Today I’m going to talk about two famous business models: multi level marketing (MLM)/network marketing and affiliate marketing.
If you haven’t heard of them and want to know what they’re about to decide which one suits you better, you’re in the right place. I’ve personally experienced both of them so I know how they function.
I’ll explain what they’re about, the differences and similarities between them and what’s my final choice.
Table of Contents
What is Multi Level Marketing about?
Multi Level Marketing (MLM) or Network Marketing is a business model that requires to build a team of people who promote a company’s products or services.
You join a MLM company by being recruited by an independent distributor of that company (your upline), who will teach you to do the same, that is getting other people to join the company and sell what that company has to offer, what means that everyone in the network sells the same products.
Consequently, the bigger your team is the bigger the company’s sales volume and the higher the commissions you’ll earn.
People who joined the company at their early stages are the ones who are at the top and reap higher rewards than people who are at the bottom.
If you join a MLM company but you don’t recruit anyone, your rewards will be very little because you won’t have anyone below you who’s contributing to the company’s sales volume, so your earnings will depend only on the sales you make.
Note that legal MLM companies will let you sell their products to people who’re not affiliated to the company (final clients), while MLM companies who require you to sign up others to sell their products are usually pyramid schemes because their first focus is on recruiting.
What is Affiliate Marketing about?
Affiliate Marketing is a business model that involves three or four parties (the vendor or company, the affiliate, the customer and sometimes the affiliate network).
The job of the affiliate is to connect the customer to the company’s services or products. If the customer buys the company’s product, then the affiliate gets paid a commission.
When the affiliate network is involved, its job is to take care of the product’s delivery and the payment.
An example of affiliate network would be Amazon affiliates, since it contains a lot of products from different companies or vendors.
The good thing is that everyone involved in the process wins: the company sells their product, the affiliate earns a commission and the customer gets the product that meets their needs.
Unlike Multi Level Marketing, you (the affiliate) don’t need to build a team and can do this from wherever you want as long as you have an Internet connection lol.
Similarities between Multi Level Marketing and Affiliate Marketing
Multi Level Marketing and Affiliate Marketing work in different ways, but they also have some points in common, as I’m about to explain in this section.
Both business models require you to help people
In Multi Level Marketing you (the sponsor) need to help people get others to join the company and distribute the company’s products, while in Affiliate Marketing you (the affiliate) have to help people know how the company’s (you’re affiliated with) product can solve their problems.
Both of them allow you to sell other people’s products
You don’t need to create any product when you join a MLM company or an affiliate program. This can actually be a good and bad thing, since you can save time by not having to create the product but you don’t have control over it so you can’t choose its price.
You can make passive income with both
If you’re in a MLM and manage a big team, you get to earn commissions off other people’s sales, so you can earn money even if you’re not present.
If you’re affiliated with a company that sells monthly subscriptions, then you get to make commissions each month just by making a sale (unless the customer unsubscribes).
Both require a winning mindset
You need to be willing to meet the customer’s needs, see failure and challenges as opportunities to become better, never stop learning and never give up. This can be applied to any kind of business.
Differences between Multi Level Marketing and Affiliate Marketing
There are some differences between these two business models that are key to decide which one is right for you.
Multi Level Marketing keeps you more dependent
In MLM you can only work with a company, so your sources of income only come from that company. Therefore, if that company goes bankrupt then you’ll stop getting paid.
You also need to rely on your team’s sales, so if your downline don’t make any sales you won’t generate any profit. This way you need to keep recruiting people to make sales, if you don’t recruit anyone you’ll only be paid for the sales you make, but this can’t guarantee you a full-time income. In MLM, most part of the money comes from recruiting.
In affiliate marketing you have more control over your business because your income depends on your effort and the sales you make and you don’t depend on a team for that.
Affiliate Marketing is mostly done online while Multi Level Marketing is done offline and online
To do affiliate marketing you need to join an affiliate program or an affiliate network (most are free to join and most are online) like Amazon associates, eBay partner network, Clickbank… and then you’ll get a link for each product you want to promote.
MLM has been used for more than 50 years so it was first done offline. Distributors had to prospect everyone they came in contact with and meetings were essential to present the business opportunity and keep everybody in the team motivated.
There’s still some people who do MLM this way and others are taking advantage of the Internet to build the business.
Affiliate Marketing enables you to choose what to promote
In Affiliate Marketing, you can join the affiliate programs or networks you want and choose the products you want to promote that are relevant to your niche. You can even promote products from company’s that compete with one another.
For example, if your niche is related to makeup or beauty, you can recommend products from different brands like Sephora or Maybelline, it’s all up to you.
On another hand, in MLM you can only promote the products or services from the company you’re involved in.
You can join more than one MLM company but it would be a mess because your focus would be in two places, what would make it hard for you to succeed in one.
In MLM the niche doesn’t matter that much because you can’t promote products from two companies that are in the same niche. Therefore, I recommend that you choose a company that offers products you like and you try them before selling them.
Multi Level Marketing compensation plans are harder to understand
Each MLM company offers a different compensation plan and different incentives.
A reason why MLM compensation plans are usually hard to understand is because there’s a lot of people involved in the business that are in different levels so the rewards and benefits are not the same for everyone (people who are in a high levels get bigger commissions than those who are at the bottom).
Another thing is, some MLM companies offer multiple ways to get a compensation so Multi Level Marketing compensation plans are usually quite complex.
If you do affiliate marketing instead, the compensation plan is quite simple. You (the affiliate) get paid a percentage of the sale you’ve made, and some can be quite high.
