you giving them your money! If it sounds too good to be true……..
David Gibson says
Put a fork on that meat. The racketeering lawsuit against Stream is considered dead. http://frontburner.dmagazine.com/2015/10/29/fifth-circuit-court-clears-stream-energy-in-pyramid-scheme-suit/
Lazy Man says
In fairness David Gibson, I think if the FTC presented the argument to a federal judge as they did with Vemma, the result would be greatly different.
My analysis is the same: Why would Ignite/Stream put themselves into a position to be sued for being pyramid scheme in the first place? It seems to be terrible business if you are a legitimate company.
David Gibson says
Well I was given a sales pitch today. I was told,just sign up for the service & sign 2 people & the checks roll in. – See more at: http://www.lazymanandmoney.com/ignite-stream-energy-scam/comment-page-1/#comment-1305736
That couldn’t be further from the truth. You do not make any money off your recruits in Stream unless they gather either energy or Mobile customers. Furthermore, you make your investment back by simply gathered 10 energy or mobile customers.
David Gibson says
“In fairness David Gibson, I think if the FTC presented the argument to a federal judge as they did with Vemma, the result would be greatly different.
My analysis is the same: Why would Ignite/Stream put themselves into a position to be sued for being pyramid scheme in the first place? It seems to be terrible business if you are a legitimate company.”
Lazy Man,you are comparing Apple’s to Oranges. First, Stream is a company that is service based with energy and mobile, while Vemma is nutritional product driven. Second, the real reason the FTC came down on Vemma like it did, and rightfully so, is because of the way the Vemma’s comp plan structure forcing its reps to buy its products in order to quality for commission instead of the end users. Stream meanwhile, does not required its reps to buy any mobile or energy services, and their customer ratio is 5 to 1 according to the FTC, that’s perfectly legal.
Lazy Man says
Fortune Hi-Tech Marketing, also shut down by the FTC, sold Dish Network service. It doesn’t matter whether it is a product or service.
It’s not necessary for reps to be “required”, but incentivized can also make it a pyramid scheme. I’d like to see a list of customers and representative posted publicly so we can verify the 5-1 ratio that you claim.
Also, I’d like to see Stream representatives hit the 10-customer guideline from Amway before you start claiming the FTC says something is legal.
As I pointed out in the article, Ignite’s marketing materials seem to discourage selling and push recruiting as the only real way to make money.
Michelle Miori says
Lazy man, Here is the proof you and your followers need so that they know the truth about Stream. (No longer called Ignite/Stream Energy) Please post this link of Stream’s official press release about Federal Judge overruling this ridiculous lawsuit claiming Stream is a pyramid. The Truth always sets you free.
Lazy Man says
I did a little more research into the actual court case and it seems like Stream is exaggerating the ruling. Here’s a link to the unbiased Dallas Business Journal… rather than the biased announcement from Stream:
It looks to me that the court seems to have simply ruled that some of the plantiffs did not meet the requirements to stake a claim in the lawsuit. Maybe I’m wrong… if I am please give me more detail on it.
It also looks like it clearly doesn’t rule whether Stream is a pyramid scheme or not. It seems to ignore the question completely.
I go back to the FTC’s guidelines as to what a pyramid scheme is and how Stream’s marketing seems to completely match that. It looks a lot like the FTC shutting down Fortune Hi-Tech Marketing a few years ago after ten years of it running in the clear.
Let’s see Stream drop the pyramid system and focus on straight commission sales. The truth always sets them free, right?
Dean Ethridge says
Completely spot on with your article. I was once “lost” in the MLM fantasy world many if your detractors are obviously in. After multiple closings of companies I was promoting, scams that came out along the way, negative comp plan changes and ultimate closing of Solavei, I’m convinced most of the MLM companies are bogus. MLM is NOT a good way to earn extra income if it’s all centered around recruiting. It cannot sustain itself without product sales. Stream could truly be awesome with the mobile plans they offer, but they pay more to the upline than the sales maker! Pyramid poster child… . If they cut the sign up fee to $49 and paid upfront commissions (make income viable without recruiting) it could be a good opportunity. Rate plans are decent so are energy rates, but I see trouble in the future with the FTC coming soon like Vemma. Just a matter of time. Thanks for the post
I did ignite when it first started. I thought get in now because it is early. Sign up was 300 and i did get that money back pretty quick. I signed up 15 total customers and had 5 people under me, was getting a check every month for about $50. Only 2 people under me ever did anything and i got tired real quick of calling friends to join. I found out the hard way that selling your friends is a way to run your friends off. I will never join another pyramid structure again. Please save yourself the massive disruption in your life of joining Ignite. Every time I was around my friends i was just thinking to myself when should i bring this up. No way to go through life. Having friends is better than having money. Especially when i was only making 25 per month.
