What is the difference between MLMs and Affiliate Marketing?
With everyone having access to smartphones these days, many people are looking to make money from their phones. There are many people out there trying to convince everyone how simple it is to do just that. Two of the ways that people claim you can make money from your phone are affiliate marketing and multi-level marketing (MLM). Are these things the same? Different? Let’s chat!
As a reminder, I have an MBA, I am a Certified Public Accountant (CPA), and have almost 15 years working in finance and accounting. These are my opinions based on researched facts and my understanding of those facts. However, this is not legal, financial, or tax advice. If you need legal, financial, or tax advice, you should reach out to a professional for a 1:1 chat! All opinions are my own.
What is Affiliate Marketing?
Affiliate marketing is when a digital marketer/content creator gets a unique link to recommend a specific product. If the viewers of their content click that link and purchase a product, the creator gets an agreed-upon commission for selling the product. Affiliate links can be placed in blog posts, websites, or social media pages. One of the most popular programs is Amazon Affiliates, but there are a lot of other options. This is a great way to monetize an existing audience you have influence over.
What is an MLM?
MLM stands for Multi-Level Marketing, sometimes also called Network Marketing. This business model is where a company hires independent consultants (paid via 1099) to sell its product. Some examples of MLM companies are Tupperware, Beachbody, Color Street, Pruvit, Amway, Norwex, and many more. In addition, the compensation plan requires these consultants to recruit others under them – their downline – to increase commissions and bonuses. In this business model, most individuals lose money. The majority of participants make very little money or lose money, while those at the top can be making a great deal of money. More on that here: Are MLMs Pyramid Schemes?
Affiliate Marketing Vs. Multi-Level Marketing
So, these are two popular buzzwords out there on the web right now. So let’s do a comparison of these different types of marketing. Spoiler alert – affiliate marketing wins for me every time. I do not recommend MLMs to anyone.
| Affiliate Marketing | Multi-Level Marketing | |
|---|---|---|
| Commissions earned on products recommended | Yes | Yes, but typically a small portion of the compensation plan |
| Recruiting required | No – there is no recruiting in affiliate marketing | Yes, to rank up and earn the larger commissions, recruiting is a requirement |
| Upline/someone benefiting from your sales? | No | Yes, Upline has a vested interest in your success |
| Monthly sales minimums | Maybe | Likely |
| Start-up expenses | No – You can create affiliate marketing accounts for free | Yes – range in amount based on MLM |
| Annual fees | No | Yes – in many MLMs there are annual fees |
| Can be done on your phone from anywhere | Yes | Yes |
What are the Differences Between Affiliate Marketing and MLMs?
As noted above, there are a few differences between Affiliate Marketing and MLMS.
- MLMs typically require start-up fees. Affiliate marketing is free to start up. With Amazon Associates, you can be up and running in about 5 minutes and for $0!
- Annual fees – similar to start-up costs, affiliate marketing costs nothing. However, you need to check the fine print of the MLMs, because most of them do require annual fees
- Recruiting required – affiliate marketing, there is no recruiting or hiring. You don’t build a team under you. You refer people to buy the product, and that is it. However, recruiting is a huge component
- Upline/Management – In an MLM you will always have an upline. Your upline will always be vested in your success because they earn additional commissions and bonuses on your sales. This results in an employee/manager relationship, where they encourage you to work and do “personal development”. In affiliate marketing, your answer to no one. You get the links, and as long as you’re meeting the requirements of the program (like a minimal number of sales in specific pay periods, and have appropriate disclosures) you’re independent in what you decide to do
- Monthly sales goals – while you may have a personal sales goal each month, is there one required in MLMs or affiliate marketing? In MLMs, you’ll likely be required to have a monthly minimum of PV (personal volume) of sales. If you don’t meet this requirement, you could lose your rank which would result in reduced commissions and bonuses. With affiliate marketing, you most likely don’t have minimum sales goals, but each affiliate program is set up a little differently. You’ll have to review the program you’re joining to confirm what the requirements are.
What are the Similarities Between Affiliate Marketing and MLMs?
As you can see in the above chart, there are a few things that are similar between MLMs and Affiliate Marketing.
- In both models, MLM and Affiliate marketing, commissions are earned from the sales of products. In affiliate marketing that is the primary method of earning funds. In MLMs, it’s usually a small component of the compensation plan
- Both can be done from your phone anywhere. Many MLMers influence Instagram and TikTok which can definitely be done from your phone. Affiliate marketing links can be placed on blogs and social media, also from anywhere
What business makes more income MLM or Affiliate Marketing?
Both MLM and Affiliate Marketing have success stories. MLMs are a controversial business model, that by reviewing the income disclosure statements of MLMs shows that the majority of participants are in the lowest ranks and do not earn any money. In fact, it is likely most individuals (over 90%) may actually be losing money by working with the MLM. If considering an MLM, I highly encourage you to research the company, income disclosure, and compensation plan. I do not recommend MLMs as a promising business model for most people.
Is Affiliate Marketing a Pyramid Scheme?
Affiliate marketing is not a pyramid scheme. You do not need to pay to participate, you do not need to recruit others to participate. As long as you’re doing business with a legitimate company, this is a very low-risk option that can have very high rewards. If you have the right audience and the right product, the earnings potential can be great.
Wrap Up
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