Have you ever been confused about affiliate marketing vs MLM? Many people have used these two methods to generate revenue and achieve success. So, can you stand out from the crowd in today’s saturated market?
The answer is a 100% definitive yes! This blog post will provide you with everything you need to know, from the MLM vs affiliate marketing pros and cons to their fundamental differences.
We guarantee that you will have the most up-to-date information in 2023 after reading all and will be able to make an informed decision about the best fit for your needs.
Overview of Affiliate Marketing vs MLM
First, it is essential to have a thorough understanding of Affiliate Marketing and Multi-Level Marketing (MLM). This is because you need to know precisely how they work and operate to choose the appropriate one. Many people have misconceptions about these two methods; therefore, we will explain them very detailed and straightforwardly.
What is Affiliate Marketing?
Statista reports that one of every six affiliate marketers earns more than $50,000 monthly, with the highest earning revenues of up to $150,000. So, what is the exact definition of affiliate marketing, and how does it work that can bring such significant profits?
Affiliate marketing operates as a performance-based marketing strategy wherein a business grants rewards to an individual or another business (known as an affiliate) for directing traffic or generating sales toward its website.
- Entries: The merchant and the affiliate.
- Operation: The merchant furnishes the affiliate with a unique tracking link, which the affiliate employs to endorse the merchant’s products or services. Affiliates promote links and earn commissions based on sales, clicks, or impressions.
- Average commission rate: Based on the merchant and the product or service being promoted, but typically ranges from 5% to 30%.
- Types of affiliates: Bloggers, influencers, reviewers, etc., through email marketing campaigns, social media, video, and blog posts.
What is Multi-Level Marketing?
MLM stands for Multi-level marketing and is also known as network marketing or referral marketing.
Multi-level marketing is a business model where people sell products or services directly to customers and encourage others to join and sell the same products or services.
- A hierarchical structure: MLM businesses are typically structured in a pyramid-like fashion, with each distributor at the top earning a commission on the sales of the people they recruit.
- Recruitment: MLM businesses rely on distributors to recruit new members. This is how new distributors are brought into the business and how the business grows.
- Commissions: Distributors earn commissions from their own sales and the sales made by the people they bring into the business. This can lead to significant income potential for top earners, but it is important to note that MLM businesses can also be risky.
Note: Some MLM schemes are illegal because they operate as pyramid schemes, which focus on recruiting rather than selling a product. Income is based mainly on recruitment, not sales. It relies on a constant stream of recruits
Pros and Cons of Affiliate Marketing vs MLM
We believe this information has provided you with a deeper understanding of the definitions and operations of these two earning potentials. However, everything needs to be considered on both sides of the coin. Let us delve into the MLM vs affiliate marketing pros and cons to enhance your awareness further.
Pros and Cons of Affiliate Marketing
| Pros | Cons |
| Multi-billion dollar industry: Statista reports U.S. affiliate marketing spending reached $8.2 billion in 2022, triple the amount from 10 years prior. | High competition: Need paid ads, a soil following, and SEO/technique knowledge. |
| Low start-up costs: No investment in inventory or creating your products/services; free to join. | Low control over your income. Income is linked to product/service sales. Poor sales by the merchant affect your earnings. |
| Flexible and Independence schedule: Work from anywhere, set your hours, and use laptops or mobile phones to access digital marketing platforms like Facebook, Tiltolk, Blogpost, Website, etc. | Low commission rates: Some merchants offer very low commission rates. |
| High performance-based salary: Unlimited earning potential; not having to share the profits. | Fraud and abuse: Some may cheat the system by self-clicking or using bots for fake traffic. However, UpPromote has effective solutions help you overcome these scams. |
| No inventory or customer service. Not selling, just promoting | Requires time and effort: Persevere and never give up to achieve success at affiliate. |
| Easy to start: There are many affiliate programs for beginners available to help you get started quickly and easily, | Quantity approach: Spam association may limit growth, damage reputation, and result in program termination. |
Pros and Cons of MLM
| Pros | Cons |
| High income: Recruit new members to build a team and earn commissions on the work of others. | High risk: Your investment in the company’s success is at stake. If the company performs poorly, you risk losing it. |
| Flexible schedule. | Lower-tier distributors earn less than upper-tier distributors. |
| Learn new skills: MLM companies often offer training and development opportunities to their members, such as improving communication skills. | Lack of product or service knowledge: Insufficient product information from MLM companies helps sell. |
| Potential to be scammed: Can be mistaken for illegal pyramid schemes. | |
| Slow growth rate: Time needed to establish your team | |
| Inventory: Buy a product from a company and hold it to sell to a customer. You will have a problem if you don’t sell it all to break even, let alone make a profit. | |
| High investment: Investing some money to join an MLM organization and buy the company’s products before you can start selling, posing a high risk if these companies are scams. |
As you can observe, the MLM vs affiliate marketing pros and cons are compiled to illustrate that each method has two perspectives, and there is no perfect method for everyone.
