Last Updated on February 29, 2024 by Eric Cantu
Is affiliate marketing a pyramid scheme? What’s the difference between affiliate marketing and network marketing or multilevel marketing (MLM)? If you’ve been looking to get started in online business, it’s very important to know the difference between the two, how each works, and which one is BY FAR the more sustainable option for growth.
Is Affiliate Marketing a Pyramid Scheme?
No, affiliate marketing is not a pyramid scheme. Affiliate marketing involves no recruiting, has no downlines, and is based on commissions earned by connecting people with products and services they’re looking for online.
According to Quora.com,
Affiliate Marketing is a process of selling or endorsing a product in exchange for a portion of any sales that you generate. A company will typically give you a referral link, or some sort of unique identifier, to keep track of how many sales you have generated by referring a product to the customer. A pyramid scheme begins with a single business transaction between two people. An offer is then made that person 2 can make money selling this product as well.
“Is Affiliate Marketing a Pyramid Scheme?” – Quora.com
In this article we’ll take a look at how affiliate marketing works, what makes pyramid schemes illegal, the core differences between affiliate marketing and network marketing and MLM, why affiliate marketing is more sustainable, and how you can get started affiliate marketing today.
What is Affiliate Marketing and How Does It Work?
Have you ever bought something online? If you reside on planet earth, I can almost guarantee your answer’s a yes. In fact, you’ve probably taken part in the affiliate marketing process without even knowing it.
So how does affiliate marketing work? Affiliate marketing is all about connecting people with the products and services they’re already searching for online.
A customer does an online search, the search takes the customer to a website where they find more info on the product or service they’re looking for, then an all-important link (called an affiliate link) takes the customer to the merchant’s website where they can make their purchase.
Just like that, each and every time this process happens and a purchase is made, the affiliate marketer earns a commission.
Commissions are usually a percentage of the total purchase price. There is no limit to how many times you can earn a commission, and commissions can also be recurring when dealing with subscription based purchases.
So every time you see a blogger writing a product review, or you watch a YouTuber doing a video review, or you see your favorite instagrammer promoting a product in their posts and stories, that’s affiliate marketing at work.
So how does affiliate marketing compare to pyramid schemes?
What Is a True Pyramid Scheme?
First of all, true pyramid schemes are exactly that: schemes. And they are 100% illegal. The reason I say “true” pyramid schemes is because network marketing and multilevel marketing businesses tend to be called “pyramids” because of their structure.
The fact is that the vast majority of network marketing and MLM businesses are not true pyramid schemes. With true, illegal pyramid schemes, money is exchanged but no actual product or service is sold.
True pyramid schemes tend to be schemes like cash gifting where people are duped into giving away their hard earned money into a “get rich quick” type system. In return, they are promised that they will soon be on the other end of this system, receiving even more money from other strangers duped into the same scheme.
Pyramid schemes are filled with unrealistic promises of revenue and “getting something for nothing”.
DO NOT FALL FOR PYRAMID SCHEMES!
Network Marketing and MLM
While network marketing and multilevel marketing may have a “pyramid” structure to them, they are not true pyramid schemes. In other words, your friends and family who are trying to recruit you into their latest, greatest home business aren’t con artists.
Are these MLM type business a good investment for sustainable success? In my opinion, no. I’ll explain why.
What makes network marketing and multilevel marketing legal is that there is a singular product or service that customers are getting for their money. Network marketers will buy that product or service themselves, and then recruit people to their team to do the same thing.
These team members will also buy the product or service and recruit more people to the team as well.
In network marketing, the model of “gather a few customers and teach others to do the same” begins to sound very appealing because of the fact that you not only get paid on your efforts, but on the efforts of your team as well.
However, because of this model, the business can only have limited success. Members who jump in during the early stages have a much better chance of growth and find less saturation, while members who come in later have less and less chance of finding other people to recruit.
Further, network marketing compensation plans tend to be very convoluted and confusing. They are filled with bonuses and incentives that draw people into the team promising a quick return of investment, but the vast majority of representatives that join never qualify to earn these commissions.
In fact, annual income disclosures from even the most popular MLM business show a shockingly high percentage of MLM representatives fail to earn a single dollar.
Lastly, the structure of the model itself can limit you. In many “binary” model plans, for example, the network marketer is recruiting into two legs, left and right, but will only get commissions based on the leg with the LEAST GROWTH.
