I distinctly remember the mood in 2000, when the World Wide Web and the concept of ecommerce were still toddlers: people everywhere in network marketing were freaking out with worry that the Internet might spell the death of network marketing. (“If everything becomes available online, then who needs distributors?”) Ten years later, of course, it hasn’t worked out that way. On the contrary, the business has both grown and matured enormously. But the Internet has radically transformed the landscape … and exactly how, or into what, or where it’s all going, is as much a matter of speculation and debate today as it was then.

There may be no one more qualified to comment on this shift than Mike Dillard. Mike is considered one of the leading authorities on what has become known as “attraction marketing,” and the intersection of Internet marketing with network marketing. More than a million people have subscribed to his Video Boot Camp newsletter, and his Magnetic Sponsoring system is one of the most widely used, studied and discussed models in the business. — J.D.M.

When did you first become involved in network marketing?

About 1998, when I was in college. Back then it was just your basic web sites, and replicated sites were becoming the hot new technology. The first sets of autoresponders were a really big thing. It was an exciting new time.

When I first got started, my sponsor had sent me boxes of cassette tapes. With the Internet, suddenly we didn’t have to go out and meet people in person or mail them CD’s. Here I was, sitting in my dorm room, and I suddenly had access to the world.

But you didn’t really start to glom on to using the Internet right away.

No, it took me five or six years of learning lessons the hard way, using traditional network marketing methods: getting people to meetings, putting out flyers on cars, doing the sizzle card thing, buying leads, using every dollar I could spare.

I never had a lot of success with those methodologies. Of course, a lot of that had to do with the fact that I was not very experienced, and my own confidence levels and personal development were not where they needed to be. Because once you acquire some of the key skills, I think you can go out and build a business using any methodology you want.

For me, though, the big epiphany happened in about 2003, when I came across information on direct response and discovered the art of copywriting. I knew I wasn’t very good on the telephone, and I wasn’t very good at selling—but I could write an email that would do the telling and selling for me.

I learned how to write a piece that would hit all the psychological elements, so that by the end of reading the letter, the person would have gone through every single hot button, objection and potential question and be ready to make a buying decision.

I started applying those skills to sizzle calls. One of my first recordings was about six minutes long. You could three-way a person onto this call, and it would tell the entire story of the company, the product and how we sell it in about six minutes. By the time they were done, 10 to 15 percent of the people who heard the call would be willing to place a $200 or $300 product order right then and there.

That’s the power of a truly effective sales message.

As I focused on selling and copywriting through online sales letters, a lot of people in my company started using those tools as well, and I started getting a reputation as an effective marketer.

Which is when you created Magnetic Sponsoring?

Right. This actually started as a training manual for my own downline. It was about 60 pages long. It described all the lessons I’d learned the hard way, and what was working for me now.

Then it took the next step, as a funded proposal: “We’re going to sell a retail product up front, in the form of information and training, for $30 to $40. The people who buy that product we’ll then introduce to the opportunity and the team.”

This lowered the barrier to entry. People would pay $40 and then see the entire methodology laid out in front of them: exactly how the system worked, how we’d market the business, generate leads, and recoup those advertising costs.

The biggest question people have when they get started in this business is, “The product sounds great, the opportunity sounds promising —but how am I going to build my business?”

If you can answer that question before they even get started, then they’re going to sign up—because their biggest objection has been answered.

And that also changed how you looked at the business.

It represented a huge turning point.

When I was starting out, $300 was a big deal, and when you spend your last $300 on leads and then watch yourself mark those leads off the list as each one says “no,” or you find the phone number’s bad … the emotional pressure is intense.

Now you could turn a profit from leads even when they didn’t actually buy your product or join your opportunity! This was enormously freeing. It allowed people to get to a breakeven standpoint long enough to go out and acquire the skills it takes to become a real distributor and a true leader.

I can hear people saying, “It sounds so impersonal, so direct mail, so mass marketing. Don’t you need the human touch to actually build for the long term?”

Agreed—and that’s the trick to making it work. This is where a lot of people drop the ball because for whatever reason, they try to hide behind the Internet. But you can’t treat this process as an automated cash machine.

