Are you considering starting a new business and weighing your options between affiliate marketing vs MLM? In this article, we will cover the main differences between affiliate marketing and multilevel marketing, what network marketing is, if either is a pyramid scheme, and see what Reddit and Quora users think.
We will even touch on some alternative business models, like dropshipping, influencer marketing, and local lead generation (which is a business model that many former MLM & Affiliate Marketers are claiming to have better success with). But first, let’s learn how to choose between affiliate marketing and an MLM company.How Do You Choose Between Affiliate Marketing vs MLM?
To make the right choice between MLM vs affiliate marketing, consider:
Affiliate marketing involves promoting a product by creating content that supports an affiliate referral link. Affiliate marketing programs are typically free to join and don't involve working with other people or closing any sales deals yourself.
MLM programs involve selling products in person, often to friends and family. Multi level marketing programs are typically expensive to join, have sketchy reputations and pushy messaging, and often return no profit.
Affiliate marketing is for the passionate, niched-down content creator and traffic generating expert.
MLMs are for the social butterflies who love closing sales and being a part of tight-knit communities.
So… affiliate marketing vs network marketing: which is best for you? Ultimately, you need to know the facts. Let’s learn more about each business model.
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.
Check out this list of best affiliate marketing courses.
What is MLM Promotion?
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.
To learn how to grow your network marketing business, read our article.
So, based on the descriptions above, is affiliate marketing the same as an MLM? No- these are two separate business models that can earn income. Let’s compare the two further.
MLM vs Affiliate Marketing Pros and Cons
Affiliate Marketing Advantages
30-60% commissions possible, free to join
No need to recruit others, better reputation, and shorter time to income
No physical products, done completely online
Choose the affiliate products you want to promote
Most programs allow you to promote their products in whatever way you want (blogs, videos, etc)
Not really selling, just promoting
MLM Advantages
If you struggle with tech, MLM is more like a brick-and-mortar product business.
Good for those who enjoy working with others
Can form a powerful community
Work on your own time
Affiliate Marketing Disadvantages
In 2023 you need paid ads and/or a strong following.
You’re in charge of finding a profitable niche/product
Need some tech knowledge to build a website
Need social media/ Search Engine Optimization knowledge
Constantly need to generate more content.
Paid traffic is incredibly difficult to learn and implement. With such a saturated market, it's also very expensive- can be up to $3000/month.
MLM Cons
Cost to join: HIGH, fees, inventory
Must recruit other members to make the real money
Depending on your program, you will have to be an expert on a library of products.
Longer time to income (setting up parties, reaching out to family and friends)
Marketing is more difficult and you have less control.
MLMs are closer to pyramid schemes and can be sketchy (LulaRoe)
For a more in-depth look at affiliate marketing pros and cons, check out this write up.
For either business model, you can join a program or start your own. If you already have a business selling digital or physical products, consider starting an affiliate program or MLM program to bring in more cash.
What is the Difference Between MLM and Affiliate Marketing?
The biggest difference between affiliate marketing and network marketing (MLM) is performance based income vs. tiered based income. Sellers in an MLM’s lowest tier will barely make any money. Especially with the cost of initial inventory and a fee to join, it will take these individuals a long time to recover even their initial investment. Affiliate marketers have a very low startup cost and no recruitment or need to work their way up in the company.
So, is affiliate marketing multi level marketing? Not at all. There are countless differences between the two business models. Now, let’s break down network marketing and affiliate marketing further.
Affiliate Marketing: 8 Questions You Need Answered
Some affiliate marketing companies include ClickBank, ShareASale, CJ Affiliate, Shopify, Awin, and eBay Partner Network Inc.
1. How Can You Make Money with Affiliate Marketing?
To make money with an affiliate marketing opportunity in 2023:
Avoid pushing conversions/sales before the potential customer trusts you. Put your affiliate links early in your content, but only where it makes sense.
2. Is Affiliate Marketing a Pyramid Scheme?
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.
So, is affiliate marketing illegal? No, affiliate marketing is legal. However, pyramid schemes are illegal.
3. What is the Success Rate of Affiliate Marketing?
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.
Stats courtesy of Influencer Marketing Hub.
4. Can You Get Rich with Affiliate Marketing?
Yes, you can get rich with affiliate marketing. One way to boost your chances is by being picky about the program's structure.
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.
5. Is Affiliate Marketing Still Profitable in 2022?
Yes, affiliate marketing is still profitable in 2023. Statista predicts that affiliate marketing will bring in $8.2 billion this year.
6. What is an Affiliate Marketing Network?
An affiliate marketing network connects you and the brand you want to promote. Brands like to use an affiliate network because it minimizes the effort of finding good promoters. Affiliates like networks because it streamlines finding reputable programs. ClickBank, ShareASale, and AWIN are a few popular networks.
