Ask Stacy: Should I Try Multilevel Marketing?

There are lots of ways to make extra money, including the time-tested method of network or multilevel marketing. Is it for you?

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Ever consider trying to make some extra money — or even a living — working with Amway, Nu Skin, Herbalife or some other network marketing company? If so, you’re not alone. Here’s this week’s question:

I’ve recently seen a renewal of direct selling — specifically Amway and it’s products. What intrigues me is that this isn’t the same Amway that I was approached by about 20 years ago — it’s online shopping, shipping directly to the consumer. While the organization appears to function the same, I’m wondering if this new method of product delivery would lend to a more successful business?

Can you recommend specific things that people should be looking for, or asking (and what answers denote good vs. bad opportunities) when considering joining something like this? Any other advice or reality checks that people should give thought to before jumping on the MLM, direct-sell or IBO (Independent Business Owners) bandwagon?

– Jade

If you’ve never heard of multilevel marketing, you can read about it on Wikipedia. Here’s how it defines the concept: “Multilevel marketing (MLM) is a marketing strategy in which the sales force is compensated not only for sales they personally generate, but also for the sales of others they recruit, creating a downline of distributors and a hierarchy of multiple levels of compensation. Other terms for MLM include pyramid selling, network marketing and referral marketing.

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In short, the ultimate goal of network marketing isn’t to sell products. It’s to recruit enough people for your downline so you’ll make a living from their efforts rather than your own.

I’ve been solicited for various multilevel marketing programs many times over the years. Most recently, an acquaintance of mine tried to get me to attend a meeting for a network marketing company offering a cash-back shopping card. Because I could theoretically use TV and the Web to reach and recruit hundreds of thousands of people — and he’d be making money from all of them — I guess he figured I’d be the perfect person to have in his downline.

But I’ve never considered joining any network marketing company and never will. That doesn’t mean you shouldn’t; do whatever makes you happy. But tread cautiously, because there’s a lot of hype and broken promises in these businesses. I’m not going to speak to Amway or any other specific company, but here are some things to consider:

Do you love sales?

Many people consider sales a sleazy way to make money. That’s understandable, because there are a lot of sleazy salespeople who employ sleazy sales tactics to separate you from your money. As far as I’m concerned, however, sales is an honorable profession. I’ve been a salesman for more than 30 years: 10 as a stockbroker and 25 selling my news series to TV stations.

If you’ve never tried sales, let me assure you it’s not easy. You have to reach people, then convince them they need what you’re offering. You’ll be regarded skeptically, because some on the receiving end of your pitch will think you’re trying to enrich yourself at their expense.

So if you’re going to sell something, make sure you can take rejection. But most important, make sure what you’re selling really has value. Because unless you’re a sociopath, you’ll never be successful selling something that doesn’t.

Are you willing to approach your friends?

While network marketing doesn’t require you to sell to friends and acquaintances, it’s often done that way. This is the chief reason I’ll never do it. In my opinion, attempting to sell anything to your friends is sleazy, plain and simple.

Back in my stockbroker days, I became friends with one of my co-workers who wasn’t a good enough salesman to make it. Months after he left the firm, he called and invited me to lunch. Looking forward to catching up, I agreed to meet him at a local Denny’s. But as soon as pleasantries were exchanged and lunch ordered, he launched into a spiel for Amway. It continued uninterrupted until I slammed my car door. I never saw or spoke to him again.

If you’re looking to reduce your list of friends, treat them like marks. Try to persuade them to become salesmen who work for you.

Are the promises realistic?

One of the reasons people hold salesmen in low regard is they tend to make self-serving statements and false promises.

I once attended a big multilevel marketing meeting at the behest of one of my stock brokerage clients. It was more like a tent revival than a business meeting, with person after person taking the stage to wild applause after waving around the giant checks they were receiving monthly, courtesy of their downline.

The next day, the visiting head of the organization called me at my office to try to get me involved. The pitch: Because he had directly and indirectly enrolled so many people in his downline, he was now getting $100,000 monthly checks with no effort. Didn’t I want to make that kind of money? I replied by asking him exactly how many people he needed in his downline to make that much. When he told me, I whipped out my calculator. The details are sketchy — it was a long time ago — but as I recall, in order for all the people in this guy’s downline to make the same money he was making, they would have had to enroll more people than there were in the state. And if those new recruits used the same $100,000 promise when they signed up their recruits, they’d be required to enroll more people than there were in the United States. And if the next layer down wanted to make $100,000 a month, they’d have to sign up more people than there were on the planet.

