There is some debate on the internet today about the difference between MLM vs affiliate marketing.
While both help you earn money online by selling products to your audience, there is a major difference between these two strategies for earning. Only one holds up under closer scrutiny and promises you an honest living that isn’t dependent on anyone but you. Hint: it’s not any MLM scheme!
So, if you are trying to decide between affiliate marketing and multi-level marketing, this guide will make sure you don’t get scammed or waste your time.
Let’s take a look at what you can expect from each of these income-earning possibilities.
MLM vs Affiliate Marketing: A Closer Look
The first thing to clear up is exactly what the differences are between MLM and affiliate marketing. Here is what you should know about how these two models are set up.
What is an Affiliate Marketing Business Model?
An affiliate marketing program is rather straightforward to understand: you earn money based on the number of sales you gain for another company.
For example, let’s say that you sign up to be an affiliate for Bluehost. They will give you a custom link to share with your audience. You can then advertise Bluehost’s services on your niche website, social media, and any other platform you might have. Everyone who clicks through your custom link and makes a purchase results in a payday for you.
This ultimately gives you more control over your earnings potential.
The benefit here is that both the affiliate marketer and the company benefit from this arrangement. You get a kickback for referring your audience, and the company gets a wider reach. It’s a win-win situation.
What is Multi-Level Marketing?
Multi-level marketing (also known as network marketing) is very different than affiliate marketing, even if it looks similar on the surface. Here is a quick breakdown of how network marketing companies make money online compared to affiliate marketers:
- You sign up to sell for MLM programs, thinking you are going to grow your own business.
- You sell a few products, but the emphasis here is on having more people sign up underneath you.
- You earn money based on your own sales but also based on the sales of your recruits.
Certainly, there is an opportunity to earn money via MLM programs for selling products, but it often is not the bulk of where earnings come from. Your ultimate goal is usually to sign up more people beneath you. In turn, you make a small percentage of the commission on each sale that they make.
You only earn money when they earn money.
This is the key area where an affiliate program differs from multi-level marketing channels. Affiliate marketers don’t have a goal to sign up people underneath them. Your earnings are based solely on your own efforts rather than on the sales and development of recruits.
Differences Between Affiliate Marketing, MLM, and a Pyramid Scheme
People mistake affiliate marketing for multi-level marketing and pyramid schemes, but the difference is actually monumental. An affiliate marketer is only responsible for advertising the products or services they know, love, and care about with their audience. It could best be summarized as referral marketing.
On the other hand, the MLM business model borders a little closer to something else that is actually illegal: the pyramid scheme.
When done correctly, network marketing is completely legal and has the potential for you to earn real money. There is an emphasis on selling products in addition to recruiting people to grow your network and business. Because there is an actual item you can sell, this is different than a pyramid scheme, even if it does benefit the people at the top more than the people at the bottom.
A pyramid scheme does not always have a product to sell. If it does, you may not be able to earn a steady stream of income from product sales alone. Instead, you are responsible for getting people to sign up under you and promising them a future payday.
When you earn more money from recruiting others than you do through sales, you may be part of a pyramid scheme. It’s worth noting that pyramid schemes are illegal in the United States.
Costs for MLM vs Affiliate Marketing
One major difference between entry into an affiliate marketing program and a multi-level marketing program is the cost to join.
In an affiliate program, you should pay nothing at all to get started. You are really doing the company you signed up with a favor by marketing their products and services. They know that affiliate marketers are doing them a favor by expanding their reach.
Why should you pay for the privilege of helping their business model succeed?
On the other hand, MLM programs often require substantial startup costs. An MLM program will usually require you to purchase a starter kit that contains the initial batch of products you need to sell to earn the promised payday. In addition, you might also be subject to membership fees to keep your business running and active.
Why You Should Choose an Affiliate Marketing Business Over MLM
The truth is that both affiliate marketing and direct sales from a multi-level marketing company can help you grow your monthly income. However, an affiliate program has more potential, less risk, and tends to be far more cost-effective than MLMs.
Plus, you don’t run the risk of encountering pyramid schemes when you stick with affiliate marketing vs MLM. If you want to protect your investment (which is really only your time), then affiliate marketing is likely the way to go.
