Affiliate Marketing or MLM (Multi-Level Marketing), which is better? Some people think they’re both scams. Some just don’t care because they only want to make money. But before you make any decisions, it’s important you need to know which one is better.
Both of them are the 2 most popular business models that people use to make passive income.
Let me be upfront with you, I do affiliate marketing and it’s my #1 recommendation BUT what you read here is unbiased information because I have done MLM, in fact, 3 times. I have knowledge of both.
If you are good with that, let’s begin…
What is MLM (Multi-Level Marketing)?
(MLM) Multi-Level Marketing is a marketing process that’s often referred to as network marketing and direct selling.
When you come across MLM companies they say they have a “business opportunity” for you.
One of the first things you’re going to want to know is how you’re going to earn income.
The 2 typical ways you can earn income in MLM are:
- Sell the MLM company’s products/services at retail prices and earn commissions.
- Earn commissions on the sales made by the people you recruit(your downline) to the same company.
Once you join with an MLM company thru a sponsor, they will refer to you with a fancy title like as an IBO (Independent Business Owner), IBR (Independent Business Representative) or an IC (Independent Contractor).
In reality, you are an “MLM salesperson” who is not an employee of the company.
Why do I say this?
As an MLM salesperson, you’re expected to sell retail products to consumers by establishing your own relationships and by word-of-mouth.
But most importantly, you’re given incentives to recruit other people to be part of your sales team.
These people are your distribution “downlines” who do exactly what you do… sell retail products/services and recruit other people to their downlines
The downlines are your incentives because you earn a percentage of the products/services they sell.
Thus begins the formation of a pyramid layout…
Is MLM a Pyramid Scheme?
In truth, MLM is rather alike to a pyramid scheme. The similarities are certainly there and a lot of people say they are.
But like anything in life, there are always the good and the bad. There are legitimate MLM companies and there are the illegal ones, the pyramid schemes.
How would one define a pyramid scheme? I’m sure you’ve heard of it and perhaps had the misfortune of being “scammed” into it unknowingly.
This is what a pyramid scheme looks like…
The sad part is, many people do get caught up into the scheme because it comes disguised in hidden forms so it’s difficult to spot them until you’ve already lost huge sums of investment.
Some sites purport to sell a product and use it to hide their pyramid scheme structure of selling only memberships.
Fortunately, pyramid schemes have 1 common characteristic. They promise large profits if you recruit people into their ‘paid membership” program.
In other words, you’re not earning commissions on retail products.
To identify if the company’s product is used to hide the pyramid scheme, look for the following:
1. Inventory overload. If you find you’re being “forced” to keep purchasing products in order to receive the incentives offered by the company, the people at the top are the only ones who will win.
2. Very little retail product(s) is sold. Some MLM companies will say their products are really hot sellers. Does this sound familiar?
However, if you pay close attention you might find it’s the sales representatives inside that do the actual product purchasing at wholesale prices that are usually inflated.
Also, new recruits are doing the purchasing at the time of joining.
In other words, it’s not the general consumers buying the product.
A legitimate pyramid has “real” products. If you’re just purchasing a membership(s), then it’s an illegal pyramid.
Let me give you a real example of an illegal pyramid …
The Case of Digital Altitude February 1, 2018
What is Digital Altitude? Business Coaching Program
What happened? FTC (Federal Trade Commission) shuts Digital Altitude down.
The company was making false claims to people that they could make huge sums of money like in the 6 figures in 90 days or less.
They were also able to influence its members to pay into their high-cost tiered memberships. In addition, they were told they would learn how to make a lot of money with an online business. Instead, the only training they received was centred on how to promote their memberships.
Another promise to the members was they would have their own successful coach help them on their business, instead, the coach was merely a salesperson who pushed their members to purchase the higher level memberships at high costs.
Digital Altitude took more than $14M from their members and charged with violating the FTC Act.
What is Affiliate Marketing?
I think you’re going to want to watch this short video…
Joel’s acronym, S.O.P.S simply means Selling Other People’s Stuff! This is exactly what affiliate marketing is! Want to see it visually?
Does it look like MLM? No, right? MLM’s marketing structure is totally different from affiliate marketing.
The Case of Wealthy Affiliate
What is it? Wealthy Affiliate is an online affiliate marketing training platform that teaches people how to have an online business in any niche product/services they want to promote.
Some of their critics say Wealthy Affiliate is a scam because members write product reviews and give bad reports in order to “recruit” people to their membership. First, Wealthy Affiliate is not even MLM. They don’t have a multi-tiered compensation plan.
