You probably know that Multi-Level-Marketing (MLM) and affiliate marketing are two of the most popular ways for people to make money online or from home.
The main reasons are that you don't need any prior experience to start either and they are both low cost in comparison to starting a more traditional bricks and mortar business.
Both "opportunities" are legit but both do come with some scam artists trying to take your money.
And if you've ever spent any time on this website before you probably know what my preference is...
I don't only think that affiliate marketing is better than MLM... I believe it's a far superior business model.
However, I'm going to throw out my own biases for this battle and I've even chatted a couple of current successful MLM member to give this a fair fight (listen to that podcast here)
That way you can make an informed decision about what suits you.
Fair? I think so!...
Listen to the full MLM vs Affiliate Marketing podcast episode
Listen to my chat with a current successful MLM member here.
Listen to my chat with someone who has tried both MLM and affiliate marketing here.
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What is Multi-Level-Marketing?
Multi-Level-Marketing (MLM) can also be called network marketing, referral marketing, pyramid selling and many "direct sales" companies are really just MLM companies.
It's a business model where anyone can join the company to get the chance to make money by selling the products.
These "distributors" (also known as consultants, representatives or associates) can also recruit more people into the company to do the same thing. The people they recruit become their "downline" and it's possible to earn bonuses and commissions from the sales this team makes.
It ends up creating a pyramid structure like this:
Typically MLM companies sell some sort of product or service. The most common products are related to health and wellness or personal care... such as makeup, protein shakes, supplements, CBD oil or shampoo etc.
In theory the business model is a win-win.
The company saves money on marketing and advertising costs...
And everyday people get the opportunity to work from home.
MLM distributors on the Make Time Online podcast:
Pros and cons of MLM
Pros
Cons
Conclusion:
MLM companies can be a legitimate way to make money from home.
There is a strong emphasis on team building and helping the people in your team.
However, this actually means that the main way to make good money is by recruiting people to earn commission from the sales they make.
MLM products are typically very expensive in comparison to alternatives on the market. To "remain active" distributors often need to sell a certain amount each month or pay for products themselves.
This means that most people end up losing money in MLM companies.
Beware of pyramid schemes in disguise
Many people think that all MLMs are pyramid schemes.
That is not the case.
However, many MLM companies do sell products to disguise the fact that the only way their members make money is by recruiting more people.
Any company that has a focus on recruiting rather than selling is very similar to a pyramid scheme, and these are totally unsustainable as you can see in the diagram below...
Check out this 5 minute video to learn how to spot a "pyramid scheme in disguise"...
However, there are some legit MLM companies out there too. They offer reasonably priced products and there are no monthly sales quota. Unfortunately, these are actually pretty hard to find!
Just check out the 3 case studies below to see the difference between legit companies and pyramid schemes in disguise...
Case Study 1- Pyramid scheme
MLM companies like this are the worst.
The ONLY way you can make money is by recruiting people into the company.
Prosperity of Life claims to offer "personal development" training that you can attend and make money from!
In reality, they just teach you how to sell this company to other people.
There's no real products that the company produces. You can sell the "personal development events" but the whole event is really a sales gig to try and make more people join.
It's impossible for everyone to make money through this type of MLM.
Case Study 2- "Pyramid scheme in disguise"
This is probably the most common MLM company that I have seen.
Pyramid schemes in disguise typically offer stupidly expensive products (100% or more above comparisons). Then they have a monthly sales quota that their distributors have to hit to "remain active".
Le-Vel Thrive will cost you $100+ a month to stay active as a distributor.
But you can only earn 20% commission for any products that you personally sell. So people can be hundreds or thousands of dollars out of pocket before they sell anything and then only make back $10-$50 from their sale.
There's a huge emphasis on recruiting and this is the only way you can realistically make any decent money from this type of MLM. Once you recruit 2 or more people you've effectively "passed the buck" down them.
Case Study 3- Legit MLM company
Farmasi claims to be a "direct sales" company but you can earn bonuses from your downlines sales. So it still is an MLM company in my opinion.
It only costs $19.99 to join and there are no monthly sales quotas to hit.
The makeup is good quality and affordable. Distributors also make 50% commission from any sales.
This means the company genuinely offers products that people would be happy to promote (as it's good and affordable).
There is a focus on selling the products and it's possible to make money simply from doing that without recruiting anyone.
But how much are you likely going to be able to sell in person to your friends and family? If only there was a way to use the internet to sell for you 24/7...
