The biggest differences between affiliate marketing and MLM (network marketing) is the business nature, product/service being sold, commission structure, skill requirement, and joining process. Affiliate marketing offers a performance-based income by promoting other business's products. Marketers get a percentage of commission per successful sale or referral. Alternatively, MLM focuses on tiered commissions from products sales and memberships. Representatives get residual income from their "downlines" or members they recruited directly.
Affiliate marketing and copywriting are both focused on making sales incentives through product purchases from other people. These business models are profitable in 2024. In fact, Authority Hacker states that intermediate affiliate marketers earn $1K to $10K monthly. This can go up to around $5 million within 5 years of grinding, as experienced by Buildapreneur founder Spencer Mecham. MLM members can earn an average of $106,570 yearly or $8,880 monthly, based on ZipRecruiters March 2024 data.
While the two business models are lucrative in the 21st century, succeeding in these industries require technical skills and in-depth product knowledge. Also, your potential earnings are not stable. Sellers in an MLM’s lowest tier will barely make any money because of the cost of initial inventory. It will take a long time to get returns on their initial investment. Affiliate marketers have a very low startup cost but has low commission structures. And because both are into referral marketing, it is crucial to build a solid personal branding. This takes time, effort, and money to achieve.
Are you considering starting a new business and weighing your options between affiliate marketing vs MLM? In this article, we will cover the two business model's similarities and differences, pros and cons, and frequently asked questions. Plus, we'll also feature top comments on Reddit and Quora and a potential online business that is more profitable, scalable, and sustainable.
Affiliate Marketing vs MLM: Top Similarities and Differences
Affiliate Marketing
MLM
Nature of Business
Affiliate marketing deals with promoting other business's products or services and getting a specific commission for each referral forwarded.
MLM involves direct selling products in person through representatives or members, often to friends and family. It uses a pyramid-like hierarchy for its membership system.
Products
In affiliate marketing, you promote niche-specific products and services. Your products vary depending on the industry, the brand, and the customer segment.
In MLM, you sell original products from the business itself. You also offer membership programs as a main offering.
Commission Structure
Affiliate marketers earn 5% to 30% in affiliate commissions for every successful sale. There are also recurring commissions from monthly or yearly subscriptions.
Representatives from MLM companies earn commissions by selling products and recruiting members. The more "downlines" they have, the higher their income potential will be.
Skill Requirement
Affiliate marketing requires digital skills like content creation, website development, ad management, SEO, data analysis, etc.
MLM requires sales and marketing skills focused on face-to-face communication, relationship building, active listening, networking, etc.
Joining Process
Affiliate marketing programs are free to join. Since you'll be helping brands boost their sales and reach, they charge nothing upon joining.
MLM companies have a set membership fee when joining. It usually comes with a package of products that you get at a discounted rate than standard market retail price.
What is Affiliate Marketing?
Affiliate marketing is a business model where an individual agrees to promote another brand’s products for a certain amount of commission. Affiliates do this by creating content for social media, a YouTube channel, a personal affiliate website, or landing pages that feature a specific link to the product they promote. Affiliates make money completely online, and may use Google ads, Facebook ads, or other paid marketing to boost sales. Their income is directly related to bringing in potential customers or products the customers purchase. Online courses, like Wealthy Affiliate, teach affiliate marketing.
Affiliate Marketing Pros and Cons
Affiliate Marketing Pros
Affiliate marketing offers 30% to 60% in commissions and are free to join.
You don't need to recruit others because most brands have a good reputation.
You don't need physical products.
In affiliate marketing, you get to choose the affiliate products you want to promote.
Most programs allow you to promote their products in whatever way you want (blogs, videos, etc.).
With affiliate marketing, you're focused on promoting rather than selling.
Affiliate Marketing Cons
In 2024, you need paid ads and/or a strong following.
You’re in charge of finding a profitable niche/product.
You'll need technical and Search Engine Optimization knowledge to build and scale a website.
You need to generate content constantly.
Paid traffic is incredibly difficult to learn and implement. With such a saturated market, it's also very expensive (up to $3000 monthly).
What is MLM?