Furthermore, unlike MLM and scammers, Wealthy Affiliate helps people learn how to create and build their website(s). They learn how to have a profitable online business promoting any product/services they desire.
How do I know this?
I am a Premium member of Wealthy Affiliate, I created 2 websites thru their training. I am also an affiliate for Amazon.
One site is about scuba diving because I am passionate about diving and I enjoy helping beginners. I do product researches, write reviews and recommend the best scuba products on Amazon. I promote other scuba products and dive location sites too from other affiliate programs.
My 2nd website is promoting Wealthy Affiliate’s affiliate marketing training platform. Unlike MLM, I don’t earn commissions or bonuses on anyone’s sales, just on my own.
Here’s how affiliate marketing works in a nutshell…
First, you have to create your website (not scary to do…) for your passionate niche product.
Write lots of content. Your first content will be about you because you want to build trust with your readers.
You join with a company that has an affiliate program with products relevant to your niche. Write content and promote your product on your site.
Companies like Amazon, Best Buy, Walmart, Shopify, eBay, Target are just some examples of brand-name companies with an affiliate program.
When people find your content thru search engines like Google, Yahoo, or Bing and if they find it helpful, they purchase the product (thru your affiliate link) from your site. You make the commission.
The real beauty of affiliate marketing which is what I do, unlike MLM, there is no recruiting of people and there are no downlines.
What you’re actually doing is helping people solve their needs or issues by recommending products.
With affiliate marketing, you don’t have to sell. All you do is write quality content by offering values on your niche product and let your targeted niche audience decide if it’s good for them to purchase or not.
The Similarities of MLM And Affiliate Marketing
Both MLM and Affiliate Marketing business models have some similar benefits. They are both legitimate business models, except for pyramid schemes.
You can be your own boss, work part-time or full-time, and set your own hours.
The ability to generate one, two, or more streams of income is up to you.
The most important factor for both MLM and affiliate marketing is your commitment to hard work. Like any business, online or local, successful entrepreneurs will always tell you they work hard and make sacrifices.
So here’s the secret…if you treat your business as a REAL business, you have the potential to succeed and live the lifestyle you dream about.
The Differences Between MLM & Affiliate Marketing
MLM – You must recruit, recruit and keep recruiting people because many will quit and you need people to grow your sales team in order to earn passive income.
To get your product sales and to recruit people, you do this thru word of mouth, cold calls, and social media.
When you first join an MLM company, one of the first things they ask from you is to make up a list of your families and friends.
If you’ve done MLM or doing now, you know what I’m going to say next. Involving your friends and families can bring hardships and stress and in time they will avoid you for fear of being asked again.
Affiliate Marketing – People come to you so there is no recruiting. All you do is write lots of quality content with helpful product recommendation. As your site matures, your targeted audience will find you and may take your offer.
In fact, let’s say you have your own online affiliate marketing website and you’ve been writing lots of great content, you can earn income while you sleep.
2. Cost to Start:
MLM – To join an MLM company, you will most likely have to pay a membership fee.
You’re also encouraged to purchase a product(s) after all you will want to demonstrate it to your prospect.
A lot of MLM companies have a point system in order for you to earn your commissions. The problem with the point system is it’s not par to the $1.
For example, 1 skincare product costs $65, well you get 40 points. You’re short 60 points. When you and your recruits don’t have enough sales, you end up purchasing inventory if you want the commission for the month. That happened to me.
That’s the point system…
Affiliate Marketing – It’s FREE ($0) to join an affiliate program.
BEWARE: Stay away from affiliate programs who want you to pay to join, they are scams.
The other thing is you can start affiliate marketing without being a techie person. I still don’t know coding, yet take a look at my site. I did this thru my training with Wealthy Affiliate.
You can build your own website in a matter of minutes, in fact, you can do this in under a minute.
Of course, you will have to invest some money like purchasing a domain but that’s only around $12 to $14 a year and as your business grows you’ll want more additional tools.
With MLM, you need to pay to join and the website they give you is not yours to take when you quit.
With affiliate marketing, it’s FREE to join an affiliate program.
3. Product Choices
MLM – You’re only promoting the MLM company’s product.
Consider this, what if that MLM company goes under or you decide you don’t like them?
You have to start all over again with another company and recruit people from zero because all that passive income is gone. Will you try to recruit your family and friends again?
My advice is to do your research and read product reviews and I hope you choose the right MLM company and products.
Affiliate Marketing – The real beauty of affiliate marketing is you can promote whatever product you want, own as many websites you want, and join as many free affiliate programs you want in any niche you desire.