If you don’t follow up with people and establish that relationship on a personal level, through the telephone or in person, then you’re just in the Internet marketing space. If you just want to sell products on the Internet and never interact with anyone, honestly, you should get out of MLM.

Network marketing essentially is about personal development and building leaders within your team. And that absolutely requires getting on the phone, meeting people in person, and building those relationships over a long period, in a very traditional manner.

The only thing we’re doing with the Internet is using it as a channel to meet more people more efficiently. But after they come into the funnel, the process should be exactly the same.

What are some of the biggest changes the Internet has created in our business, and in business in general?

Social media has brought about true transparency. With social media today, if you’re not honest, if you’re trying to hide something, it will come out. Everybody will know it, and you can’t do anything about it.

This has never been an issue before. In the past, there have been a lot of crooks, scam artists, and people hiding behind corporation names and bad addresses. Those days are over. Today, if you treat someone badly or do them wrong, everyone knows about it. And once it’s on Google, it’s not going away.

There are network marketers who get a little overzealous with their promises or their claims—and they learn that lesson the hard way. I’ve seen people who’ve been run out of networking marketing because they screwed up and crossed that line.

This is a great thing. It keeps people honest.

On the flipside, that transparency also allows you to build relationships that are that much stronger. That’s what allows you to get in front of so many more people and build a network that truly is global. Today, your biggest source of equity is in your name and reputation.

Can you explain your concept of “You, Inc.”?

The You, Inc. model is how I build my business these days.

I view my email list, Facebook list and Twitter list as my You, Inc., distribution channel.

This is no different from owning, say, Fox News, or your local cable news station. That list is your channel, where you disseminate your message and sell your goods. Only today each of us has the ability to acquire our own distribution channel. It may never get to the kind of scale of a Fox News—but it can be much more profitable, because it allows you to establish ongoing relationships with potentially hundreds of thousands of people around the world, from your laptop.

That list becomes your business. That’s your asset; that’s really where the money is. That’s where you can market your MLM opportunity and products, or affiliate products, or whatever you want. And it’s a true business, unlike simply building a downline—which unfortunately is not really a business, because you don’t own it, the company does!

When you sign that distributor application, you’re really signing over all of your rights. They can cut you anytime they want to. And if they do, and you have not built up your You, Inc. reputation, list and communication channel, then you’re done. You have to start over again from scratch.

How duplicable is this approach?

The truth is, the methodology I just described is not really a highly duplicable business model. It’s not reasonable to expect to build a downline of thousands and thousands of people who are all building their own lists and You, Inc. business models.

But for those people who choose to go that route, it’s a powerful model.

At the end of the day, it’s up to the individual.What do you enjoy doing, and how do you want to build your business?

Do you want to have a team of tens of thousands of people, but not take advantage of the new functionalities and benefits the Internet offers? Or do you want to go for the You, Inc. business route, where you won’t have as large a team, but will instead build a core group of effective professionals, where you will own the distribution channel and can also tap into multiple streams of income?

I’m not saying the Internet way is right, and the old-school way is wrong. I don’t see there being a “right” or “wrong” here. It comes down to personal preference and how you want to build your business.

What I often see happen, unfortunately, is people getting exposed to the Internet side of things and being fascinated by it—and then being told by their upline, who’s been in the profession for twenty years, “No, you can’t do it that way.”

The Internet is a reality, and we all need to deal with it in a productive, balanced manner.

When you say “multiple streams of income,” are you talking about building several different opportunities at the same time?

No—I never, ever build more than one business. The one I’m in now, I’ve been in for four years, and I’m one of the top three residual income earners there. That’s all I’ve done, and that’s all I will do.

It’s hard enough to build one; you can’t build more than one!

I get offers of incentives every single day to join companies, and I won’t do it—because the grass is never greener. I learned that lesson a long time ago.

When I talk about multiple streams of income, I’m talking about providing tools, services and education—never multiple opportunities.

You’ll have much more success sticking with one thing for three to five years than by doing something different every twelve months. There are people who never learn that lesson, who get greedy and see a bright, shiny new toy to play with and think that’s going to make them money. They don’t understand that it’s not the business or the opportunity, it’s the skill set that causes you to succeed.

