Whenever we stop to look at the potential to make a lot of money from a side hustle there are two areas that often stand out as ways to make a significant amount of money.
The first is Affiliate Marketing. The second is Multi-Level Marketing (MLM).
Both of these areas seem to bring in a significant amount of money. However, they are not to be confused since they are completely different things.
Table Of Contents
- Affiliate Marketing VS MLM – What Is The Difference?
- Unfortunate Fact About Multi-Level Marketing
- Unfortunate Fact About Affiliate Marketing
- Conclusion
- Before You Go
Affiliate Marketing VS MLM – What Is The Difference?
According to neilpatel.com, “Affiliate marketing is the process of earning a commission by promoting other people’s (or company’s) products.
You find a product you like, promote it to others and earn a piece of the profit for each sale that you make.”
This is a pretty good way of defining it.
What Affiliate Marketers Do Not Do
With affiliate marketing
- there is no need to handle any products or network with other sellers.
- You do not need to seek out customers or pay any money to the companies whose products you promote.
- Affiliate marketers do not earn commission from other persons’ effort. They only earn through their own affiliate link.
Affiliate marketers are more in the nature of helpers. You provide persons’ with information they need and link to products they may be.
Customers may then buy products through your affiliate link.
Multi-Level Marketing on the other hand uses representatives to distribute their products. These representatives earn a commission from these sales.
Additionally, representatives recruit others to distribute more products and earn additional commission based on the amount of sales their down sells (recruits) make. Their recruits also earn commission on each sale and are allowed to recruit down sells of their own and earn commission this way.
This mean that the higher up the chain you are the more comission you stand to earn not because of your own efforts but because of the efforts of your recruits.
The diagram below may help to explain this better.
MLM may be done with door to door sales or with the use of a website.
Commissions Earned Through MLM
Representatives of Multi-Level Marketing Networks earn many levels of commission based on not only the sales they make but also on the sales made on the commissions made by their recruits.
Here is an example of how these commissions are earned. These figures are by no means accurate and do not represent any particular company but are meant to show how MLM work.
Recruiter 1
Earns 10% commission from his own sales. Earns 7 percent commission from the sales made by each of his direct recruits. Earns 5% commission from the first set of recruits that his own recruits have. Receives 3% commission from the first set of recruits that the recruits of his recruits have.
Unfortunately because of the need to pay so much commission to their representatives MLM products are usually quite expensive and representatives pay for the products before making sales.
So in essence they buy and sell products and earn a commission on the sales made.
Unfortunate Fact About Multi-Level Marketing
Because of the nature in which representatives of MLM companies earn commission, it is often referred to as a pyramid scheme.
This causes many persons’ to shy away from this business model. However unlike pyramid schemes, at the moment the MLM business model is legal in many countries.
Some MLM businesses pay commission to recruit new distributors. According to Wikipedia, The US Federal Trade Commission consider MLM companies that pay commission for recruiting distributors pyramid schemes and these are illegal.
Why Affiliate Marketing Is Better Than MLM
1. Freedom In What You Promote
Unlike MLM representatives Affiliate Marketers have more control over what they promote.
No one tells an affiliate marketer what to sell. You are free to join programs you are interested in and promote only those products from distributors you wish to work with.
You can promote one product from a given distributor or ten, it’s up to you. There is also at the same time promote products from other distributors.
Added to this affiliate marketers typically are expected to promote products they have an interest in and have actually used to advise others on why this product may be right for them.
MLM representatives on the other hand are limited to selling the products of the company they are attached to. They are given a list of products and whether they know the product or not, like the typical sales man they are expected to sell them.
2. Cost To Join
Affiliate Marketers do not pay to join affiliate marketing programs and they earn money on every sale.
MLM distributors on the other hand usually pay very high fees to join. These fees may or may not include their starter kits.
The starter kids that distributors are required to purchase typically include the products they are expected to sell.
Many of these networks typically have a recurring monthly fee which mean that the distributor has to sell above a certain amount to make a profit on a monthly basis.
3. Personal Interaction
Due to the fact that affiliate marketing typically take place completely online there is little need to interact with or recruit other people.
The very nature of Multi-Level Marketing however requires distributors to interact with persons’ to sell their products as well as build their network of distributors.