Let’s say you enjoy fishing, you can sell fishing equipment, fishing clothing, accessories, and so on.
Maybe you’re passionate about dogs, you can sell dog toys, dog clothing, healthy dog meals, how to train dogs ebooks, etc.
What I’m saying is, if one product doesn’t sell well, you can go to other companies with relevant affiliate programs and so you’re not stuck with one product line on your same website.
UNLIKE MLM COMPANIES, WITH AFFILIATE MARKETING YOU DO NOT HAVE TO PURCHASE THE PRODUCT(S) YOU RECOMMEND.
4. Don’t Have to Rely on Recruits
MLM – With MLM you are relying on how well your sales team (downlines) performs in order to receive a decent amount of commissions on their sales.
You have to keep them motivated and teach them how to recruit.
However, there is a problem with most MLM training. I don’t know if you noticed but there seems to be the lack of training from the person who sponsored you.
If you’re totally green to MLM and know nothing about how to sell to people cold-turkey and your sponsor can’t teach you, it’s like the blind leading the blind. It doesn’t work and you will fail.
Affiliate Marketing – You are in total control of your own online business. You don’t have to look after your recruits. What you put in is what you get out.
You join with a well-known and proven online affiliate marketing training platform like Wealthy Affiliate and take your own initiative to learn and go thru their training.
Wealthy Affiliate does have e a very comprehensive step-by-step training procedure and when you’re stuck, you ask questions and get support 24/7.
5. The Way To Get Paid
MLM – When it comes to getting paid with MLM companies, their compensation plans are extremely complicated and confusing.
There are at least 12 common MLM plans ranging from the Matrix, Binary, Unilevel, Hybrid, Generation and so on. Some MLM companies even combine the plans making it even more complex and make your head spin.
In addition to the plans, there are all types of bonuses.
Affiliate Marketing – The payment structure is easy with affiliate marketing. When you join a company’s affiliate program, they give you a unique affiliate link that you insert into your content recommendation. The is how they keep track of your sales.
When your readers click on it and buy, Well, that commission is yours.
Not confusing right?
Stay Away From Multi-Tier Affiliate Marketing!!
While Affiliate Marketing is still the #1 recommended way to make money online, unfortunately, there are the scammy sites.
They are the scammy MLMs who hide in disguise. They pretend to be doing affiliate marketing.
The Case of Easy 1Up
What is Easy 1Up? It’s a classic MLM pyramid scheme hiding in disguise. They claim to be in affiliate marketing and even give you their unique affiliate link for the purpose of recruiting people.
Their compensation plan (multi-tier) goes like this. When your 2nd recruit makes a sale, the commission goes to your sponsor and not to you.
Likewise, when your recruit’s 2nd recruit makes a sale, well then you get the commission. I know, quite bizarre, isn’t it?
If you look at the diagram, Easy 1Up has an upline and a downline. This is MLM at it’s best.
Also, another reason to beware is, Easy 1Up has NO products. They rely solely on you recruiting people and this is a 100% pyramid scheme. They only have membership levels.
So you see, Easy 1Up is a pyramid scheme AND an MLM in disguise claiming to be doing affiliate marketing.
Affiliate Marketing has no upline and downline.
Please don’t fall into this trap. Its hideous people do this to get your money.
NOTE: There are a lot of sites coming up like Easy 1Up. Beware of them.
Who MLM is For
MLM is not good for everyone. If you’re interested in pursuing MLM, I suggest having the following skills to make yourself successful at it:
- Enjoy cold calls, face-to-face selling
- Experience in selling
- Enjoy the social aspects of networking with people
- Experience in MLM
If you have any one of these attributes, you can do quite well just don’t get caught up in a scam.
I’m not sociable and also don’t like doing cold calls. These were the 2 biggest reasons for my failure of MLM. I’m not afraid to do hard work but face-to-face selling is not me.
However, I’m passionate about computers, although not techie by any means, it’s certainly one my niches. I can be on my laptop for hours and enjoy learning and working at home all day on my laptop on my online business.
So, if you can relate to what I’m saying, then affiliate marketing will work quite well for you. It’s for anyone who wants to earn passive income and willing to work hard. If you can read (I know you can) and have a computer (which you have), you can do this.
The greatness of affiliate marketing is you don’t need to know any coding or be a computer guru. Anyone can do what I do.
Creating a website in the exciting technology we’re in today allows you to create your site in a matter of minutes.
Unfortunately, The Downside to MLM & Affiliate Marketing…
You must work very hard, be patient, persevere and never give up.