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Why Affiliate Marketing is a More Sustainable Option
First and foremost, affiliate marketing is a much more straightforward business model than network marketing and MLM. There is no recruiting aspect, no downlines, no confusing compensation plans, and no limits put on your business because of any “binary” or “matrix” model structures.
With affiliate marketing you also have complete freedom to build your business in any niche of your choosing. You’re not limited to simply selling and reselling a singular product. In fact, most affiliate marketers build multiple websites spread across several different niches.
There are no diminishing returns due to saturation. Now more than ever people are doing the majority of their shopping online.
You also don’t need products or services of your own to be successful. You’re simply the middle man connecting your global audience with the merchants they’ve bought from countless times, 24 hours a day, 7 days a week.
The biggest tool to any affiliate marketer is a dependable keyword research tool that gathers data from all the search engines allowing you to know the exact word for word searches your target audience is making.
And when you know exactly what your customers are searching for you have the ability to create content that is the ANSWER to those searches resulting in massive, FREE traffic.
Finally, the internet is NEVER closed, meaning there are no limits in terms of scalability or sustainability.
Related Article at WorkFromYourLaptop.com!
Check out “The Free Way to do Keyword Research Without Tools” for some true insight on using Google itself to drive targeted traffic to your content!
How Can I Get Started Affiliate Marketing?
Where you get your training matters.
I’ve done countless reviews of so many affiliate marketing training platforms that make unrealistic promises and lean heavily on the “guru” based approach where you buy very high ticket training modules in hopes of piggybacking on their success.
Don’t ignore obvious red flags and end up spending thousands on training. If you put yourself in such a deep hole to start with, how will you ever be profitable?
You’re smarter than that.
Want training that delivers? Check out my detailed review and full walkthrough of the affiliate marketing training platform I owe all my success to! The training is straightforward, affordable, and you can test drive it first to see if it’s a good fit. Click here to check out my full review!
Final Thoughts
Affiliate marketing is a much more sustainable option than network marketing and MLM. Instead of endless recruiting and convoluted compensation plans, affiliate marketing connects people with the products and services they’re already searching for online.
Any questions? Have you had any experiences in MLM and network marketing? What questions do you have about getting started with affiliate marketing?
Leave any questions or comments you have in the comments section below. I always respond and I look very forward to connecting with you!
This is such an excellent explanation about affiliate marketing. I told my friend who is all about MLM to try learning affiliate marketing. He insisted it’s no different than it. I’m bookmarking your article here and will show him when we meet again later this week. Hopefully, he can understand it.
They couldn’t be more different. I think he’ll see the light. Thanks for the comment!
I’m really glad you took the time to explain that affiliate marketing is not the same thing as an MLM. I’ve heard so many people refer to affiliate marketing as a pyramid scheme when it isn’t. I also have friends who are involved in MLMs. Do you have any advice on how I can warn them about these companies, or should I just mind my own business?
Send them to this article. At a certain point, they have to be able to see for themselves when investing into a business is a bad idea. While there’s nothing illegal about them, the numbers don’t lie and a shockingly high percentage of network marketers don’t earn a single dollar, let alone become profitable. Thanks for the comment!
I heard a lot of bad things about MLMs. Are they also offline or only online? If it works with recruiting only, then how are you going to recruit strangers into this system when it has a bad name already? And trying to recruite family and friends will only make them run from you. So, if this is so difficult, why do people sign up for these things?
If you start with affiliate marketing, how soon can you start earning money? Does it take more than a year to see some first results?
Multilevel marketing and network marketing are online only. That’s the way to reach the most people and keep track of everything. Pyramid schemes can take on any form, but most are online because, again, it’s the easiest way to reach the most people.
Check out my article here that shows my personal results with affiliate marketing. I recommend it to everyone looking to make money online. Thanks for the comment!
As you said ” NO WAY, I WAS BORN RICH”, haha Affiliate marketing is one of the sure and legit ways to make money on the internet. As a beginner to Affiliate Marketing, what would you advise the person to know/learn first before becoming a successful affiliate marketer? I need help on how to select a Niche?
Check out my article on finding your niche. I think it will help you find your direction. 🙂 Thanks for the comment!