The key to the whole thing is that the money is based on recruiting recruiters and not actual customers. I sat in on the presentation and I couldn’t put my finger on it at the time, but I have two primary thoughts to offer. First, with more than a couple of generations of recruiters, the system can’t pay all the incentives. Second, the business plan forces recruiters to lean on their own family and friends to get their own money back.
Thank you for all of this information. My Father-In-Law has been driving us crazy with Stream/Ignite and he just will not stop. Like the others here who seem brainwashed to me, my FIL has an answer for every question. Of course now he wants us to change cell companies. Even though I have pointed out great information about cell phones to him from Clark Howard, he still insists that Stream is cheaper. Of course when you factor in the cost of being an associate (since you cannot simply get a cell phone from Stream) the costs are too high. Plus, he tells me that I should be his associate and my husband (his son) can be my associate!!! What the hell? He has already been kicked out of one church, and he is starting to send tons of emails to members of his new church. Add to this the fact that some of us believe he is Bipolar – which makes him the perfect boob for these scans. He is in NJ – do you know of any lawsuits and such against Stream there? I have not found anything… yet! Thanks for your due diligence!
Lazy Man, you still trying to convince your audience that Stream Energy is a scam after 5 years from your original thread. Well, just to give you an update that Stream is selling its energy retail operations to NPG Energy but the company will still market NPG/Stream for the next ten years. Meanwhile, Stream will soon changes its name to Kynect and will focused on marketing not just energy, but other services like wireless, digital phones and will get into the streamline cable TV. Therefore, Kynect will still be around for a long time.
Lazy Man says
I haven’t written any new articles on this since the original post (that I remember), so I’m not sure what you mean by “still trying.” I’m not sure I was trying to convince in the first place.
It’s probably a good move for Stream to get out of the energy business. Looks like they paid out $46 million to settle a pyramid scheme lawsuit. In my opinion companies that are innocent don’t simply choose to pay $46 million. Did I read that wrong? If I did, there’s also this inquiry. It definitely seems like lawyers are questioning the legality of Stream/Ignite, but you can make up your own opinion.
So the energy company sold off the energy part and is changing its name to Kynect to focus on marketing communication services? It reminds me of the debacle of Solavei. I wouldn’t expect Kynect to do any meaningful business just like Ignite didn’t (in my opinion).
It’s been so long since I looked into this that I can’t remember whether I cited Atlanta Journal-Constitution’s investigation into Ignite/Stream. Spoiler: It didn’t go well for them.
David Gibson says
Lazy Man, you said: “It’s probably a good move for Stream to get out of the energy business. Looks like they paid out $46 million to settle a pyramid scheme lawsuit. In my opinion companies that are innocent don’t simply choose to pay $46 million.”
Ummm, Yes and NO! Yes, they’ll no longer be in the energy biz, but they (Kynect) did signed a very nice lucrative contract with NPG/Stream Energy to continued to market their energy services EXCLUSIVELY! However, since they have already settled their lawsuit from the former disgruntled former reps A LONG TIME AGO after nine years of litigation. Therefore, NO! It’s more like they are moving on.
As far as the Solvaei debacle is concern, it was basically Ryan Wuerch’s fault for not realizing the fallout he was facing for his company. He should’ve took a deal with ACN in the first place when they’ve approached him to buy him out.
Lazy Man says
Yes, but moving on kind of shows that they didn’t really have anything to begin with. As you say, they are just marketing. It seems like they were marketing overpriced energy. It also seems like (from the article cited earlier) that 90% of people lost their investment in getting involved.
So without overthinking it too much or looking into too much (because this isn’t worth my time), my opinion is that it’s a marketing company where almost everyone loses their money. I don’t know what your definition of scam is. I’ll let the readers apply their own.