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  • janices

    Great article!!

  • janices

    Great article!!

  • Jason

    If you look at the statistics only about 5% of people break even in multilevel marketing and less than 1% make enough to quit their day job. That should tell all you need to know about it.

    I’ve had numerous family members and friends try it, none made any money and many damaged relationships trying to sell to their friends. A tip. If you do decide to try selling to friends and family take the hint and drop the discussion if they say they aren’t interested. This is exactly the opposite of the training you will receive from the multilevel companies. They will tell you to use your personal network and teach you the hard sell. That is a great way to lose friends but the company doesn’t care about that.

    • Eddy A

      Jason, It’s sad that you really have no clue what you are talking about.. Look at Corporate America, only 1% retire Rich and 4% with Financial Freedom, the other 95% are broke, still working passed 65 or living off Federal Assistances. Also not every Network Marketing Company works how you explained, some might but most are great companies selling a great product.. I personally don’t participate in 4 MLM companies that I buy product from, people don’t realize that MLM companies have better if not more superior products then what you can find at Walmart, Target, etc… Another Reason why 5% make it, is because the give it the time to develop their Business 3 to 5 years.. 95% don’t even give it 2 months before they quit… I am not saying this is you, but Being ignorant is not so much a shame, as being unwilling to learn.- Benjamin Franklin

      • Jason

        There is a huge difference between 5% becoming rich and 5% making any money. The vast majority of people lose money selling in multi-level companies. That is a fact.

        I do know what I am talking about. Like I said, I’m had multiple family members and friends try Amway. I’ve sat though the meetings, and heard everything their recruiters (uplines) promised. The focus is not selling products, it is selling people the idea that they too can own their own business.

        • Eddy A

          The problem with MLM and 95% of the people never give it the right time to learn and educate themselves in the industry. This Industry moves over 187 Billion Dollars a Year, Billions are paid in commissions yearly.. But 73% sign-up and never do anything again with the company they join, the other 15% only give it 30 days to 90 days and quit and the rest 7% stay in the companies, attend meetings and buy product, but never work on personal development and never work on developing skills they need to be successful… Asked Bill Gates, Walt Disney, Steve Jobs, etc.. how many years of work and sacrifice they put in before they reach success…

  • LagunaLady27

    Your description of the goal of network marketing is off. While people do make a small amount of money from the sales of each of their downline, they must also sell products, by law. Yes, some people are obnoxious in the way they approach people to join them, but they were probably obnoxious before starting a MLM business.

    My problem with all MLM businesses is that they underestimate the amount of time, energy and money it takes to make money in the business. I should know. Been there, done that. Secrecy is also a serious issue. The rules are not divulged by the owners of the main concern. Instead, the upline is expected to train the downline. The problem is that sometimes keeping the downline in the dark makes the upline more money, while the downline is shafted. Want to see my scars?

    I was very successful until it became more beneficial to my upline to keep me in the dark, change the rules midstream and deny me earned benefits. Never again.

    • Max Brandon

      Excellent points, LagunaLady – including …
      A. the Mushroom Treatment (keep you in the dark and feed you crap)
      B. changing of the compensation plan to benefit ONLY the Upper Crust (crumbs held together by their dough)

      Having twice been in MLM, I mostly wound up with …
      1. friends & acquaintances who would pale and run when approached
      2. inventory it took me YEARS to sell

      Recently I was again treated to weeks-long on-n-off presentations & discussions of yet another MLM outfit (same ol’ MLM zebra stripes – with sucker-theme variations).

      When I finally asked them SPECIFICS about their SOURCES of LEADS, what I was ACTUALLY BUYING, what I’d be PROVIDED, and a Statement of Work of what THEY’D do for my investment – it was just another run-around parade of innuendo and unanswered questions. Everything was “cool”; I’d be “taken care of” (hoh yeah – would I ever … ).

      Same malarkey – different day.

