July 12, 2024

Brad Marolf

Business & Finance Wonders

When Multilevel Marketing Met Gen Z

When Multilevel Marketing Met Gen Z

So you’ve been scrolling through Facebook for a while—dull, dull, dull—when you hear the sound of tropical bird chatter. You glimpse a 20-something woman floating in a natural pool of water with her eyes closed, and then she starts to talk to you about her passion for “manifesting money” and how every little thing she’s ever wanted is now hers. What’s this? She’s looking out the window of an airplane, through the clouds at a mossy mountaintop; she’s scooping up sand and blowing it at the camera as if the grains were dandelion seeds; she’s biking in a white dress on a secluded path, no handlebars. She has more time and wealth than she knows what to do with—and so now she will pause to bathe an elephant. Wait a minute, you say to yourself. Could this be my life too?

Maybe, because this video is “your invitation to experience lasting abundance” and “financial freedom” and the opportunity to travel the world, ethically, while eschewing plastic water bottles. Amelia Whelan, founder of the Breakaway Movement, shared it to Facebook on her company’s launch day, in the summer of 2019, when she was 25 years old. “I’ve dedicated the last 12 months of my life to this project, so I know you’ll love it,” she wrote at the time. “I invite you to join me and breakaway …”

Doing so would cost just $33.33 a month, in exchange for access to a private Facebook group, invitations to weekly group calls, an assigned mentor, and dozens of hours of video-course materials about how to create a social-media brand, how to form an LLC, how to maintain a “money mindset,” and, sort of, how to sell $5,000 K8 water-ionizing machines to your friends and followers on commission for a Japanese tech company called Enagic. (Enagic says it does not have a formal relationship with the Breakaway Movement or Whelan, beyond her being an independent distributor for the company.)

Whelan, the self-made (and self-declared) millionaire at the center of the movement, grew up in a small town in New York and moved to Hawaii for college. When she first started selling water-ionizing machines for Enagic, she joined a sales community on Facebook but didn’t vibe with it. The group had a “very predominant male presence,” she’d later say, and its members’ approach to spending money—“they were flashing checks and they were buying Yeezys”—did not appeal to her. “I knew I was tired of working for corporations that did very little for the things I truly care about,” she told me when I first got in touch with her last April. So she decided to start her own Enagic group, built around those things: “holistic health, sustainability, and the environment.” This would be the Breakaway Movement, an expansive community with good vibes and great aesthetics, offering coursework teaching newbies how to set up effective Instagram ads and “attract” a small fortune. Together, they would sell more than they could sell alone, and they would make Enagic machines into something cool.

By this time, Whelan had an enviable personal brand under the Instagram handle @saltsandandsmoothies. Now her look would be the movement’s look—young, blond, an even tan, well dressed in the sense that well-cut bathing suits do not come cheap. (In 2019, she posted to Facebook that she was earning “more money than every single person I know.”) The women she’d tag in her posts—many of whom were also part of Breakaway—starred in equally beautiful narratives on their own Instagram accounts, such as renting a luxury tree house in the rainforest or chartering a ship to sail around “secret islands.” And for more than a year, the platform thrived. As the company started receiving monthly fees from thousands of members, Whelan set up a real company with contractors, and planned glamorous retreats where attendees could enjoy yoga, breathwork, and bonding activities.

Whelan’s pitch had been tailored to her generation’s fantasy of success: quantifiable influence on a social platform, a flexible schedule working from a MacBook Air, unlimited world travel, virtuous accumulation of wealth. But her business model might have been familiar to the Breakaway members’ grandparents. The best way to get started in the group as a seller for Enagic was to buy at least one K8 water-ionizing machine yourself (or another, less expensive Enagic product, like a $2,890 shower filter); then you were encouraged to bring in other people to sell machines themselves, passing a chunk of their commission checks on to you.

In other words, this was classic multilevel marketing, optimized and freshened up for Gen Z. Amelia Whelan’s influencer sheen would help to bring an old business proposition to a wide, new audience. But that same, new audience was about to bring a lot of trouble in return.