What is Affiliate Marketing?
Affiliate marketing is earning a commission by promoting someone else's product.
Simply put...
Sell other people's stuff.
It really is a win-win...
- Companies or individuals create a product or service and save money on their marketing costs.
- Affiliate marketers promote the products or services and earn a commission of the sale.
You can become an affiliate marketer right now by joining affiliate networks for free, such as:
- Amazon
- Click bank
- Commission Junction
- JV Zoo
- Shareasale
- Walmart
In fact, many businesses or entrepreneurs will have their own affiliate program that people can join for FREE...
So if you find products that you like, you can share your "affiliate link" with people and if they buy something through your link, you make money!
It's possible to get paid 4-90% commissions depending on the individual product.
It sounds too easy, right?
Well that is an overly simplified version and you probably won't be able to get many people to buy products like this.
But the best affiliate marketers use a website to "drive traffic" to it and promote products to earn commission.
If these websites actually help people to solve their problem, then people will buy these products.
It's possible to create these websites that bring in hundreds of thousands of visitors each month for free... and they work for you 24 hours a day 7 days a week.
Examples of affiliate marketers on the Make Time Online podcast:
Pros and cons of MLM
Pros
Cons
Conclusion:
Affiliate marketing is a way to make money by promoting other people's stuff.
But because it's completely free to become an "affiliate marketer", many people try affiliate marketing and don't make any money.
The best affiliate marketers build a website that helps solve problems and attracts thousands of visitors every month.
This way the business grows over time.
Plus, the skills you learn from affiliate marketing can be used to help any business in the 21st century.
You may be interested in this...
MLM vs Affiliate Marketing
Tonight, we are going to witness the most anticipated match in the history of online businesses for the heavyweight championship of the world!
Entering the ring wearing navy blue is...
Affiliate marketing!!
And the opposition wearing teal blue is...
MLM!!
Let's get ready to ruuuumbbbblllllle...
Round 1- Start up costs
It's claimed that you can start either business opportunity for next to nothing. In fact, the initial cost to join most MLM companies is under $100.
They do however, often recommend you buy a product pack so that you can test the products or use them as samples to sell to others.
This can set you back anything from $50-$1,000.
There are also often monthly sales figures to hit and if you don't reach that then you will need to pay for the products yourself. This is usually around $50-$200 a month.
However, it's possible to start affiliate marketing for free. Any legit affiliate marketing opportunity is free to join.
There are even ways you can build websites for free. Watch this short video to see how.
And it's possible to learn how to build an affiliate marketing business with all the training and tools you need from scratch for as little as $30 a month.
Winner- Affiliate marketing
Round 2- Choice of products
MLM companies provide certain products or services.
If you join a company you can only sell their products to people. There are often terms that state that you are only allowed to work for one MLM company at a time, especially if you're thinking about joining another one in the same industry.
These products are often very expensive and you can easily find better alternatives for a fraction of the price.
With affiliate marketing you can choose anything.
Honestly... anything!
If you have a passion about sailing you can create a website specifically to help people with sailing. If you recommend certain products or information that could someone solve a problem, then you can get paid for this over and over again.
You are complete control over what you promote.
Winner- Affiliate marketing
Round 3- Selling style
The real way that MLM distributors make good money is when they "build a team". This sounds great to many people as most people don't want to do business by themself.
But what this really means is that you need to recruit people into the MLM company.
So you're going to need to ask all your friends and family and once they reject you, you'll be taught how to put your life on social media to try and attract new unsuspecting victims.
Many MLM companies still encourage "home parties" where you invite friends over and show them how good your products are.
Affiliate marketing is all done online.
That means you provide real value to people on your website and never need to sell face to face. Some people are put off by the thought of having to write a lot.
But the beauty is that you can do this at your own pace and build your website over time... it doesn't disappear.
I used to hate writing but like anything else, it's a skill that you can improve on in time.
If your business is not on the internet then your business will be out of business- Bill Gates
Winner- Affiliate marketing
Round 4- Personal development
Most MLM companies are quite big on this.
Many of them will have live events around the world for you to attend (it does cost more money mind you!)
But if you've never been to an event like this, it can spark a fire inside you that you never knew was there.
Most MLM members encourage each other to read self development books and continue to improve.
There are events like this you can attend for affiliate marketing such as FinCon or Affiliate World Conference. However, many people try to do affiliate marketing all by themself.