  • Brandy

    I’ve had several people attempt to recruit me over the years. I’m a people person and BEING one, I WOULD NEVER solicit a friend for money! I’ve watched several go down the Amway, Monavie, Essential Oil and random Avon/other “miracle” cosmetic whatever path. Many are no longer friends for trying to sell me on stuff (constantly) they know I don’t want (and tell them so up front). Only one is currently still trying and I have her blocked on FB. NONE have made significant money off of it. ONE was investigated by the authorities (I believe the FBI) because he came up with his own pyramid scheme. I believe HE DID make money but had to give it back! His was the best plan because he was the one who came up with it therefore, he was in the top tier. In a crappy economy, stuff like this always looks better because we’re desperate. If you’ve got even $500 to blow on inventory, you’re better off in the stock market! Better odds for growth.

    • Eddy A

      Sad Sad Sad.. You refer family and Friends to Movies, Restaurant, Salons, Spas, coffee shops, lawn care, Maid service Etc… And they will never pay you for it, But you can’t sell you family and friends a product you support and make a living from… If I sell Coffee, vitamins and other products from a shopping plaza and spend over $2,000 a month in rent to sell me product, what is the difference if I sell the same product from my home??? If you opened a coffee shop in the mall, wouldn’t you invite all your family and friends to visit your new business?? What if I opened my online coffee shop from home, why wouldn’t I invite all my family and friends to enjoy my coffee?? – “Being ignorant is not so much a shame, as being unwilling to learn”.- Benjamin Franklin

      • Brandy

        What I’ve found with this sort of sales is that it comes in waves. Being pyramid in nature, I usually get solicited by more than one friend for the same product around the same time and am not interested in selling or buying. It creates unnecessary tension in the relationship. If I tell you it doesn’t work for me, I don’t want it even if you want to sell it to me! I’ve been through this enough times that I can’t claim ignorance. I KNOW BETTER.

        • Eddy A

          I can agree with you that if you are not interested, they should drop it.. 2 of my Best friends were not interested, I never talk about my product to them again, we still hang out and have fun and they do support me in what I am doing. MLM is not for everyone, I get that totally..

      • Stacy Johnson

        A. Referring friends to a service isn’t remotely related to profiting by selling something to your friends.
        B. If while enjoying your coffee at the mall you begin recruiting me to sell coffee for you, I’ll order it to go.

        • Eddy A

          So its okay to refer a friend to a service or product and giving that business the profit for your effort, but its not okay for you to refer a friend to a product or service that you work for because its bad to earn a income from your friends.. please..

          BTW, when you do buy a cup of coffee and you are enjoying it and walking with your cup in hand, you are a walking billboard for the that coffee shop for free.. and if that coffee shop wants to open another coffee shop in another area, they need to recruit new team members.. Wow that’s MLM, I recruit someone new in Spain, and now they need to recruit to build their business.. Direct Sales will be the business of the 21st century, listen to Robert Kiyosaki his audio is on You Tube..

          • Stacy Johnson

            Actually, Eddy, you hit the nail on the head. Yes, it’s NOT okay to earn an income from your friends. Because then they’re no longer your friends, they’re your customers.

            There’s been a lot of mixing up in this discussion between sales and MLM sales. I’ve been a self-employed salesperson for 34 years. You don’t need to extol the virtue of helping yourself by helping others, or working for yourself instead of making the boss rich. You’re reading the results of my doing exactly that right now. Nor do you have to remind me that seeking referrals is smart. If you’ve been on this website for long, you know we do it all the time.

            In short, I don’t like MLM for one reason: It often suggests turning your friends into customers, employees, or both. If you’re down with that, awesome. Good for you. But when you’re invited to my house, the only thing I’ll be after is your company, not your money.

          • Eddy A

            Stacey, If you don’t like MLM for one reason, you miss the boat.. lol especially if the reason is turning your friends into a customer.. In MLM you own your own business, if you don’t want to sell to your friends then don’t, their are 7 billion people on this earth.. Again, if you were to open a restaurant or store, you would definitely invite everyone you know to come by for Friends and Family, almost every business does that and try your food or product.. I do the same, I started my business from home and yes I invited all my friends and family. It was easy, try my product, if you like it great you can consume my product instead of whatever you were buying prior and if you don’t like it, I will never talk to you about my product and we can have tons of fun doing other things..

