Over recent weeks, the government has announced the discovery of eight network marketing companies guilty of conducting fraudulent activities in Egypt, notably by operating Pyramid schemes that promised participants payments, primarily for enrolling others into the schemes, without offering any real products or services. The eight companies were reported to have defrauded Egyptians of some $96.8 million. Network marketing has taken off in recent years in Egypt, attracting people from different backgrounds hoping for additional income. The schemes have been attractive to young people who were either unemployed or had been made redundant as a result of the slow-down in the economy. Sally Said, manager of a marketing company and one of the victims of the schemes, said that the company she had subscribed to and was supposed to encourage others to join turned out not to be selling any products. She had paid $500, and she was supposed to review advertisements for six months, earning $50 weekly. “We were told we would be paid by the advertisers themselves, who would pay consumers to review their ads,” said Ahmed Ramadan, another victim. The advantage of joining a network marketing company was that he could be his own boss, he said. “Network marketing allows you to build your own network from your personal and professional contacts. It is sad that countless poor victims join the industry without understanding what they are getting into, and when they run into problems they blame the company or even the industry itself,” Taher Fahmi, a professor of economics at Cairo University, told Al-Ahram Weekly. Subscribers should ensure that the company is selling a tangible product, he said, adding that the profits made through network marketing depended on the amount of effort a person put in. If that person wanted to make a profit, he would have to sell more products or services or develop a team to increase sales and thus increase profits, Fahmi added. “Profits don't just come out of thin air,” Fahmi said. There are also other issues to look out for. According to Andreas Papatheodorou, a professor of economics at the University of the Aegean who was recently in Cairo, people are sometimes tempted by promises of how much money they can make without considering whether they have the required aptitude to do well in network marketing. He said that it was essential for a company to have a defined product if it wanted to promote itself as a multi-level marketing company (MLM). Multi-level marketing is a marketing strategy in which the sales force is compensated not only for the sales they generate, but also for the sales of the other salespeople they recruit. Anyone interested in joining an MLM should have a checklist of questions before deciding on the company they intend to join, Papatheodorou said. “Is the product something you're interested in, or are you joining just for the sake of making money? Can you afford the product, which would allow you to become a member of the company, or will buying it cause financial difficulties? Are the products affordable to your immediate circle? Does the company have a good record and verifiable financial stability? Do you share the same values as others in the company you are interested in? Do you have the time, energy, and interest to take full advantage of the training the company can offer?” he asked. “If you find what you consider to be a good company, double-check by looking for any warning signs that the company is not what it claims to be,” Papatheodorou added. “Merely looking at marketing literature, talking to sales reps, or reading testimonials are not always enough.” Warning signs could be the company website not offering reliable contact information or not mentioning the names of the founders. It was also important to ask whether the quality of the product or service guaranteed consumer satisfaction, he said. People should be careful of companies that did not seem to be offering a tangible product or service, but instead were focused on attracting more subscribers. Some people have made it big in the industry, however. Ahmed Gheith, an engineer and a representative of one of the companies, said that “network marketing opportunities are one of the most efficient ways to make not only extra money, but also to make a long-term residual income by investing your spare time in them.” Gheith said he had found the experience worthwhile because not only did he earn extra money, but he also learned marketing, teamwork, communication skills, and time management. He had been introduced into a new community. “I'm sure network marketing will be a future industry worldwide, even if people in Egypt are not ready to take it seriously as a real job,” he said