4. Effort Needed
While the start of the affiliate marketing journey is pretty time-consuming with low output affiliate marketing websites have the potential to earn massive returns as the website grow older.
This mean that an article, written today may not earn much in the first two years but it could potentially pay well in the years to come.
With MLM on the other hand the monthly earnings are based on the effort of all the distributors in a given network.
Unfortunate Fact About Affiliate Marketing
While affiliate marketing is one of the easiest businesses to start it, Affiliate marketers have a very high failure rate. This is due to several reasons outlined in the article 13 Reasons Why Affiliate Marketers Fail.
Affiliate marketing typically does not pay much money during the early months, sometimes not even during the first year. As a result it requires patience and perseverance to make it.
Choosing Between Multi-Level Marketing and Affiliate Marketing
If you are a really great sales person and love networking with others, recruiting others to sell and maybe even teaching them how to make the best of their MLM strategy then MLM may be right for you.
On the other hand if you hate selling is not a people person and just like helping others Affiliate marketing may be better for you.
Personally as an introvert I find affiliate marketing to be more suited to my personality.
Additionally, as a single parent who wishes to be at home with my children I find the freedom to work at a computer in my own home without the need to network with others suits my life style very well.
Of course the fact that there is a very low start-up cost with affiliate marketing with the potential to earn a great deal in the future also makes it hands down the winner for me.
Conclusion
While Both Affiliate Marketing and Multi-Level Marketing are sometimes referred to as network marketing, they are completely different things.
MLM has the potential to earn a great deal of money in the short term and is more suited to persons’ who are good at networking.
You do not need to have an affinity for networking to be an affiliate marketer, however. You simply need to have patience and love to help others.
Additionally, unlike MLM starting an affiliate marketing company does not require a great influx of capital since affiliate marketers do not need to purchase any products.
Before You Go
If you have any questions or comments about affiliate marketing or MLM be sure to leave me a comment in the comment section below and I will get back to you within 24 hours.
Candy Benn
I have participated in both mlm and affiliate marketing and made money at both. I found that your article was one of the most clear explanations both types of marketing. I am not a person who enjoys recruiting so mlm didn’t really work for me. As well, I found that attendance at all the recruiting meetings was too much. I enjoy being on the computer and like to write so affiliate marketing, where I had to describe products really works for me. I think your article will help a lot of people better understand the two systems.
Hi Anastazja,
Thank you for stopping by and for your comments.
Candy Benn
Between MLM and affiliate marketing, affiliate marketing is much better. Besides being illegal pyramid schemes, many MLM programs are scams. People who join MLMs normally wind up spending a lot of money just to join, and often to remain a member, whereas affiliate programs are generally free to join. Even though affiliate websites normally take some time before they make any money, most people who join MLMs never make any money at all, or they make very little.
Hello.
Thank you for stopping by and for your comment.
Unfortunately I have to disagree with you. MLMs when done correctly are not illegal, at least not in my country or the US. Refer to this article for clarifications. However there are some companies masquerading as MLMs that definitely qualifies as pyramid schemes.
MLMs are hey are organized like pyramid schemes and many of us may dislike them but unless they pay members to recruit they are not pyramid schemes. Yes the distinction is small but it is still there.
I also agree that it is a risky venture where most people actually lose their money. I also consider their products overpriced.
So far as MLM vs Affiliate marketing goes I also prefer affiliate marketing. It takes time but with patience the returns are definitely worth it.
Of course I may be biased since I am an affiliate marketer.
Candy Benn
I love this straightforward breakdown on affiliate marketing vs MLM. I have tried my hand at many MLM businesses but it simply isn’t the right thing for me. Many will lock you into automatic monthly shipments or minimum sales. Some are good at it but I’m more like you, preferring to work from home and have less personal interaction so I stick to affiliate marketing. Having said that, I have a friend who has been very successful in an MLM business. She’s been doing it for 12 years and makes a full-time income doing it. It just depends on who you are as a person. Thanks for sharing!
Hi Cynthia, I have to agree with you, MLM seem to suit some people better. My best friend works with an insurance company organized this way and she makes a great deal of money doing it.
She has always been an extrovert and loves to interact. She is a great business woman and seem to make a success of all businesses she set her mind to.
On the otherhand she has no desire to try affiliate marketing. Go figure.
Candy Benn