            By the way, someone presented me this amazing opportunity, it has totally changed my life – family life, social life, financially and personally.. Asked my kids, they see me everyday now, before working 80 hours a week, I saw them one day a week.. So if this opportunity has changed my life, why would I not share it with my closest friends and Family.. Example, My Wife’s best friend work has a VP for a Corporation w/ a 6 figure income, but no time to enjoy life and the money.. Now She is full-time w/ us in our MLM business, loving life and she thanks us everyday because she rather work with us everyday then spending the day working with other people she did not like in her prior job.. I also have 2 other great friends that don’t want nothing todo with my business and we have a blast together when we hang out, the only problem they have is that I have a lot of free time and they don’t, lol but again thats their choice..

        • Brandy

          Side note: Stacy, you rock!

          • Eddy A

            Brandy, its all about education.. If Stacey would have been more informative on the question asked, okay.. but if I were to read this article, I probably would not even think about joining a MLM and would still be working as a Director of F&B, about 70 hours a week and making my bosses rich and giving them the time to spend with their children while I am running the show at work and not spending time with my Children.. I would not have the time and money now to do the things I want and I would not have help many families earn addition income and improve their financial situations.. But you won’t know that feeling of having many people come to you thanking you for helping them and their families in so many areas of Life – Family Life, Social Life, Finances, etc… I never had my bosses come to me say thank you for working so hard for the company, that now they pay me more and I spend more time with my family and children while you do all the work, that conversation has never taken place.
            But if you really think that you and Stacey are correct well – “if you think you can or you think you can’t, you are right”. – Shakespeare.

            I guess its okay for Millions of people to work hard for their company and for the owners to make Millions of Dollars of their efforts, but If I work for myself and share my product with everyone I know and make a profit, that is not good.. What is sad is how people are okay in making others super rich, but have no interest in helping their own Family and Friends.. Doesn’t make sense.. But that is why the 95% work the 5% in the world, the 5% do things totally the opposite from the 95%.. My Mentors says all the time, “one key to success is to observe the masses and do the opposite”.. Maybe thats why he is a Millionaire now..

          • Brandy

            I don’t work for anyone, Eddy and you ASSUME quite a lot about people from commentary on a blog. The reason that I think Stacy rocks is because I’ve made some similar choices based on both information he’s provided AND from just getting older and paying attention.
            I lost my job almost 2 years ago and was on my FOURTH CAREER. The difference this time is that I invested and saved a great deal when the lay-offs started and the market was low.
            Essential oils (the “hot” pyramid crap – excuse me MLM) wouldn’t have kept my house payment. As a matter of fact, I was so heavily solicited by so many people by 3 different MLMer’s that I chose NEVER TO VISIT THAT HOUSE AGAIN as I was only there to provide a ride for someone’s daughter!
            That being said, we bought a foreclosure years ago and now we can move on and make a decent profit while seeing what’s on the horizon.
            Pyramid marketing to me is a circle jerk. In an area that is small and somewhat depressed – like where we live – usually the same people are involved and everyone attends to make everyone else feel better. It becomes irritating to socialize when everyone’s looking for the next sale or pyramid to sell for their ticket away from “the man” instead of becoming an independent contractor and taking a risk of their own.
            Thankfully, my investments are kicking ass! So, for now, I’ll be keeping up with Stacy…or trying, while I write my novel and sell my house and maybe go to Europe on vacation.

          • Stacy Johnson

            Thanks, Brandy. You too! :-)

  • Techout

    There are a lot of holes in this author’s reasoning, with very myopic reasoning at best. There are a lot of other things to consider as well. What about the product? The market? What if you are getting wholesale prices on things you use everyday? Wouldn’t it make sense to get a deal like that, compare your wholesalers like Costco, Sams etc.

    Yes, some companies require you to have thousands in your downline in order to make money, and I agree, I don’t like that. OR the fact that you’re recruiting people to work for you.

    Maybe ask yourself, if I had no one in my downline, will I be happy with this product or can I sell it efficiently? And if the answer is not a “hell yes”….then its a no! Move on to the next company.

    My two cents..

  • ModernMode

    When I see or hear MLM, I always ask myself the question, if these products are so great, why are they not in stores? The answer is it’s not about the products. It’s about recruiting people. And sooner or later, they run out of people. The truth is almost no one makes money in MLM.