That’s a downside to the Internet: it makes competing opportunities infinitely accessible, especially through AdWords and Google. If you’re in company X and I’m in company Y, I can go advertise on your doorstep and say, “My company’s better.” That’s opportunistic and silly, but people do it. It’s had a big, negative impact on retention rates for companies, and has been a hard lesson for newbies to learn in the networking profession.

Twenty-five years ago, when you look at me, you see my company. The company was the business. But you’re saying the relationship between me and my company has radically changed.

Absolutely. And the old relationship you describe is exactly the mentality and methodology that came from corporate America. The baby-boomer generation lived and breathed their company—IBM, Xerox, whatever, you’re there until the day of your retirement, when you get your pension. That’s what you lived for.

That has completely changed. Now the individual is empowered to an incredible degree. The balance of power and value exchange has completely shifted.

How does that change our relationship?

I think it has to become an equal partnership between company and distributor, because they both rely on each other.

I’ll go so far as to say that today, the actual power really lies in the distributor’s hands, because their options are infinite. Fifteen years ago, the company had all the power and resources, and it was a privilege to be part of that organization. Today, the individual has all the power—and the company is privileged to have you as a distributor.

This is something I think everyone in network marketing is having to come to terms with. But overall it makes the relationship much more symbiotic, and I think that’s a good thing.

Say I’m a corporate executive. Given this shifting balance, how should I change the way I run my company?

The word “humble” comes to mind.

Unfortunately, a lot of network marketing company owners who have been around for a while have a sense of entitlement. “This is my company and my rules, and if you don’t like it, goodbye.”

I would love to see the company owners appreciate and acknowledge their distributor base in a new way. I’d love to see them embrace transparency and authenticity and recognize the value in their distributors by giving them more power and more rights.

This would translate into things like compensation plans that don’t require ongoing activity requirements to get your check.

The big promise of network marketing is, “Build the business and enjoy residual income.” But companies too often put clauses in their compensation plans that say, “Actually, you have to keep working forever, as long as you want to get your check.”

It’s just deceitful. And how can you build a team of great leaders who stay around for ten or fifteen years when your compensation plan doesn’t make that kind of residual possible?

It seems to me that as the corporation makes that shift, they stand only to gain, because they’re actually accessing a whole new source of power through their field.

You’re exactly right: they’re gaining more power by giving power away.

The problem is that when you’re in power, it’s hard to give it away. There’s a fear there, a mindset that can corrupt and become a virus in your head.

It’s the same with government. You never find a leader who comes into power and says, “You know what? I’m going to give the people more power, and take some of these silly laws off the book.”

But the truth is, when you empower people, you gain more real power. The more you give, the more you get to keep.

On one of your sites you declare, “Integrity, authenticity and accountability are absolutely paramount.” Who would argue with that, right? But in today’s information environment, suddenly that’s not only a sound moral principle, but also a very practical thing to do.

With the way transparency rules today, you have to adhere to it. It’s mandatory. Because there are no more secrets in the closet. It’s a matter of business survival.

I started Magnetic Sponsoring in 2005, and I can’t tell you how many affiliate programs and funded proposal programs have come and gone since then, the scams and deceit I’ve seen.

It’s easy to win in this business. It’s just a question of providing the most value in a really honest way, with integrity. If you can do that, you will succeed.

For us, the philosophy is very simple: value comes first, and money comes second—always. Keep that in mind, and you automatically win.

What do you see as network marketing’s place in the world over the next one or two decades? How do you see that playing out?

At the moment, it is an incredibly critical channel for the baby-boomer generation. These people have been hit by a very significant economic event, and this business is a way for them to recoup and start a new life.

I think serving that group is the biggest opportunity in our profession right now.

Beyond that, penetration into international markets, as we’re starting to see with Asia, Africa and the Middle East, is the next big thing.

Inevitably, network marketing is going to become more and more relevant. It will become more commonplace throughout the U.S., because the economy here is completely shifting from an employer/employee model to a contract-based model. People are no longer incentivized to hire employees, because of the added expense burden they have to pay, when they can just go hire contractors with no extra expense.

So that’s what everybody else is doing. From Disney to Dell, everybody is going either overseas or to a contractor-based model. Practically everyone’s going to become self-employed in the next ten years, unless they’re in retail.

We are becoming a nation of entrepreneurs again—and that can only help to promote and support the networking profession.