I had been recently reading about Charles Ponzi. He was this Italian swindler and the original “ponzi” schemer. Affiliate marketing is nothing like those schemes. Well written post and well explained. I’m looking forward to growing my affiliate marketing business in the same way you have! Another great article, Eric! Thanks so much!
I appreciate the support! Thanks for the comment!
very well put article.
Yes affiliate marketing is legit and I can attest to it because you do not recruit like an MLM business. You simply promote.
You can also be able to even have less over heads as you may only need a website and maybe a few things like email marketing and funnels ( which are not a must).
Affiliate marketing is definitely head and shoulders above network marketing and MLM. No doubt. Thanks for the comment!
Thanks for sharing a good article to read to learn what is the difference of Affiliate Marketing vs network marketing. A few years ago I joined a network marketing company, after a few months of hard work, I didn’t see the results I wanted to have so I lost interest. I joined Wealthy Affiliate a few years ago to learn more about affiliate marketing, today I’m really happy about how it works. Today I have my own website and it’s working pretty good, I’m my own boss, and I can talk about different products and not only about the product of one company, that has been a big difference for me between these two business models, I really like how affiliate marketing works!
Keep up the great work! Affiliate marketing is so much more dynamic and sustainable, it’s really an each choice to make. Thanks for the comment!
Eric: It’s a pleasure to read and drop a comment on your blog. Your post is very comprehensive, and you make it very clear affiliate marketing is a viable way to create an income stream. I liked how you explained the versatility of affiliate marketing; that you’re not pigeonholed to a single product or service; you can choose to enter any business niche and build an income stream.
I think most people coming to affiliate marketing (me included) find it difficult to wrap our heads around the fact we can create multiple businesses niches. We’re having enough to do just to get the first one up and running. So, in the beginning, practicing patience and asking for help is a priority. That I learned from you. Remember, Rome wasn’t built in a day. And research shows, now more than ever, people are shopping online. Thanks for the informative article and support. I have subscribed to your YouTube channel and will start watching today. See you around.
Absolutely. The truth is when you start off, focus on just one website. Building one business is PLENTY of work. It’s no different than building a traditional business. You don’t start off trying to build 10 pizzerias. You start with 1 and go from there. Over time, you may decide to build another, and another. But don’t lose focus on your primary business. Thanks for the sub and thanks for the comment!
The internet is never closed is a great slogan and very true.
How long would you say it takes to start making a sustainable income through affiliate marketing if one works at it consistently? I am making it work for myself, and this could change my sisters life if she gave it a chance. I am trying to make a portfolio of a few hard facts to help her see the benefit.
That all depends on a number of factors. How long would you say it takes to start making sustainable income in any business? How about a barber shop business? A pizzeria? The keys here are how much time you’re putting in. Even though affiliate marketing businesses don’t have the high overhead that, say, a barber shop or pizzeria would have, you have to treat it just as importantly like it’s your full time job. When you do that, you almost force your own success. Push out that new content regularly. 2-3 new posts per week. Do good keyword research. Make google take notice! Thanks for the comment!
Having managed to get a decent number of sales on a site that I’ve kind of put off a little, affiliate marketing is for sure not a Pyramid Scheme. It is a legitimate income source for an online business of the niche of your choosing, Had I been more productive on my site, I sure would’ve done way better with sales. But the fact that a somewhat dormant site has earned sales is living proof that affiliate marketing is a legitimate way to make money.
Absolutely! Now get back on that site and don’t let it stay domant! That’s money you’re sitting on! Thanks for the comment!
Tried a few MLMs in the past which turned out to be impossible to make any money in and found affiliate marketing to be the much better option. Mind you I have noticed that affiliate marketing is rapidly changing.
What do you think and is it for the better?
How do you feel it’s changing?
I honestly wish I could’ve seen this article two years ago when I first started in the business. I started out with no idea of what affiliate marketing was. I just assumed I was going to end up working with a lot of numbers and financial integrations, but it is nothing as what I’ve thought. As you said, I’m sure we have all gotten involved in affiliate marketing without even knowing it! I have seen so many people get entangled in the MLM schemes and later on joining the affiliate marketing business and their lives have completely changed in the best way possible.
In my book, affiliate marketing is the absolute best way to go if you want to make money online from home. So much more straightforward than MLM. Thanks for the comment!