eBIZ.com uses MLM route to dupe students with IT package offer

The hitherto little known company, which is believed to be operating for the past 10 years, is selling IT educational packages through the MLM format, even as the content of its courses is available on the Internet free of cost

Over the past few years, Moneylife has regularly reported on how multi-level marketing (MLM) companies are duping gullible people with new, innovative schemes. Here is one more company which we discovered is offering a computer course on the internet, free of cost, and claiming that it has been doing this social service for many years! That's fine, only till the subscriber is asked to make an upfront payment of Rs7,446.

The company is eBIZ.com.Pvt.Ltd and it is the brainchild of Pawan Malhan. According to sources, Mr Malhan is a non-resident Indian (NRI). Some say he was a director of BITS, Pilani, while others inform that he was head of the Association of Indian Universities (AIU) for nearly a decade. Some blogs even suggest that Mr Malhan was founder of a US-based MLM company SkyBiz, which was fined $20 million by the government. Sources among IIT alumni say they have not heard about Mr Malhan and that they have no clue about his credentials.

eBIZ sells online self-learning educational packages that contain courses on operating systems, programming languages, database and some capsules on MS Office, computer hardware and internet surfing. The catch is that the subscriber is expected to learn all these courses online at his/her own cost. eBIZ.com says, "Please note: All our courses are designed for self-learning only by using computer and Internet at the cost of the learner."

The CD containing the package provided by the company has some animated tutorials. The fact is that anybody can create such animated tutorials using software like Screen Casting which is available on the Internet free of cost. (Screen Casting captures all the movements on the screen and saves it as a flash file.) What is more astonishing is that neither eBIZ nor its educational module is registered with any university or technical board; so whatever certificate is given would have little or no value in the market.

As eBIZ claims it is offering educational packages-mostlly related to information technology-many students are attracted to this. Students and their parents believe they are getting a good offer at a lower rate than other computer education institutes are charging, but they fail to understand that there is no value in such self-education, unless it is endorsed by a government recognised technical education board or university.

The business module is equally interesting. There are some cycles and orbits. The first six cycles make the first orbit that the associate has to complete within a year. To complete the first orbit the associate has to sell this educational package to 50 people in the ratio of 1:2 and he may receive a commission of around Rs26,000. In case he cannot maintain the 1:2 ratio he will not get the commission. This is about the income an individual can earn. But how does the company earn its revenue?

When a person becomes an associate he pays Rs6,550 to eBIZ. (The balance from the total of Rs7,446 goes towards service tax and cess on service tax.) To earn a commission of Rs2,000 he has to enrol two more people as his left and right legs. eBIZ's total earning works out to Rs19,500-Rs2,000=Rs17,500. The company keeps about 30% from this as its revenue.

In the next cycle, the person has two associates who each add two people down the line (in the ratio of 1:2). eBIZ's total earnings now works out to Rs6,550 x 7 = Rs48,850 - Rs6,000 (commission paid to the initial subscriber and his two associates) = Rs39,850. Let's say the subscriber's business continues in the required ratio of 1:2 till there are 25 members in the left and right down lines, then eBIZ would have to pay him Rs8,000 and the associates would each get Rs8,000 in the next cycle.

This assumes that the business continues in the required ratio. However, if eBIZ has to pay out each eligible member the commission from the 70% it gets, it could begin to pinch. That's why MLM businesses seek to register more and more people, but would like to see less and less subscribers achieving the 1:2 ratio. This explains why there are very few people (less than 2%) who joined up early and earned money and the majority end up losers.

eBIZ has been active in the northern states, where subscribers are now finding it difficult to add new candidates to the fold. So, the business in moving to other states. The target group is the same-gullible students. Why does one have to pay for something that is otherwise available free of cost over the Internet?