MLM stands for multi level marketing. Other terms used for this business model is “network marketing”, "referral marketing", or "direct sales". Those who join might be called an "independent distributor" or "network marketer." It depends on the company.
When you join an MLM, you make money by selling a product. More senior members receive a commission off of your sales. To make more money, the network marketer must recruit others to sell products underneath you. Network marketers can promote the products online, but will typically need to store, package, and ship physical products. Income is related to what they sell and the people they bring in.
MLM Pros and Cons
MLM Pros
MLM is more like a brick-and-mortar product business. It deals less with technical stuff.
MLM is good for individuals who enjoy working and communicating with others.
You can form a tight-knit community that offers support when needed.
In MLM, you can work anytime.
MLM Cons
MLMs are costly to join and have high fees because of physical inventory.
Depending on your program, you will have to be an expert on multiple products.
It takes a longer time to make an income (setting up parties, reaching out to family and friends, etc.).
In MLM, marketing is more difficult and you have less control.
MLMs are closer to pyramid schemes and can be sketchy. (LulaRoe)
Affiliate Marketing vs MLM: Top Reddit Comments
Reddit users SociFunnel and Mad_mike_media commented on how affiliate marketing and MLM are very different business models. In affiliate marketing, you get to choose the products and services you advertise and create content about. It is also simpler because of the straightforward process. You get a percentage of commission for every sales you drive to the business or brand.
Alternatively, MLM product offerings are limited. You sell the same things the other members are selling. This factor is what makes it difficult and highly competitive. That's why Sinedelta mentioned that some MLM members or representatives tend to label themselves as affiliates to entice others to become a member.
Affiliate Marketing vs MLM: Top Quora Comments
Maxwell Brown, an expert in affiliate marketing, talked about how both business models are the same. Affiliate marketers are online salespersons, while MLM members focus on face-to-face contact. Maxwell prefers affiliate marketing because it deals with offering products to fulfill a target market's needs and wants. He said that MLMs tend to have unethical business practices, such as promoting products to family members and friends.
Reddit user Saif Thaha prefers the MLM business model or network marketing because of it multi-tiered income structure. This differs greatly from affiliate marketing with its single-tiered commission scheme. Saif also mentioned that MLM can help improve your entrepreneurial skills.
Gary Deutschmann Sr, CEO of Classic Haus Limited, advises aspiring affiliate marketers and MLM members to choose a more profitable income stream. Both business models focuses on getting sellers to promote or their products and services so the company can drive sales and revenue. Gary prefers being independent and building your own business from scratch.
How Do You Choose Between Affiliate Marketing vs MLM?
To choose between affiliate marketing vs MLM, consider the following questions:
Is Affiliate Marketing the Same as MLM?
No, affiliate marketing is not the same as an MLM because of factors like income structure, business nature, skillset requirements, and selling process. Reddit user Smartminds88 mentioned that the two business models are polar opposites from one another. Affiliate marketing involves promoting a product by creating content that supports a brand through a unique affiliate link. You get to choose the niche, product, and target market that you want. MLM programs involve selling company products in person, often to friends and family. You can also earn by getting potential members to sign up and positioning them as your "downline". However, both business models deal with a specific percentage of residual income that sellers receive usually on a monthly basis.
Affiliate marketing is for the passionate, niched-down content creator and traffic generating expert. Affiliate marketing programs are typically free to join and don't involve working with other people or closing any sales deals yourself. Alternatively, MLM is for social butterflies who love closing sales and being a part of tight-knit communities. Multi level marketing programs are typically expensive to join, have sketchy reputations and pushy messaging, and often return no profit.
Which is Better: Affiliate Marketing or Network Marketing?
Affiliate marketing is better than network marketing, according to Reddit user MarleneEarningMakers. She commented on the sketchy nature of MLMs and how the founders or the people on top are the ones benefitting the most from the overall earning process. MarleneEarningMakers also remarked on the sub-standard products sold by most MLM companies. For brands, the MLM vs affiliate marketing debate leans towards affiliate marketing. In fact, there are 11,400 affiliate marketing programs in the United States alone, according to Datanyze. There are only over 2,500 MLM companies in the world, as mentioned by Homework.Study.com.