From the start, Whelan tried to put her rapidly growing water-machine sales force at ease about the nature of their work. “No one wants to get involved in anything that is shady or unethical,” she explained in one of her early informational videos. “It’s a lot like real estate, honestly.”

Multilevel marketing is not, in fact, that much like real estate. The phrase describes a form of person-to-person sales in which your income is partly a function of your ability to expand the network. The more recruiting you do for new salespeople, the more money you make. That works fine, so long as the products that you’re selling are easy to unload, and the supply of new recruits never dwindles. In reality, distributors in these MLM businesses may be set up to fail by weak demand, and by a byzantine structure that can leave them to amass unsold inventory while recruiting more and more salespeople into their downline.

The best-known MLM companies of a generation ago—Tupperware, Avon, Amway, Mary Kay—mixed suspect commerce with a genuine sense of community. Participants sold functional household items and basic beauty products at cozy living-room parties, surrounded by their friends and family. “You’d get a nice card in the mail or a direct phone call, which was really sweet and feels personal,” says Jane Marie, an executive producer and co-creator of the podcast The Dream, which reports on MLM culture. “It would be a bunch of ladies getting together to have tea or wine and shop, but mostly just, like, hang out.”

Whelan’s Breakaway Movement would not seem to have much in common with these sip-and-browse affairs, aside from its connections to a similar commercial structure. In place of cheap, disposable housewares, Whelan and other members sell luxury water machines that are meant to fit into a sleek, environmentally friendly, minimalist lifestyle. And if the Avon lady was someone you knew who would drop by your house and have a cup of coffee while she gave her spiel, Whelan presents herself as an untouchable celebrity posting from thousands of miles away, usually from Indonesia or Hawaii. She’s not your cousin or your neighbor; she’s an influencer. That means she, like others who ascend the ranks of today’s multilevel-marketing companies, can recruit from all over the world—an Instagram-famous salesperson for an Instagram-famous brand, selling access to her expertise in online groups or exclusive meetups: Imagine if an Avon lady could knock on 100,000 doors at once. Recruits come in through referral links, and it takes mere minutes to go from scrolling through an Instagram feed to typing in your credit-card number and getting started.

MLMs like Enagic have boomed online in recent years, selling essential oils (doTERRA, Young Living), fitness products (Beachbody, It Works), beauty products (Monat, Arbonne), or women’s fashion (Paparazzi, LuLaRoe). At the same time, their global reach poses problems of its own. An insinuation of grandeur, posted to Instagram over and over, with only slightly varying images and phrases, may well lead to exponential business growth. But the same message, and the same posts, can be quickly fact-checked on the internet, and debunkings will go viral too. Indeed, many of these companies have been publicly excoriated, thanks to ex-distributor testimonials shared on social media, the same platform that enabled their success.

The faux-warm “hey hun” used by MLM recruiters in Instagram and Facebook messages is by now a meme, and an “antiMLM” forum on Reddit went from having fewer than 1,000 members at the beginning of 2017 to more than 740,000 by the time of writing. A recent special report from the industry trade publication Social Selling News described the “troubling rise” of anti-MLM sentiment on YouTube, TikTok, and other platforms, and quoted Joe Mariano, the president of the Direct Selling Association, as saying that this was different from “the general kind of public perception issues that we have always had.” Paranoia has been growing in his industry about “a group of unlikely allies,” including anti-MLM social-media influencers, longtime consumer advocates, and government regulators, who are angling for the Federal Trade Commission to get more involved in MLM business practices. The August cover story of Social Selling News was a hand-wringing article about the new FTC chair and “progressive millennial” Lina Khan.

The “unlikely allies” have had a real effect, according to data presented by William Keep, a professor of marketing at the College of New Jersey. MLMs are struggling to recruit, he says, and he claims that their trade association has finagled its numbers in annual reports to obscure this fact. (A spokesperson for the Direct Selling Association did not refute Keep’s analysis when contacted by email, but linked to the organization’s own study projecting industry growth.) Time reported last year that consumer complaints to the FTC about MLM companies have been on the rise, and if you search for any MLM that was popular two or three years ago on YouTube, you may see a wall of text like this: “Ex Beachbody Coach EXPOSES THE TRUTH,” “Why I Stopped Selling Younique | THE TEA,” “THE TRUTH ABOUT MONAT | Pyramid scheme? Hair loss? Free car? Why did I quit?” Or even:

“Breakaway Movement Scam.”