Commissions usually depend on the product (digital products have higher commissions than physical ones) and commissions usually range from 5% to 75%.
Affiliate Marketing requires lower costs than Multi Level Marketing to get started
If you want to start a MLM business, you’ll have to pay the company you join a fee to become an independent distributor or an other cases a monthly or annual fee.
You’ll also spend a ton of money every month (don’t expect less than $200) because you’ll have to buy a minimum amount of products in order to qualify for commissions and bonuses.
You may end up purchasing products you don’t need just to earn the monthly commissions, which could be an issue if you earn less than what you spend on the products.
If you start an affiliate marketing business instead, you can start for free because most affiliate programs are free to join.
If you want to promote the products on a website, then you’ll need to pay for a domain name and hosting, and training so you know how to do it.
Other expenses may be an autoresponder and Facebook ads, Twitter ads, Instagram ads, Google adwords… if you want to advertise on social media or pay for traffic. However, it’s all up to you and your budget.
Multi Level Marketing requires recruiting while Affiliate Marketing doesn’t
In an MLM business, you need to get people to join the same company you’re involved with in order to earn commissions off their sales. If you don’t recruit anyone then you can’t expect good rewards because you won’t earn big commissions off the products you sell.
Take into account that some people who are in a higher level than you like your uplines, get to earn a big commission off the sales you make.
On the other hand, in an affiliate marketing business you don’t need to recruit anyone to make a good commission off your sales. Note that the money made from your products you sell only goes to the vendor and you, nobody else.
If you want to duplicate your efforts then you can hire someone to work on tasks you don’t like like writing posts for your website or manage your social media accounts. Anyway, it’s up to you. You don’t need to do this when you’re starting out, especially if you’re on a low budget.
Multi Level Marketing is related to pyramid and ponzi schemes
There are and have been some pyramid and ponzi schemes disguised as MLM companies like Merlim Network, which I already exposed.
This is because a MLM company presents a structure in a form of a pyramid. A way you can differ a MLM company and a pyramid or ponzi scheme is by looking at what the company offers.
If the company doesn’t offer a product or a service or their products/services have a low quality or no real value, then I can assure you this company is a pyramid or ponzi scheme, which is illegal because most of the revenue comes from the fee that people pay to join the company.
If the MLM company is really a pyramid or ponzi scheme, then it’ll come the point when people stop joining because it doesn’t offer any real value and will eventually stop working.
This doesn’t happen in affiliate marketing as recruiting doesn’t have anything to do with it, so it’s more common to be scammed in a pyramid scheme disguised as a MLM company than in affiliate marketing because affiliate programs don’t require you to recruit anyone.
Why I choose Affiliate Marketing over Multi Level Marketing
There are a number of reasons why I prefer affiliate marketing over multi level marketing. One of them is the fact that affiliate marketing gives me more freedom of choice, since I can choose what products to promote and what companies to work with, and can do it from anywhere where I have an Internet connection.
To be honest, I believe affiliate marketing is more fair than multi level marketing because the revenue is shared with two parties (the vendor and the affiliate), while in multi level marketing the revenue is shared with all the people in the network, what I don’t find it’s 100% fair because the ones at the top get to receive more rewards than the ones at the bottom.
Let’s say that you join a MLM company and you purchase and sell a product, would you find it’s fair that other people (your uplines) who haven’t sold the product got paid a higher commission than you? I don’t know what you think, but it’s not fair in my opinion, especially if they haven’t helped you sell the product.
I don’t believe MLM is a good business model for people who are on a low budget because all MLM companies require you to pay a fee to get started and they also require you to buy a minimum amount of products each month.
Would you like to spend at least $200 a month on products you’re not going to consume just to earn $50 of commissions? I honestly wouldn’t like it, since I would be spending far more than I earn and would collect products I don’t need.
Another thing I don’t like about MLM is that you’re forced to recruit other people, something I didn’t like when I was involved with a MLM company. My uplines used to pressured me to try to get my family and friends into the company, which didn’t feel good at all.
Oh, and the fact that I could find the products (the MLM company offered) in the market for a better price was another think that made me end up quitting, especially when I found out that there were better opportunities out there.
I believe that MLM can be a good opportunity for some people, but it wasn’t for me. If you’re thinking of starting a MLM business, I recommend that you get to know everything you can about the company, the products and the compensation plan before joining.
When I found out about affiliate marketing, I was happy that I could start for free and found the process to be more simple (not easy) than when I was in that MLM company. The fact that I wasn’t required to recruit people or buy tons of overpriced products each month was another reason to do affiliate marketing.
If you’re thinking of starting an affiliate marketing business, then I recommend that you check out Wealthy Affiliate, an online business platform where you’ll be taught to start and grow an affiliate marketing business from scratch. I’ve personally been a WA member for more than a year now and I’m so glad that I found it out.
You won’t only learn to build an affiliate marketing business, you’ll also get support and help from the community members (included myself) and the owners. There’s always someone who will reply to your questions or doubts! =)
If you want to know more about Wealthy Affiliate, then you can check out the review I wrote about it by clicking below:
I hope you’ve found this post helpful and now you know which of these two business models is right for you. Don’t hesitate to share this post on social media so more people can benefit from it.
If you have any questions or comments related to MLM, affiliate marketing or Wealthy Affiliate, feel free to leave a comment below and I will get in touch with you as soon as possible. Thanks for dropping by! 🙂
Best wishes 😀