It is by far easier for brands to begin an affiliate marketing program than an MLM. Affiliate marketing programs only need to set up a structure for finding and paying affiliates for their products. In contrast, MLMs need to develop a host of products, pre-made content, and have a recruitment strategy just to start operating.
Can You Do Network Marketing and Affiliate Marketing?
You can do network marketing and affiliate marketing to diversify your income. However, don’t start both at the same time. Start with affiliate marketing and get a steady stream of income. Then, see if an MLM is what you actually want to do. You might find that another more online based business model would complement your affiliate marketing business in more valuable ways. For example, monetize your YouTube channel further or start researching how to create your own Amazon private label product since you already know how to promote the product.
Are Affiliate Marketing and MLM Worth It in 2024?
Yes, affiliate marketing and MLM are worth it in 2024, given you make a stable monthly income that keeps up with your expenses. Affiliate marketing is worth it, but it’s not a get-rich-quick model unless you already have a steady audience through social media or blogging. If you have already built up traffic, affiliate marketing is a great way to diversify your income. Otherwise, plan on spending a lot of time in content creation and some investment in paid ads to push your link. As mentioned by Chad Bartlett in his YouTube video, affiliate marketing in 2024 entails learning to use AI and machine learning platforms like ChatGPT and Google Bard.
MLMs are worth it if you’re very dedicated to the business model and specifically want to work with a certain company. You can also join an MLM with good products and a solid reputation. Otherwise, you should think twice about this business model because only 25% of MLM members make a significant profit, according to FTC and the AARP Study of Multilevel Marketing.
Affiliate Marketing FAQs
0.5% to 1% is the success rate of affiliate marketing, as mentioned in Authority Hacker's blogs. It is the average conversion rate of affiliate marketers. According to Influencer Marketing Hub, 60.68% of affiliate marketers make over $81,000. 5.98% of these make over $2 million.Jason Stone of Millionaire Mentor made $7 million from affiliate marketing in a single year.
To make money with affiliate marketing in 2024:
- Find a niche with an active, curious audience. Do this by looking at Google trends or a niche research tool like SEMRush. Don’t use a free tool- find a tool that pulls data from online search engines. Look for a combination of high search volume but low keyword difficulty.
- Identify a problem within that niche by searching through popular self-help books on Amazon, reviewing Google related searches, or reading reviews of similar products.
- Locate a product that solves that problem by searching terms like “tools to solve [problem]”, or reading through comment boards.
- Ensure the product’s affiliate program has a good reputation and high commissions. Avoid wasting time and energy on commissions 10% or lower- some go as high as 60%.
- Apply for the brand’s affiliate marketing program.
- Create content on social media, a blog, YouTube channel, or landing page promoting that product.
- Set up a funnel and use paid ads to target your audience. Generating traffic with paid ads is expensive- expect around $3000/month for ads alone.
- Consider offering a freebie before the purchase so that you can collect their data.
- Target this segmented audience with more offers through email marketing.
Yes, you can get rich with affiliate marketing. One way to boost your chances is by being picky about the program's structure.
- Some programs pay a commission for a sale that comes from your affiliate link.
- Some commissions increase the more sales you bring in.
- Others continue to bring in commissions as long as the customer continues to subscribe to a certain service.
- Certain programs pay you if a customer buys anything on the site, not just one product.
- Others pay according to the number of leads you bring in.
- Some programs even base your commission off the sales of the affiliates you bring in. This is one way that the two business models converge.
Choosing the best structure for your audience and traffic can help you make more money. Consider user intent. If your audience might need multiple products to solve their problem (like if you’re promoting camping equipment or a series of courses on how to develop a skill), choose a program that pays you if a customer buys anything from the site. Or, if pushing a single product to your audience makes sense, choose a program that has a high commission for a single sale.
No, affiliate marketing is not a pyramid scheme. The difference between affiliate marketing vs pyramid scheme is the existence of a product. If you were in a pyramid scheme, you would only make money from the recruitment of other sellers. With affiliate marketing (and MLMs), there is a physical product involved.