When Kathryn Human, then an undergraduate student at the University of Pittsburgh, found the Breakaway Movement in September 2019, she was working part-time at a restaurant and struggling with medical debt accrued over the course of a chronic illness. She was looking into getting a sugar daddy or selling her plasma when she came across the group on Instagram, and signed up almost immediately. “I was sitting in Starbucks in between classes trying to get through these videos, being like, I just have to figure out what to do to make the money,” she told me.

A friend told her it sounded like a pyramid scheme, and she got embarrassed and backed out. Now she gets angry thinking about the group’s worldview. Human, who is Black and biracial, remembers listening to Whelan and other members talk about the idea that, as she interpreted it, poor people stay poor because of their attitudes. “Of course you’re saying this; you’re a wealthy white person who lives on an island,” she said. (Whelan told The Atlantic she did not say this outright, but added, “I have contributed my own poor ‘money mindset’ to personal financial struggles and stress I have felt and experienced in my own life.”) Describing herself as a young, broke college student with an interest in spirituality and community, Human says she was a “perfect target” for Breakaway’s pitch. “I have a great friend group, my family is great, but being supported financially is something that I’d never had,” she said. “The community being like, We all uplift each other; we all get rich together—that seemed really appealing to me.”

MLMs can exploit that kind of desperation; indeed, they tend to thrive in times of economic instability. In March 2020, the Breakaway Movement contractor and Enagic distributor Sean Little posted a video that seemed to encourage community members to buy water-ionizing machines to fend off both the health and financial impacts of the pandemic. “No. 1, our immune systems have never needed the help more than right now,” he explained. “Buy the machine; get the machine in your house. No. 2, people are out of work, people are laid off, people are postponed to return to work. People are looking for ways to earn income … There are a whole host of financing options for you to be able to purchase a K8.” (Little told me via email that he does not believe that Enagic machines can prevent COVID-19, but he does think it’s therapeutic to drink ionized water.)

Enagic’s water-ionizing machines promise to transform tap water into something different by adjusting its pH by varying degrees. Highly acidic water can be used to clean countertops and toothbrushes, slightly acidic water is “beauty water” for washing your face or conditioning your hair, and strongly alkaline water can be used for rinsing produce and removing toilet-bowl stains. But Breakaway members most often tout the benefits of drinking slightly alkaline, “hydrogen-rich” Kangen Water, referring to its therapeutic qualities and superiority to the knock-off “alkaline” water products sold in (wasteful) plastic bottles at the grocery store. Evidence for the former remains limited; many studies of the topic have been paid for by the so-called functional-water industry. At any rate, Enagic’s K8 machine sits at the higher end of the price range for similar products, and critics note that the pH of water can be altered just as easily with baking soda or vinegar.

A water machine, dollar bills, a glass of water, 'Only $4,980'
Illustration by Ryan Haskins

Six months after Little made his pandemic pitch, and with the number of COVID cases entering its third wave, the company discovered that it had accidentally attracted attention from the wrong person: a YouTuber known for studious one-woman documentaries picking apart online phenomena, shared under the name Anna’s Analysis. “I Joined the Breakaway Movement So You Don’t Have To,” she titled her presentation, which is more than two hours long and, she says, based on six months of research. The video runs through a battery of topics, criticizing Breakaway Movement members for promoting pseudoscience, for its obsession with exclusivity and wealth, for its whiteness, and—most of all—for the claims of its founder that it was not an MLM.