That’s why someone may succeed in MLM but need help with affiliate marketing and vice versa. However, affiliate marketing seems to be a less risky and easy way for beginners without any experience. Anyway, think carefully about the pros and cons of each method to pick the right one for you.
Affiliate Marketing vs MLM: Start-Up Cost
The start-up costs for affiliate marketing and multi-level marketing (MLM) can vary significantly.
- MLM start-up costs: Typically depend on the company you choose to represent. Many companies require you to purchase a certain amount of products or inventory upfront, and there may also be monthly or annual fees and registration costs.
- Affiliate marketing: on the other hand, it has minimal to zero initial costs. You typically only need to create a website/blog and sign up for affiliate programs.
As you can see, affiliate marketing is gaining popularity over MLM because it is low-risk and free to join. People are more likely to participate in affiliate marketing because it is a new field they have no experience, and they don’t lose anything if they fail.
In comparison, MLM requires people to invest money in products they may not fully understand, which can be risky for beginners.
Affiliate Marketing vs MLM: Earning Potential
About Affiliate Marketing
Based on a survey conducted by the Influencer Marketing Hub, over 50% of all affiliate marketers earn $10,000 or less annually. In comparison, approximately 33% make $10,000 or more.
According to data from Glassdoor, the average yearly salary for an affiliate marketer is $59,060, with potential earnings ranging from $58,000 to $158,000. These figures encompass various “additional pay” options such as cash bonuses, commissions, tips, or profit sharing.
About MLM
On the contrary, as stated by MagnifyMoney, MLM participants worked 14 months over five years, dedicating approximately 33 hours each month to their endeavors.
Despite their efforts, their median monthly earnings amounted to $18.18, translating to a meager $0.67 per hour, even before accounting for business expenses. It means that, on average, MLM representatives earn $9.86 less per hour compared to the lowest-paid workers in the US.
However, the most astonishing revelation is that an average of 99.6% of participants in MLMs end up losing money when all expenses are considered.
In a nutshell: Affiliate Marketing and MLM offer earning opportunities, but their approaches and making structures need to be revised. Based on the data, Affiliate Marketing appears to have a higher earning potential than MLM
Key Differences Between Affiliate Marketing vs MLM
What is the critical difference between MLM and affiliate marketing? We will compare them based on four factors: product selection, sales closing, product promotion, and program enrollment. Let’s delve into the details.
Choose Products
One key difference between Affiliate Marketing and Multi-Level Marketing (MLM) when choosing products is the level of control participants have over the products they promote.
- Affiliate Marketing: Participants can choose which products suit their niche, align with their interests, and are believed to resonate with their audience.
- MLM: Participants are typically required to promote the products of the company they represent. The ability to choose which products they promote is limited, and they may be required to promote products they do not personally use or believe in.
Close a Sale
Closing sales is the most crucial step to earning a commission.
- Affiliate Marketing: Generate a commission every time someone clicks on your affiliate link and purchases. You don’t need to be directly involved in the sales process.
- MLM: Earn a commission on the sales of the products or services you sell and on the sales of the products/services sold by the people you recruit. It means you are vested in helping your recruits make sales.
Promote Products
Affiliate marketing allows individuals to choose the types of products/services they want to promote and how they want to promote them through special tracking links. Thanks to the internet, affiliates can promote products from the comfort of their own home.