Yes, an affiliate marketer can get sued. To protect yourself, you should thoroughly research the product and the affiliate program before joining. You can also pay an attorney to craft or review an affiliate disclaimer for your landing page. This will help keep you out of trouble with the Federal Trade Commission.
If your goal is to make extra money online, there are plenty of options that might be better for you. For instance, local lead generation brings in passive income after you create a website for local businesses, organically rank them to the top of Google, and sell your leads to a small business. Other online business models include:
- Amazon FBA
- Online course creation
- Other digital agencies (like local lead generation)
- Dropshipping
- Influencer marketing
MLM FAQs
No, MLM vs pyramid scheme is not the same business model, though they can sound similar. In fact, pyramid schemes often call themselves multi level marketing programs to avoid getting caught.
A business is not a pyramid scheme as long as its members/sellers are selling an actual product. As soon as the business reveals it's only paying for the recruitment of other members, you know you’re in a pyramid scheme. With a network marketing business like Amway or Mary Kay, there is an actual product sold.
The best MLM companies can also make you a living, but they won’t make you rich. According to an AARP study, only 0.05% of sellers made over $100,000 in profit. 27% of participants break even on their startup costs. About half lost money.
Amway is the top MLM company in the world. It brought in $8.1 billion in 2022. Their direct selling strategy has worked in over 100 countries. Amway sells home, health, and beauty products. To sell Amway products, you must pay a $100 annual fee (refundable within 90 days). There’s no purchase requirement, but you will have to buy and store your products before you sell them for a higher price.
Often, a sponsor must recruit new distributors (Amways’ word for you, the seller). As a lower level distributor, it is possible to make more money by selling products than your sponsor does. So, Amway is not a pyramid scheme.
No, Amazon is not an MLM. Shane Ram wrote an article on LinkedIn claiming that Amazon would be the world’s largest network marketing company. The article spread throughout the internet and is still the Google featured snippet today, even though it’s not accurate. In this article, Shane claims Amazon doesn’t make its own products (they do) and then describes the Amazon FBA program (which isn’t MLM). With Amazon FBA, sellers need to pay Amazon FBA fees, but they don’t recruit other members; nor does any part of the program involve one third-party seller making commission off of another third-party seller’s sales.
The Amazon “Delivery Service Partner” program is very close to the MLM model. Drivers must prove they have access to $30,000 to be accepted into the program, though this amount is not a fee paid to Amazon. It is a requirement, however, and therefore has some of the MLM business model’s features. The DSP program is more like a franchise than an MLM.
Note: There is an Amazon Associate Affiliate Program.
Affiliate Marketing vs MLM: Is Local Lead Generation Better Than Both Business Models?
Affiliate marketing and MLM (multi-level marketing) are profitable business models in 2024 because of the market's high digital marketing activity. However, a local lead generation business model offers more than just commissions ranging from 5% to 50%. In affiliate marketing, you need to deal with third-party platforms, unstable sales, and consistent content generation. With MLM, you need to have high entrepreneurial skills, sell physical inventory, and manage your "downlines" constantly.
Affiliate marketing is saturated as it is in the 21st century because of its low barrier to entry. Plus, you have to be wary of third-party platform's strict rules and regulations to avoid getting suspended. You also need to produce high-quality content regularly to keep up with competitors. In fact, Google's latest algorithm update will focus on addressing low-quality and AI-generated content. Similarly, MLM deals with consistently trying to increase member signups and selling recurring monthly product inventory. Investopedia estimates the total cost of holding inventory to be around 20% to 30% of your total inventory's value.
Local lead generation is less complex and more scalable and profitable than other online business models. You won't have to deal with the difficulty of generating traffic through paid ads and daily content creation because it involves ranking sites organically on search engines like Google through SEO. You also don't need to hold physical inventory since you're dealing with digital assets or local service sites. All you need is to choose a niche and build websites for specific services. When these digital assets get ranked on the first page of Google, you get free leads that you can forward to local businesses. This lets you earn around $10,000 for every microsite. Imagine having 30-50 sites running monthly.
2024 is about choosing a business model with high revenue potential that you can do anytime, anywhere. Achieve income stability with a local lead gen business.