“I’m gonna try not to get worked up in this video, because there is a lot of stuff that makes me mad,” Anna says, after playing a clip of Whelan saying that Enagic isn’t an MLM. She pulls up the illustration in Whelan’s video of Enagic’s compensation plan. In it, an imaginary distributor’s sales and subordinates are arranged awkwardly side by side, with arrows to indicate the flow of commission checks. “Let me draw this exact same thing for you except for with the lines a little more organized in a way that makes sense,” she says. On a whiteboard, Anna illustrates an imaginary distributor who sells to two people, one of whom also sells to five more people. “It doesn’t matter if you make it a rectangle, or draw a squiggly line over here,” she says. “At the end of the day it’s still an MLM, and it still has a triangle shape.”

By November 2020, the feature-length video had more than 400,000 views. (At this point, it’s at more than 850,000.) In the private Facebook group, one Breakaway Movement member encouraged others to watch positive videos about the Breakaway Movement as a means of pushing the Anna’s Analysis video down in search results. (“I think with your support we can work the algorithms in our favor,” the member wrote.) Other YouTubers had already been sharing lengthy investigations of the Breakaway Movement, declaring it a “scam” or a “cult,” but this situation was more serious—the meticulously crafted straw that broke the camel’s back, and attracted the attention of hundreds of thousands of people.

Later that month, Whelan led a Zoom call in which she seemed more nervous than usual—though still casual-cool, wearing a silver nose ring, a boxy lavender T-shirt, and matching chandelier earrings. “My intention is just to be super transparent with you all,” she said. Enagic, she’d come to understand, was a multilevel-marketing company after all. (Enagic doesn’t deny this, though it sometimes uses the terms direct sales or human-based marketing instead.) Multilevel marketing is “incredible, and it’s something that I personally am so proud to be involved in,” she continued, highlighting the fact that most MLM distributors are women. “Breakaway Movement is owned by a female,” she added, referring to herself. “Which is dope.”

Whelan alluded to her own youth and inexperience, saying she’d begun working on Breakaway as a 23-year-old with no knowledge of how to run a real business. In recent months, she explained, she’d learned a lot about the world and the various bureaucratic entities in it. “FTC is the big boys on the top,” she said, with some uncertainty. The letters stand for “Federal Trading Committee, I believe.” But later in the call, her voice got stronger, and she portrayed the FTC as a pedantic government scold. “FTC likes to view everyone on the internet as vulnerable,” she said, framing the last word with air quotes. “They believe that when we promote income claims, or how much money we’re earning with something, that it can be misleading … or, I’m forgetting the word, like, persuasive to someone who is a vulnerable person on the internet.” This didn’t make sense, she said, because any dentist is allowed to tell you that they make $100,000 a year, and then you’d be like, “That’s dope; thank you for being a dentist.” But these are the rules, she said, and the Breakaway Movement is going to have to follow them even if she feels they are “crazy.”

The comments below the video remained upbeat. “So so so happy to have pressed play on this call,” one community member wrote. “Thanks so much for always being as sincere as you can be!” But in the months that followed, while Whelan remained in communication with Breakaway members on Zoom and in the Facebook group, she stepped back from her Instagram account. For the rest of that winter, and all through the following spring, her followers would see no more photographs of the salt, sand, and smoothie lifestyle that Breakaway had helped Whelan build and secure.

Last March, I had a call with one of the first Breakaway members and head of community engagement, Gina Marovic, to talk about the company’s handling of the YouTube-video fallout. At the time, she and her colleagues were overhauling their training videos to acknowledge that Enagic is indeed an MLM. The previous error—which Marovic called “misinformation”—had caused them a lot of grief, she said, and Whelan was accepting full blame for that. “Amelia blatantly said, ‘This is not an MLM-marketing thing,’ and it’s like, ‘No, it is, Amelia … Why are you acting like it’s not?’” she said, and laughed a little.

Marovic told me that the company was grateful for the original YouTube video from Anna’s Analysis, which brought attention to things it needed to improve. Then she referred to it as “the hate video.” As in, the hate video that is the first thing anyone sees when they Google the Breakaway Movement because they’re thinking about joining. As in, “The hate video has hurt [Breakaway] immensely, which is why we’re doing so many changes.”

