Affiliate Marketing vs MLM: Key Differences and a Clear Winner

I’m just going to say it; multilevel marketing is the worst possible version of affiliate marketing. Settle down, I’m not saying MLMs are always bad or that the people in them are bad. But I will prove in this article that affiliate marketing is a much better investment for both brands and marketers in the vast majority of cases.

Affiliate marketing and MLM are both commission-driven compensation models that businesses can use to only pay for performance. Traditional marketing involves creating your own campaigns or hiring a marketing agency, whereas affiliate and multilevel marketing allow brands to only pay out when someone accomplishes something for them.

The main difference is that affiliate marketing operates on a commission-only model. This means you only get paid when a sale is attributed to your account (or in some cases, your sub-affiliate’s account). Multi level marketing often compensates their distributors for registering new sub-promoters which are known as their “downstream”.

Many MLMs are structured in a way that encourages promoters to focus on registering more people to increase their commissions from new members and their downstream commissions. This often leads to recruiting being prioritized over product sales and product quality, which is never a good thing.

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Definitions and differences for MLM and affiliate marketing

MLM (Multi-Level Marketing) is a business model where participants earn their income through the direct selling of products or services, as well as recruiting a team of distributors who also sell and recruit.

Affiliate marketing is a performance-based marketing tactic where products or services are promoted by external marketers who earn a commission for each sale (or in some cases, lead generated) through their promotional efforts.

The key difference between MLM and affiliate marketing lies in the structure and approach of the business model.

In MLM, participants earn from both direct sales and the sales of their recruited team, creating a multi-level commission structure. Affiliate marketing, on the other hand, focuses solely on direct sales or leads generated through individual promotional efforts.

Another key difference is the requirement for an initial investment. MLM often requires participants to purchase a starter kit or inventory.

Why affiliate marketing is better than MLM

In multi-level marketing, distributors will never be on a level playing field with those above them in the company’s structure. Affiliate programs offer everyone an equal opportunity for success because their revenue is based on sales, not recruitment. 

Affiliate programs also place a greater focus on product quality. Because promoters can only make money by selling (not recruiting), they can only sell based on the product’s merits and not based on a supposedly lucrative business opportunity.

This leads to a more sustainable business model for both brands and affiliates, as they can build a loyal customer base through genuine promotion of quality products.

Is MLM a pyramid scheme?

MLM (multi-level marketing) is often misunderstood as being the same as a pyramid scheme, but there are some important legal distinctions. According to FTC guidelines, an MLM is a legal business model that rewards selling products to consumers, as well as recruiting new members to become distributors.

A pyramid scheme is illegal and focuses primarily on recruiting new members with the promise of earning money from their investments.

Warning signs that an MLM may be too similar to a pyramid scheme include a heavy emphasis on recruitment rather than product sales, high startup costs or stock requirements, and a lack of focus on sales to consumers.

Is network marketing the same as MLM?

Network marketing and MLM (multi-level marketing) are often used interchangeably, but there are several distinctions between the two. Both involve selling products or services through a network of distributors, but the structure and compensation plans vary.

In network marketing, distributors earn commissions on their direct sales, as well as the sales made by their recruited team members. It focuses on building a network of distributors who sell products and expand the business.

On the other hand, MLM often includes the same structure as network marketing, but also offers the opportunity for distributors to earn from the sales of their recruits’ recruits. This creates multiple levels of earning potential, hence the name multi-level marketing.

Examples of multilevel marketing companies

Some well-known MLM companies include Amway, Herbalife, Mary Kay, Avon, and Tupperware. While some people still support these companies, most are known for their unethical practices.

For example, Herbalife recently settled a $200 million lawsuit for deceptive practices, while Amway has faced allegations of operating as a pyramid scheme. These companies often use misleading advertising to lure in new recruits with promises of financial success and flexible work hours, but the reality is that very few actually make a profit.

MLM companies are notorious for their deceptive recruitment tactics, preying on vulnerable individuals with promises of easy money. Many distributors end up investing more money than they make, leading to financial problems.

Are MLMs always bad?

MLMs, or multi-level marketing companies, have garnered a controversial reputation in the business world. While there may be some good MLMs and undoubtedly good people at all of them, the structure of MLMs is inherently predatory and motivates distributors to focus on the wrong things.

Many MLMs require distributors to purchase a large amount of product inventory upfront, leading to financial risk and potential loss. The pressure to constantly recruit and sell can also lead to high-stress environments and a constant fear of failure.

While some people do find success within MLMs, the overall structure can create more harm than good. As a marketing expert, I believe there are better, more sustainable business models that allow individuals to thrive without preying on others.

Examples of companies with great affiliate marketing

Many successful companies use affiliate marketers to expand their reach and increase sales. Promoting someone else’s products can be a great side hustle or an entire starter business because it’s easy to get your affiliate links and learn how to direct targeted traffic to them.

Here are three examples of successful companies with strong affiliate marketing programs and how they effectively use them:

Amazon: As one of the largest e-commerce platforms in the world, Amazon has a robust affiliate program called Amazon Associates. They provide affiliates with a wide range of products to promote, and offer competitive commission rates on each sale. Amazon also provides affiliates with various tools and resources to track and optimize their marketing efforts, making it easier for them to succeed.

Fiverr: This popular freelance marketplace connects businesses with skilled online workers. They have an affiliate program called Fiverr Affiliates, which allows marketers to earn commissions by referring new customers to their platform.

Fiverr provides their promoters with a range of promotional materials and tracking tools to help them maximize their earnings, including a widget for displaying Fiverr offers right on your website. You can join Fiverr Affiliates here.

Surfer SEO: Surfer is an SEO tool that helps content writers and teams optimize their articles and website copy for search engines. They have a lucrative affiliate program where software users can earn a commission by referring new customers to the platform. Like many SaaS tools, Surfer has high commission rates and pays out monthly for recurring subscriptions. You can join Surfer’s program here.

How to create a successful affiliate program

Creating a successful program revolves around identifying your target audience and understanding their needs and preferences. This makes it easy to recruit the types of promoters who will be able to get your offers in front of your ideal potential customers.

Next, make sure that an affiliate program is right for your business. While paid commissions are more enticing, many companies can massively increase their sales with a less costly referral marketing program. The difference is that referrals can be rewarded with store credit or other bonuses rather than cash payouts.

How to start affiliate marketing

Getting started is relatively simple. First, find a niche that aligns with your interests and expertise, as this will make it easier to create a compelling sales funnel. Next, join programs or networks to gain access to multiple products in your niche. Then, drive targeted traffic to your affiliate links.

That’s a simplified explanation, but you can read this article for more detailed information on the best promotional strategies.

Affiliate marketing requires less investment and risk than most types of online business. It also requires a smaller skillset to get started than almost any other type of online work, so it’s a good place for small business owners and freelancers to start.

Is affiliate marketing profitable?

Affiliate marketing continues to be a highly profitable business model with global revenue over $8 billion. Many people have achieved full-time income through this strategy, with success stories showcasing the potential for passive income and rapid profitability.

Compared to other “make money online” niches like dropshipping, affiliate marketing offers a lower barrier to entry and requires no investment with less hassle. This makes it an attractive option for anyone looking to earn money online without the overhead costs associated with traditional businesses.

If you’re interested in generating residual income by promoting products you love via simple referral links, give MLM businesses a wide berth and focus on promoting affiliate products that have high commissions and/or recurring commissions. It’ll be much easier to create a revenue flow that can supplement or replace your current income.