If you’re doing research about making money online you’ll undoubtedly come across Affiliate marketing and multi-level marketing.
The 2 methods share a lot of similarities but succeeding with one of the 2 methods heavily depends on the type of person you are and what you’re willing to invest in.
Choosing the wrong method can have huge ramifications for succeeding in earning money online.
This is why I thought I’d add some value by highlighting the most impactful differences between Affiliate marketing and MLM and making it easier for you to decide if you’re going to get affiliate marketing training or become a multi-level marketer.
Affiliate Marketing vs MLM: What are the definitions of the 2 methods
What is affiliate marketing?
Affiliate Marketing is a form of marketing where you make an arrangement with companies to promote their products and in exchange for every sale that’s made by your recommendation you’ll receive a commission.
As an affiliate marketer, you aren’t a part of the company. You’ll be provided with unique referral links that you can use to refer people to the company.
Most affiliate marketers promote the affiliate products with either SEO or social media and drive that traffic to their personal website on which they have the affiliate links.
What is multilevel marketing?
MLM (a.k.a network marketing or direct selling) stands for multi-level marketing.
According to Wikipedia, multi-level marketing is a marketing strategy for the sale of products or services where the revenue is derived from a non-salaried workforce.
As a part of this workforce, you can earn money in 2 ways.
Directly selling the products the company offers face-to-face and/or recruiting a group of people and as a result, creating a pyramid structure that makes it possible to earn residual income based on the sales of your recruits.
They both have a lot of similarities such as not needing to create a product to sell and earning commissions but that is where the similarities stop.
Now let’s look at what makes these 2 methods different.
The differences between multi-level marketing and affiliate marketing
1. Recruiting & Managing your recruits
This might be one of the biggest differences between multi-level and affiliate marketing. To reach the maximum earning potential with multi-level marketing it’s required that you recruit people.
In the MLM world, the people you recruit are often referred to as your downline, while you’re considered their upline. Dependent on your rank you might have to recruit more people.
Aside from just recruiting it’s also important to reach maximum earning potential that your downline is deemed “active”. The term active refers to multi-level marketers that fulfill the basic requirements for selling a specific number of products over a certain timeframe.
None of this applies to affiliate marketing. In affiliate marketing, from the day you’ll sign-up you’ll receive the max commission rate. You also don’t have to “monitor”, inspire, and coach your recruits to reach your maximum earning potential.
2. The Monthly Quota
When you sign-up for an affiliate program, you become a permanent member. It doesn’t matter if you don’t refer people for years, the link will stay active and you can earn commissions.
This isn’t the case with multi-level marketing. To stay eligible to earn commissions in MLM you have to fulfill a monthly quota of PV you have to “accumulate” (which means purchase or resell).
Most MLM companies use a point system to express the worth of their product which is called Personal Volume or in short PV. Every month multi-level marketers have to invest a minimal amount of money to stay eligible or stay at the rank they’ve achieved.
3. Increased commission rate based on performance
While you have to fulfill a monthly quota to remain eligible for earning commissions you can also increase your rank which comes with an increase in commission rate.
Most MLM programs start at a commissions rate of around 20% to 25% and based on how many people you recruit, their performance, and how many products you personally accumulate you can increase it to sometimes even 40%.
Affiliate marketing, on the other hand, has a fixed commission rate from the day you join the program.
4. The Starter Fee
99% of affiliate programs don’t require you to pay money. In theory, because of that, you could start earning money without investing even a dollar. In reality, this isn’t the case because most people invest in affiliate marketing resources to increase their chances of succeeding.
This isn’t the case with multi-level marketing. To join an MLM program one is required to purchase a starter kit. These are often packages containing samples of the company’s best sellers, training resources, and other support items.
In the 4 years, I have been reviewing make money online opportunities I have come across MLM starter kits of all prices ranging from $100 to even $1900 for some clothing MLM companies.
5. Promoting multiple businesses
MLM companies restrict their independent workforce from joining other MLM programs. The moment a company finds out you’re doing multi-level marketing for other companies even if they’re in a different niche you’ll be removed from the MLM program.
Affiliate marketing companies, on the other hand, allow you to join as many affiliate programs as you want even if they’re from companies that are their competitors.
This makes it in my opinion easier to earn money with affiliate products since you can compare them to competitors and earn money regardless of which product they pick.
You can also complement your main affiliate products with other products.
6. Freedom in your marketing
Affiliate Marketing programs don’t have many constrictions when it comes to how you market their products. The only notable rules seem to be not being allowed to present yourself as part of the company and using their name in the URL of your website.
MLM companies have this same restriction but they also have some other things you have to consider. An example is not being allowed to use Search Engine Optimization to market MLM products.
It’s a shame because it is one of the most effective ways to market products and do it in a way where you don’t have to trade in hours for money. When applying proper SEO, 1 page can bring in thousands of visitors every day for years.
Most affiliate marketers take advantage of SEO because it’s the closest thing to promoting products passively.
7. The Reputation of the Methods
Affiliate and multi-level marketing do have some similarities but how they’re looked at is very different. The fact that multi-level marketing companies have a pyramid-like structure works to their disadvantage.
Let’s say a friend approaches you and he says you can earn money by recruiting people. The only thing you have to do is join my “downline” and start recruiting people as well.
What word is the first thing that comes into your mind?
In most cases, it’d be the word “pyramid scheme”.
This often makes it hard for people to get the most out of MLM programs. Most people will say no because they’d think it’s a pyramid scheme and they honestly have a good reason for it.
A lot of MLMs have been exposed and turned out to be pyramid schemes. So even if you join a legitimate MLM program it’s still an obstacle you’re going to have to overcome.
Affiliate marketing doesn’t have this problem. If you join the affiliate program of a company that has proven to be trustworthy such as for example Amazon, Walmart, or eBay you don’t have to spend time convincing people it’s legit.
You’ll just be referring people to websites they’re already using and trust in most cases.
What’s the better choice?
That depends on a few factors in my opinion.
1. The size of your Network/Audience
Having an extensive network or audience is a huge advantage no matter what method you choose to pursue but the level of importance of it differs with both methods.
Multi-level marketing requires you to purchase starter kits and invest financially on a monthly basis. If you don’t have the guarantee of being able to sell and recruit people you might end up in a financial deficit.
According to some MLM statistics, it is not uncommon for people to lose money with MLM. Since you don’t have to pay to join an affiliate marketing program you can build up an audience or traffic stream without the pressure of losing money every month.
2. Your willingness to recruit face-to-face
A large component of success with Multi-level marketing is recruiting. It is possible to earn money with most MLM programs simply by directly selling the products but in most cases, you’ll only be able to make a decent side income if you combine it with recruiting.
If you’re not comfortable pitching to your family, friends, and network to join as a recruit it might be wise to take a look at affiliate marketing.
3. Willingness to take on financial risk
I have touched on this earlier but to get into multi-level marketing a big budget is needed. You need to buy starters kits and invest financially on a monthly basis.
I can understand not everyone is willing to take that risk. This is why most people that don’t have any experience with marketing, or sales or have an extensive network rather learn affiliate marketing and join an affiliate program.
If you’re confident in your sales and recruiting skills and you can find an MLM program that doesn’t stack the cards against you it might be worth it.
Before choosing I’d advise you to take these factors into account.
That’s all for today.
If you have any questions or just want to show some love. Leave a comment below and I’ll respond a.s.a.p.
Until the next post!