Whelan posted to the Facebook group herself a few weeks later, explaining that she had been in touch with me about this story. (I had joined that group in February, with The Atlantic paying about $130 worth of monthly fees on my behalf.) She did warn members that my article might not “speak highly” of Breakaway, but she also framed it as a positive development, sharing the news with a Millennial-pink graphic that paired the movement’s logo and The Atlantic’s logo in the manner of a fashion collaboration. “Thank you for the transparency, the trust and your leadership!” one comment read. “You have such a strong yet sincere heart Amelia!”

As Breakaway’s leader, Amelia Whelan had presented a fresh, modern face for MLMs. Now her group was encountering a modern problem. In the days of Tupperware parties and next-door Avon ladies, an MLM might fizzle or burn out, but it could do so with less drama, and far less public discussion. “I did not see anyone come out of an MLM and admit that something went wrong,” Jane Marie told me, referring to her own childhood exposure to MLM culture. Participants had an emotional and psychological incentive to accept personal blame for any failure, she remembered—to say, “I wasn’t scammed; I wasn’t ripping off my mom and my aunt and my cousin and my co-workers.” But as a social-media phenomenon, the whole scheme is based on a bigger, looser, more fragile set of social ties. Disillusionment is more threatening because, like growth, it doesn’t happen in geographically isolated groups. Like growth, it happens at scale.

Whelan built the Breakaway Movement like any viral online brand, by posting warm invitations paired with images that suggested the possibility of a better life. Viral content made by other influencers put her brand under threat, and Breakaway in the position of needing crisis reputation management. At first, she asked members to avoid watching videos that described Breakaway as a “scam” or a “cult,” and instead watch and engage with positive testimonials about the company “as many times as you can.” That behavior would, of course, push critical takes further down the YouTube search results, though Whelan denied that she had this motivation. But these search results were still a problem, even after Breakaway’s subsequent publication of a video called “Breakaway Movement Exposed | The Truth Revealed,” which co-opted keywords of the anti-MLM community, and in which Whelan and Little spent 30 minutes discussing the “constructive criticism” the company endured.

The original video from Anna’s Analysis still shows up at the top of the list when you search for the Breakaway Movement on YouTube; just below it is her two-hour follow-up video from August, “Checking Back In With the Breakaway Movement.” Whelan’s private group has shrunk to about 2,000 members, just half of what it was when I first joined. In my conversations with former members of Breakaway, I spoke with several women who had left the organization. They didn’t express bitterness toward the company exactly, but they did feel disenchanted. “I no longer felt inspired by her,” a 24-year-old former member from Austria told me, referring to Whelan. “I no longer trust her, I guess. Not that she’s a bad person or anything.” (The former member said she did not want to share her name for privacy reasons, and to avoid getting involved “in any drama.”)

It might still be possible for Breakaway to turn itself around—especially if Whelan continues to be up front about what the company actually is—but the pure excitement of its early days are over. No matter what else changes, Breakaway won’t be able to escape the ethical quandary of its business model: To succeed, you recruit; to recruit, you offer a fantasy. Why else would anyone sign up to market an extremely expensive system for doing confusing things to water? Still, if there’s one overarching lesson to be gleaned from Breakaway’s “money mindset” videos, it’s that having these kinds of doubts about the MLM business model will attract nothing but negative energy, and keep you frozen in a place of scarcity and lack. A business like Whelan’s may have to become more rhetorically careful, or make some ethical adjustments, or even suffer public embarrassment. But it can never let the haters win.

In May, Whelan announced her return to Instagram after a long, clarifying hiatus—“147 days of true presence and appreciation,” during which time she says she took a candle-making course and rescued a duck named Greg. She quickly resumed sharing dreamy images of beaches and beautiful food and elegant clothes and her picture-perfect life relaxing on soft surfaces with her partner, reading books. There were come-ons for Enagic too—posts about giving away a K8 water machine. By September, it was clear that Whelan had her mojo back. She put up a photo of herself surfing, which was cut into two slides, with SELF-MADE over the first, and MILLIONAIRE over the second.

“Don’t let anyone talk you down from your dreams,” the caption said. “You’ve got this. Really, you do.”