Without the support it's very easy to avoid personal development or connecting with people regularly. MLM takes this round!
Winner- MLM
Round 5- Skills learnt
As already touched on, affiliate marketing can teach you crucial skills that every business needs in the 21st century.
Learning how to market online is useful for anyone.
Helping your website be found on Google (SEO), copywriting, email marketing and social media marketing are all skills that you can learn and improve, whilst building a business with affiliate marketing.
Every business in the world needs this. You can either market the skills you learn to make money from freelance work as your business grows or use these skills to build your own mega future business.
MLM companies rarely come with any training to improve these skills.
You're really only taught how to be on social media all the time to try and attract people into asking how you make money... then bam! Recruit, recruit, recruit!
Winner- Affiliate marketing
Round 6- Income potential
There are far too many people earning mega money from affiliate marketing to even know.
I have personally spoken to 5 people on the podcast who make over $1 million a year (and they were all 30 or younger and not even the real big fish of the industry).
The big reason for this is due to the previous round... they have learnt skills that they use to create a mega business.
It's possible to create a growing passive income as once you put the work in once your website can get found every single month by more and more people.
It is possible to make some great money from MLM companies. But you will always be a cog in the wheel (unless you create your own MLM company!)
The most I have seen anyone make from an income disclaimer is around $1,000,000 a year (and we're talking about millions of people that are in MLM companies).
Winner- Affiliate marketing
Final Score: MLM 1 vs 5 Affiliate Marketing
The downside to both businesses...
So this is the side that not many people will tell you about.
There are so many people out there trying to sell something or suggesting they have the answer to help you make millions of dollars overnight.
To be successful in either one of these business models is going to be hard.
It will take time and effort and you will have a LOT of setbacks along the way.
The reason I know this is because it's happened to me (and pretty much every other successful entrepreneur I've spoken to or read about... not that I'm putting myself in the same category as them, but I know I'm on the path to get there).
This is the reality...
And many people just get so caught up on one thing...
The truth is, it's going to take time to see the money.
Yeah you can see a little bit of success just for proof of concept.
In fact, you can go to Amazon Associates right now, get a free account and send the link to a book you know your Mom wants to buy to her.
Once she buys it you get a commission... boom!
Real Money! (it will be like $0.23 so don't go quit the day job)
But here is what actually happens...
I know I haven't "made it"... in fact, I would say I'm just about coming up out of the trough.
But I have to be honest, the speed at what this scales is even frightening me!...
MLM vs Affiliate Marketing: who wins?
So yeah, as I already told you...
I am biased.
But hopefully you can see why now.
There are just some reasons why affiliate marketing wins by a country mile in my opinion:
- You control the business (you are not restricted to the products you promote or what niche you choose or what you "duplicated website" looks like)
- The skills you learn can provide you with a mega business (like never have to work another day in your life stuff)
- You don't need to recruit people or sell to your friends and family
I know people that do well from both.
I can't say that I would be comfortable selling overpriced products to people or recruiting them knowing they are becoming another cog in the wheel.
But I know one thing for a fact...
Doing the same thing will get you the same results.
Action takers always win.
Ready to make passive income online?
In 2018 I had no idea how to make money online. I was a full time PE teacher with no marketing skills or online experience.
I fell for scams along the way but I've managed to create a growing passive income online.
If I can do it, anyone can.
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Thanks for clarifying the difference between multi-level-marketing and affiliate marketing. From above they look the same, but when you zoom in, you can see the difference. I’ve been doing a bit of both and the one thing that matters to me is both systems are legitimate and they have earning power. It’s on people and their abilities to decide whether or not they are going to succeed. Great post, thanks for sharing! What’s your preference?
Hey Ivan. The more I’ve researched MLMs, the more I realise that most of them are very similar to a “pyramid scheme in disguise”. If they have expensive products and a monthly sales quota that is a huge red flag that the only way you’ll be able to make money is by recruiting people into the company.
Any company that only pays you good money for recruiting is unsustainable and the majority of people will lose money.
If you were to use an MLM as a learning experience, realise you weren’t going to make decent money (I certainly wouldn’t recommend recruiting friends and family into a pyramid scheme in disguise) and took some of the personal development to use in your own business in the future then it’s not the worst thing for people to do.
However, affiliate marketing can provide an incredible income for some people, whilst learning more important business skills in the 21st century. It beats MLMs hands down in my opinion.