Many affiliates choose to create an affiliate website and write blogs incorporating referral links, but this is not the only option. Some affiliates make money promoting products through their social media channels (Instagram, Tiktok, Facebook, Twitter, etc).
YouTube is also a widely favored platform for affiliate marketing promotions because it can accommodate affiliate links within the video description.
In contrast, regarding MLM marketing strategies, while some participants can make sales online, a significant portion of their earnings is derived from direct communications.
MLM heavily relies on recruiting new members, necessitating more personal interaction to expand the network. It often involves using tactics that some might find intrusive or bothersome. As a result, MLM may not be for everyone.
Join A Program
Joining an MLM business requires a substantial investment, as the parent company typically charges a fee for a “startup kit” that includes all the products to sell. It can be difficult to offset this cost, and there may also be ongoing membership fees.
Additionally, you may have to generate a specific sales volume before seeing any return on your investment.
However, most affiliate programs are free to join. Once accepted into an affiliate program, you can start promoting the brand’s products and earning commissions immediately. It means that there is no upfront cost involved in joining an affiliate program, and you can start earning money without making a significant investment.
Popular high-paying programs include Amazon Associates, ShareASale, ClickBank, AWIN, JVZoo, Impact, CJ Affiliate, etc.
Which is Better? Affiliate Marketing Or Multi Level Marketing
Determining which is superior between affiliate marketing and multi-level marketing (MLM) is challenging as it hinges on individual preferences, development strategy, and goals. Both approaches offer opportunities to earn money by promoting products but operate in distinct ways.
Affiliate marketing involves promoting products/services through websites or social media platforms. Besides, most affiliate programs are free to join and can be an excellent choice for those passionate about content creation and driving traffic.
Conversely, MLM entails recruiting individuals to join the program you are promoting. Commissions are earned on the sales made by these recruits, and you also earn commissions on multiple levels when you bring in others. MLM might suit those who enjoy salesmanship and value being part of close-knit communities.
Successful Examples of Affiliate Marketing vs MLM
Case Study 1: Successful Examples of Affiliate Marketing
Pat Flynn, the accomplished affiliate marketer, is the mastermind behind the renowned Smart Passive Income website. Through this platform, he generously imparts his invaluable expertise to constructing an online business and achieving passive income using Adsense and Amazon’s affiliate program.
As acknowledged by Tryootech, Pat Flynn boasts a vast audience, with over 500,000+ subscribers on his YouTube channel, and rakes in an impressive $1 million annually.
Case Study 2: Successful Examples of MLM
Once a dedicated kindergarten teacher, Sarah Robbins experienced the unfortunate setback of losing her job amidst a challenging economic period. However, she skillfully transformed her career trajectory by venturing into MLM.
In this new endeavor, she exhibited remarkable prowess, ascending to the coveted position of #1 distributor and highest earner, with annual income soaring to an impressive seven-figure figure.
Harnessing her expertise and accomplishments, Sarah Robbins penned a highly acclaimed book titled “Rock Your Network Marketing Business,” wherein she generously shares her invaluable insights and best practices.
FAQ
Is Multi-Level Marketing (MLM) permitted on TikTok?
No, it isn’t. TikTok doesn’t allow MLM on its app. It means they don’t let people promote pyramid schemes or multi-level marketing companies. They recently changed their rules to make it clear that users should not post or share anything related to Ponzi schemes, MLM, or pyramid schemes.
Is it possible to lose money in affiliate marketing?
In affiliate marketing, you can lose money, especially if you become a target of fraudsters. How your affiliate program is structured and managed can also influence the amount of money you might lose. Generally, the more you invest in affiliate marketing, the greater the potential risk if fraudulent activities occur.
Are MLMs allowed in Singapore?
No, MLMs are not legal in Singapore. According to the Multi-Level Marketing and Pyramid Selling (Prohibition) Act, promoting or participating in MLM schemes can lead to penalties, including fines of up to $200,000 or imprisonment for up to five years.
Conclusion
Understanding the differences between affiliate marketing vs MLM is crucial in deciding which business model suits you.
While both offer opportunities to earn residual income, their methods are vastly different. By reading all the information from MLM vs affiliate marketing pros and cons to successful case studies of each, you will better understand these two approaches and be better equipped to choose the one that aligns with your goals and preferences.