    • Eddy A

      “Being ignorant is not so much a shame, as being unwilling to learn”.- Benjamin Franklin

      By positioning a Product in MLM, the Company can spend all the money it has in developing the best product for the consumer.. If you know business, when a new product is launched and place on store shelves, the product can not talk, so the company spends very little in create the product (low quality) and puts 80% of its money into advertising the product..

      • ModernMode

        They’re spending money recruiting people instead of actually trying to sell the product.

  • Mark Yotter

    I thought Stacy’s article was fair and well written. He explained up front that he was biased and was giving his opinion (on his own website). He let you know that from his limited exposure to MLM, he wasn’t impressed it was realistic, and if you wanted something more positive, you’d have to look elsewhere. That’s counts as good journalism. My wife and I attended several startup meetings from three different MLM companies back about 20 years ago. We listened to the hype about sucessful lifestyle and attended the training classes for selling. We actually joined Shaklee and worked the program for a couple years. But if you aren’t willing to pressure your friends, and always be approaching any potential customer to either buy products or join the sales team, you won’t grow enough to make it into a real business. If you don’t care about ethics and honesty, and your whole goal in life is to just make money, then MLM can make you money if you put lots and lots of work into it for the first 3 or 4 or 5 or 6 or 7 years. I do have a sensitive conscience about honesty and ethics, so it definitely wasn’t for me. I know one little old lady who joined primarily because she liked Shaklee vitamins and just wanted to be able to buy them at the distributor discount price. She will sell to friends who want the stuff, but she isn’t trying to make it a real business. Her adult son has been building his downline for over twenty years and while he has “earned” several free trips to motivational meetings at vacation spots, he still hasn’t gotten to where he could quit his day job. My chief ethical concern is that in order to pay profits through 7 levels of downline, the product has to be overpriced to begin with. “Normal” marketing has manufacturer / wholesaler / retailer, so you are just looking at three levels of markup. MLM still has the manufacturer level and the retail level, but it has 7 levels in between where each one gets his profit margin also. That is un-realistic, even for good products like Shaklee, Amway, or Melaleuca. I also wasn’t comfortable that 3/4 of the emphasis was on building your downline rather than actually selling the products. If customers aren’t buying the products, there’s no income to pay anybody. But many of the products are being purchased by all the distributors who just buy the products for their own use, or to keep some quick stock available.

  • nmtonyo

    A neutral opinion: Network marketing has a high failure rate because very specific skills must be attained in order to reach those highly compensated positions. Experts estimate about 1 in 1000 have the talents, or are able to gain them with little training. The other 999 must usually go through a years-long process of learning what it takes to get to make significant in network marketing. To anyone looking at an opportunity, the red-flag word should be “easy”. If someone tells you it’s EASY to make 5 figures a month in MLM, they’re lying. A friend of mine making 5 figures per month told me he spent 17 years making NOTHING, prior to finding the right mentor and opportunity. Very few have the resources to devote to years and years making nothing, so they quit, and blame the industry rather than their own lack of stamina to learn the needed skills. A new person should figure on making little or nothing for a good while, and spending some cash on skills building as well. As Stacy Johnson himself would say, “Beware of shiny objects”.
    About why aren’t these type products sold in stores? Network marketing companies are really “new product introduction” companies. The network marketing model is used to save huge expenses introducing new products that require customer education and consulting. In order to retain top marketing talent, ethical companies promise to keep the products out of the traditional retail chain. Because much of the wholesale distribution chain is sidestepped by direct to consumer sales, network companies pay a larger percentage of receipts to the network of sellers, who also save them considerable expense in advertising, customer service, and order fulfillment. Products of poor value disappear quickly, and unethical companies cannot retain marketers or stay out of trouble with the feds.
    Thanks for addressing this issue, Stacy. Your friend Tony Olson in New Mexico

  • Patrick Seitz

    How about writing an anonymous comment and then liking your own comment? Is that integrity?

    • Amy Livingston

      I don’t think you’re allowed to like your own comment. Must have been someone else.

  • Amy Livingston

    Of course he knows it’s negative. He admitted that right at the beginning. But that doesn’t make it inaccurate.