7. Can an Affiliate Marketer Get Sued?
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.
8. What is Better Than Affiliate Marketing?
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 (read our Amazon FBA vs. affiliate marketing article)
- Online course creation
- Other digital agencies (like local lead generation)
- Dropshipping
- Influencer marketing
Let’s compare these last two a bit more.
What is the Difference Between Affiliate Marketing and Dropshipping?
The difference between affiliate marketing vs dropshipping is: Affiliate marketers promote a link and get a cut of sales from that link. Dropshippers promote a product listing, purchase the product themselves at a low cost when a customer orders, and ship the product from manufacturer to customer without ever handling it themselves. As you can tell, these are two very different business models.
Affiliate Marketing vs Influencer Marketing
Influencer marketing is another digital marketing strategy. It's geared toward social media influencers to build brand awareness. Instead of creating a landing page or website, the influencer creates social media content for a flat fee from the brand (think a certain amount per video or per post). Read our Instagram affiliate marketing article for another unique look.
SUMMARY: Is Affiliate Marketing Worth It?
Yes, affiliate marketing is worth it in 2023. 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. If you have not built up traffic, plan on spending a lot of time in content creation, and some investment in paid ads to push your link.
For a full breakdown of how to start affiliate marketing, read our guide.
MLM: You Asked These 6 Questions
A few examples of marketing MLM companies include Mary Kay, Herbalife, Amway, Avon, and Vorwerk. Each of these is worth billions of dollars.
1. Who is the No 1 MLM Company in the World?
Amway is the top MLM company in the world. It brought in $8.5 billion in 2020. 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.
2. Is Amazon an MLM?
No, Amazon is not an MLM. In 2015, 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.
3. Is MLM and Pyramid Scheme the Same Thing?
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.
4. What is Wrong with MLM?
Even though MLMs are not pyramid schemes, there are a few things wrong with the business model that have made sellers lose money. For instance, according to this study by John M. Taylor, MBA, Ph.D, at least 50% of MLM sellers fail within the first year. At least 90% leave by the end of their fifth year. Only 5% of sellers remain by year 10.
Also, representatives are supposed to sell your initial inventory to friends and family. However, this can feel extremely pushy for some sellers, and lead to broken relationships, hurt feelings, and an unsustainable business.
Other issues include:
Products that are overpriced or unsafe
High registration fees and other costs
Requirements to buy more inventory when you’re not ready to sell
No refunds for registration fees or inventory purchases
The people higher in the company are often extremely pushy, make false income claims, and speak at emotionally charged conferences.
5. Can MLM Make You Rich?
MLMs can also make you a living, but they (probably) 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.
6. What is the Difference Between MLM and Network Marketing?
There is no difference between network marketing vs MLM. The two names cover the same business model of brand representatives selling products directly to customers, rather than going through a retailer. Representatives then recruit more people to be in their network and make money off of their sales.
SUMMARY: Are MLMs Worth It?
MLMs are worth it if you’re very dedicated to the business model and specifically want to work with a certain company. Otherwise, I do not recommend MLMs at all because only 0.05% make a significant profit.
Can You Do Network Marketing and Affiliate Marketing?
You certainly can do both network marketing and affiliate marketing to diversify your income. But, 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.
Should Brands Opt for Affiliate Marketing or MLM?
For brands, the MLM vs affiliate marketing debate leans towards affiliate marketing. After all, according to Datanyze, there are 11,400 affiliate marketing programs in the United States. There are only about 1,000 MLM companies.
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. Brands that opt for this can use MLM affiliate software, too, which helps with setting up affiliate programs or tiers for existing programs. In contrast, MLMs need to develop a host of products, pre-made content, and have a recruitment strategy just to begin.
Affiliate Marketing vs MLM Reddit
Reddit users weigh in on the affiliate marketing vs network marketing debate:
Difference Between Affiliate Marketing and Network Marketing Quora
Quora has some great insights on if affiliate marketing and network marketing are the same:
CONCLUSION: Affiliate Marketing vs. MLM: Are They the Same? Which Should You Choose?
Affiliate marketing and networking marketing (MLMs) are not the same. If you want to make some money promoting another brand’s products online, affiliate marketing might be best. If you want to buy into a large company because you believe in their messaging and products, and MLM might be a good choice.
However, local lead generation might be an interesting middle ground for you to try. It involves content creation, organic SEO, and making money passively online. But you will also get to develop relationships with the people who run small businesses as you sell your leads to them. And, you won't have to deal with the difficulty of generating traffic through paid ads because we rank our sites organically. Learn more about why I quit affiliate marketing and started local lead generation instead.