Whether it’s MLM or affiliate marketing, you need to treat what you do as a REAL business. If you don’t, you will fail.
Working hard with no pay is one of the hardest tasks to accept. This is not your 9 to 5 job where you can expect to get a paycheque.
This is why you need to change your mindset and accept the fact you are going to work EXTREMELY HARD and put in long hours and make sacrifices along the way. This is what all successful entrepreneurs do.
Accept the fact that you’re not going to get paid for a while. The “a while” really depends on how much effort you put into your business. It could take 6 months, a year, even 2 years before you earn anything substantial.
BUT, you know what? Your efforts will be highly rewarded.
For a while you will earn nothing, then you start to see a little bit of growth, a little bit of money rolling in, then the money will be more consistent and before you know it, you’re on your way to your dream lifestyle.
Working paycheque to paycheque on a 9 to 5 corporate job will take you a long time to live the life you want. But isn’t it worth it to work your “butt” off now while you still can for free to live your retirement dream?
“Without hard work, nothing grows but weeds” by Gordon B. Hinckley
Have you heard of people talk about earning income while they sleep? This is true. These are people who put their blood, sweat, and tears into their online business.
How We Make a Living!
By now you know a lot more about Affiliate Marketing and MLM and now it’s up to you to decide which business model you prefer to join.
Whichever one you choose, I hope you still do your due diligence to research sites.
I’m sure you already know I’m a big fan of affiliate marketing. Want to see how people are making a living?
Meet RD40… CLICK HERE to read his success story!
Meet Eric… CLICK HERE to read his success story.
So what do you think? If you’re interested in learning more about Affiliate Marketing, CLICK HERE for my Guide to Affiliate Marketing for Beginners.
When you’re done reading it, let me know if you have any questions or comments. It would be awesome to hear from you. Which business model do you prefer?
Thanks for reading!
8 thoughts on “Affiliate Marketing or MLM (You Need To Know This)”
This is a really good review. I used to think that MLM was the same as a pyramid scheme because they really look alike and I already know pyramid schemes are scams so I treated MLM as such. I just read all the features of both MLM and affiliate marketing, it’s quite obvious that affiliate marketing is the best pick for me to make passive income. I’ve been trying to figure the best way to make money so I’ll look into affiliate marketing more. Thanks
There are legit MLM pyramids and bad pyramids. The bad ones are the schemes. Ya, I know, they look so much alike. It’s really important to read reviews on any company you’re interested in before taking the action to join.
The worst part is when MLM companies come in disguise and claim to be doing affiliate marketing.
Thanks for reading and doing your research here.
Having experienced MLM, yes I lost money. I’m now doing Affiliate Marketing and just starting to make money.
I found this article to be totally fascinating, an almost absorbing critique of MLM. I suppose that’s kind of a definition of what MLM would be, a form of legalized scam, as it can payout. I certainly learned a lot and definitely, Affiliate Marketing is the way to go.
Regarding Affiliate Marketing you made me realize that whilst I post what I think is quality content, I do not have enough affiliate links in them, sometimes none at all, so how can I make any money? So thanks for that.
Excellent article, many thanks.
You’re welcome and I’m glad I was able to help you. Also happy to hear you’re now doing affiliate marketing.
I wish you much success in your online business.
This is an excellent comparison of MLM and affiliate marketing and their associated business models, Monica. I personally know and socialize with several people who have made substantial income with MLM. Their success is based on building effective sales teams that sell product, which meant they recruited, trained, motivated, and supported their sales teams. It took them years of patience and persistence to achieve their successes.
Thank you for your comment. You hit it right on the button, the success behind MLM is to give real support and training to the downlines. So many people just sign up with no training and even sponsors don’t know the product(s) well enough to train. It’s definitely a team effort.
I believe there are certain types of people who are successful… people who have the confidence and skills to sell, and certainly a motivator.
Monica, we share a similar history with MLMs. I tried five of them over the years. all were on healthy, organic products, vitamins and supplement schemes. I joined them because of the supposed health benefits and of course, the ease of making money. Yes, I had to buy the inventory to make any money at all.
I do like the contrast you’ve drawn through your personal experience with MLMs and affiliate marketing. I experienced these as well. The pitfalls of MLM’s are very real to anyone who has tried them. By reviewing Affiliate Marketing in contrast to MLM’s you’ve created sound reasoning for anyone who read to follow through and examine Wealthy Affiliate closely.
Thank you for your comment.
I hope the content helps people make an informed decision on choosing the business model suitable for them.