    I’m not sure I understand what you mean by “every business has a pyramid structure.” Most products have more people buying them than producing them, but that’s not the same as a business model where you make your money not from selling the products, but from recruiting others to sell them.

    • Eddy A

      “every business has a pyramid structure” – asked your boss if you earn more money then him, then asked your boss if he earns more then the his boss.. every great business, church, organization and government has a Pyramid structure.. Employees, Managers, senior Management, President(owner). The pyramid structure is the most solid structure on earth..

      • Stacy Johnson

        That’s a misinterpretation of the way the term “pyramid” is used in this context. Obviously, most business and social organizations have multiple layers. But as Amy pointed out, they don’t survive by recruiting additional participants.

        Like most businesses, we have a pyramid organizational structure here at Money Talks News. But my team members don’t need to recruit additional members to get a raise. Nor does their income depend on money brought in by their recruits.

        That’s what the term pyramid refers to in this context.

  • Amy Livingston

    “The point that you slammed your car door and never spoke to a person after that for him talking about a business to you that he was pursuing, shows level of maturity and openness you have.”

    Based on the story, I would say Stacy’s problem was not that his former friend “talked to him about a business he was pursuing”; it was that he pretended he wanted to get together just for social reasons, then blindsided him with a sales pitch. And, since he “never stopped talking about it,” apparently he also refused to take “Sorry, I’m not interested” for an answer.

    In any case, your objection is that Stacy is unqualified to write about multilevel marketing because he has no personal experience doing it. But he does have personal experience being recruited for it, and his reaction was very, very negative. That’s an important piece of information for people to have if they are thinking about getting involved in a scheme like this; if you try to sell your friends on it, a lot of them are going to be very annoyed with you. And if you refuse to drop the matter, you may end up losing your friends.

  • Stacy Johnson

    “author clearly seems to have no hands-on experience with traditional sales and/or direct sales”

    Did you even read this entire article? “I’ve been a salesman for more than 30 years: 10 as a stockbroker and 25 selling my news series to TV stations.”

    So I guess 30 years in sales translates to no experience in sales to you?

  • Eddy A

    Stacey, every corporation, business, church, organization and Government is always recruiting.. its the only way they survive. Its all a Pyramid, they have departments that focus on that 24/7 and they asked every member to recruit, only difference is that companies, churches, organization and government don’t pay their members for recruiting.. When I worked as a F&B Manager for Disney and Director for the Ritz Carlton, they would have me do recruiting trips and always have my eye open for new talent, neither were on my Job Description, churches are always asking to spread the word and recruit more members for the church, every organization I have been involved is always looking for new members, some even give incentives for whoever brings the most members for the month, Recruiting is part of every structure. In MLM, people that really learn how to become a professional in the industry, get compensated really well for doing something their job, church, organization has them do as well..

    Definition of a JOB – The Employee does enough not to get fired and the Employer pays you enough for you not to quit.. – Very sad..

    The problem with MLM and 95% of the people never give it the right time to learn and educate themselves in the industry. This Industry moves over 187 Billion Dollars a Year, Billions are paid in commissions yearly.. But 73% sign-up and never do anything again with the company they join, the other 15% only give it 30 days to 90 days and quit and the rest 7% stay in the companies, attend meetings and buy product, but never work on personal development and never work on developing skills they need to be successful… Asked Bill Gates, Walt Disney, Steve Jobs, etc.. how many years of work and sacrifice they put in before they reach success…

    In the company I am involved in teaches that if you want to make lots of money, you need to get out of your circles of Family and Friends.. Family and Friends might support you and buy the product, but the riches come from people you don’t know. I have personally help many families earn extra $1,000 to $3,000 a month in income and have help a few go full-time and now spend tons of time with the Family, kids and enjoy life. Just because I have more time for Family, it does not mean I don’t work. I can tell you that I work hard to maintain my lifestyle, but every hour I put in is for my Family, not to make my past Superiors or owners of the companies I worked for to give them the freedom to be with their families whenever they want and leave a great fortune for their kids…

    Sad news.. 95% are influenced by people, mostly by people that don’t have a clue. The problem is that people don’t think for themselves.. Listen to “The Strangest Secret” by Earl Nightingale, on You Tube (30 Minutes)..

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