Here are the top reasons why affiliate marketers have the better business model.
Little to No Initial Cost
Most affiliate programs have absolutely no startup costs to start advertising and reaping the rewards of making sales.
If you are eager to start earning and have no money to invest in something, you have no risk and nothing at stake with an affiliate program.
The only thing you need to invest in making a successful go of affiliate marketing is your time. You will need to create engaging content that markets the product or service of another company, but it should not cost you a dime.
Under the network marketing business model, you will have to pay your membership fees and pay for the actual product you sell. You might need to spend hundreds before you can even start. Earning back your initial investment requires time and lots of hard work. For many people, they never earn back this money.
Consider this statistic: According to the FTC, 99 percent of people lose money in MLM programs.
Earn Based on Your Sales, Not Recruitment
The major benefit of an affiliate program is that you earn more money based on your actual sales rather than your recruitment. Direct sales are the name of the game with affiliate marketing. The more sales you can make, the more money you will earn.
It’s an easy and straightforward way to see how you can position yourself to earn more. Want to make more money? Advertise a different way, create more engaging content, or find a new audience.
On the other hand, a network marketing business promises that you’ll make more money if you recruit others. The goal isn’t direct sales but rather the sales that your recruits tend to make — a percentage of which usually goes right to your bank account. It benefits the people at the top the most, with few dollars trickling down to the lower-level recruits.
Freedom to Select a Niche
The affiliate marketing industry is full of opportunities for you to earn money, no matter what your audience is most interested in buying from you. You might join an affiliate network that gives you access to several different brands and items. For example, Skimlinks, ShareASale and Commission Junction are great places to start.
However, you can also select a far more specific niche that expands your earning potential.
Think about this scenario: you want to target the outdoor industry and camping. You might want to sign up with any or all of these best outdoor affiliate programs. You can earn a commission not just from a single company or product but from a wide array of them.
No Risk If You Don’t Make Sales
Multilevel marketing has an inherent risk if you don’t make sales: you lose the money you invested, and you may even lose your right to sell on their behalf. The parent company might require you to hit a certain sales threshold to maintain active seller status.
This is how MLM businesses ensure that they have a minimum income each year.
On the other hand, most affiliate programs don’t have the same requirements. If you don’t close any sales, there is absolutely no risk to you.
While it can be a great way to earn residual income because your content exists permanently after its creation, you can build slowly over time. You don’t need to hustle to make as many sales as possible as soon as your content goes live because you aren’t going to be out of your initial investment (because there was no initial investment).
No Need for Sales Funnels
One of the hardest things about closing sales is moving prospective customers through a detailed sales funnel. You may need to move them along the AIDA funnel (awareness, interest, desire, and action). This can require a lot of heavy lifting on your part. It would mean educating people about the product or service, gauging their interest, sparking their desire, and moving them with your call to action.
Instead, the parent company does all of this for you.
All you have to do is promote the product to your audience. You make them aware of the product and maybe even spark their interest before sending them to another website where they can learn more. This site moves them further down the sales funnel until they are ready to take action.
Fast Turnaround Time for Payment
Are you ready to start earning money online right away? Affiliate incomes are great for earning passive income — and you can get started right away! As soon as you have your custom affiliate link for a given site, you can start making money online. Create content and start to reap the rewards.
There may be a minimum threshold for when you can cash out with affiliate marketing, though.
Many companies require you to earn $50 to $100 before receiving your payout. The good news is that it rolls over to next month if you don’t hit the threshold this month. You never lose the money you earned.
MLM businesses may have a much longer turnaround between when the sale is made and when you expect to be paid for it. Because you have a much smaller pool of products and services to sell, it can take months or even years to build up substantial earning potential.
Final Thoughts: MLM and Affiliate Marketing Opportunities
Maybe you have been thinking about the difference between MLM vs affiliate marketing, wondering which one is the best fit for your income and business model. Hopefully, you have come to see that MLM is a risky endeavor at best and could lose all of your startup funds at worst.
Affiliate marketing is better if you want passive income based on your efforts rather than recruitment.
While you may still need multiple marketing strategies to make a decent living with affiliate marketing, it is much easier than signing up with MLM companies. Here are our best affiliate marketing tips to help you drastically boost your income!
