MLM vs Affiliate Marketing, which is the Best Online Business Model for making money online in 2020?
Making money online while doing what you love has become easier than ever as it was 50-60 years ago.
Indeed thanks to the Internet, you have the possibility to start a business on the side of your day job, to work remotely from the comfort of your own home and in your own schedule.
However, if you are a newcomer in the online world, finding the business model that will help you reach your financial goal may be challenging. In fact, many people (included me) tried and failed before finding what works for them.
If you want to start a business and you are wondering which one to choose between MLM and affiliate marketing, you are in the right place.
Today we will discuss the subject of MLM vs. Affiliate Marketing to figure out which is the best business model to choose.
I am sure by the end of this post you will know which business model you should choose to make more money and live the life of your dreams while avoiding the pitfalls many people make at their start.
What is MLM or Multi-Level-Marketing?
MLM known as Multi-Level-Marketing or network marketing is a product or service distribution system in which distributors (sellers or independent affiliates) have rewarded on their own sales, and also on a percentage of their referrals sales.
That said you are 2 streams of income on the same product/service you promote:
- One comes from your personal or direct referrals (when they buy the product/service to be part of the selling chain).
- The second income stream comes from the wholesales of your referrals (your directs referrals and their referrals until a certain level according to the compensation plan set by the company).
In this business model, unlike affiliate marketing, the seller or affiliate need to purchase the product or service selling right in order to qualify for a commission. What I mean here is that you need first to buy the product/service you want to promote in order to get paid for the sales you will generate promoting it.
How does MLM work?
MLM is a win-win scenario! Network marketers make money selling companies’ products/services. Companies also get their product sold (make money too) thanks to Network marketers.
In fact, companies that have opted to promote their products/services on the basis of this marketing system are not obliged to spend money on advertising to sell their product or service.
They rely on people (network marketers) who want to develop an activity in this industry to sell or market their products or services for them.
That said, the advertising budget companies should use in advertising is used to pay affiliates who helped them sell their products.
MLM works like affiliate marketing but there is a bit of difference in how promoters get paid.
As a network marketer, you need to find a product or service you will be proud promoting, pay a license fee and then start setting up a marketing plan to market your product and build your selling team. That requires you to find a direct partner or referrals, pass on your knowledge to them to help them find their direct referrals and so on.
The downside of this selling method is that the only one that profit is the one who is on the top of the pyramid. The newcomers need to build their own selling team and they need to work hard for that.
In the meantime, the first one who joined the company at his launch is making decent money while the newcomers are struggling to make a dime.
Also, the amount of money you make depends on your team (downlines and uplines) capacity.
MLM vs Pyramid Scheme?
MLM or Network Marketing is a legitimate business that differs from the Pyramid Scheme. In the Pyramid Scheme, there is no product or service to sell. Members pay a fee to join the program and then invite other people to join the system while paying their membership fee. In this way, a part of their membership fee is given to the sponsor and the new members need to invite or refer other members to the system to get paid. This is called a cash-gifting scheme (not to confuse with crowdfunding).
However, in the MLM business model, commissions are earned on the basis of sales made by the distributors and his team, and not on any registration fee.
The advantages and disadvantages of MLM
The advantages of MLM or network marketing
- ✔ You don’t need to create your own product or service to get started
- ✔ Possibility to make a passive income if you are able to build a strong and dynamic team
- ✔ You can do it as a part-time job and add a side income to existing business cash flow
- ✔ Possibility to build multiples stream of income but unlike affiliate marketing, it requires extra expenses like buying the new product/service reseller right
The disadvantages of MLM or network marketing
- ❌ Pay to play business model
- ❌ You can’t start an MLM business for free
- ❌ Your earning potentials depends on your team capacity
- ❌ Lack of flexibility and freedom – It is difficult or impossible to promote many products or services at the same time as you are required to recruit people.
- ❌ A people-based business model: As a network marketer, you need to recruit people as much as you can because selling the product alone will not make you rich.
- ❌ MLM business model is business you don’t own: when the company you are promoting close his door, your business also do and you need to find another company to get started again.
- ❌ You need to invest more money and/or to recruit more people to make more money
- ❌ A lot of rejection involved
- ❌ There are many network marketing scams – that impact your reputation as a network marketer
- ❌ You are dependent on your merchant’s rules and conditions
Now, you know what MLM is, and how it works, and his downs and ups; let’s move on to the next section of the MLM vs affiliate marketing to find out what affiliate marketing is and how it works.
What is affiliate marketing?
Affiliate Marketing is the practice whereby a publisher (affiliate marketer) promotes other people’s products or services (known as advertiser or vendor) and earns a commission when a customer buys a product/service through his unique affiliate link.
In a nutshell, it is a marketing method in which you get paid by selling other people or company products/services.
How does Affiliate Marketing work?
Affiliate marketing is a win-win scenario and 3 parties are involved in the affiliate marketing channel:
- The vendor or advertiser is the one who creates products or services to meet the consumers’ needs.
- The Publisher or an affiliate marketer is the one who promotes or markets the vendor’s products or services to customers.
- The customer or consumer is the one who is looking for the vendor’s products or services to meet his needs or solve his problem.
In some case, there is an affiliate network which acts as a middleman between advertisers and publishers.
As an affiliate marketer, you need to find a product or service you love to promote, partner with the advertiser (vendor or product owner).
If your application meets the vendor affiliate program requirement, you will get an affiliate tracking link you can use to send visitors (prospects or customers) on the merchant sale page.
And if they end up to buy a product the merchant will reward your effort with a certain rate of the sale generated.
Here is how affiliate marketing works:
- 1. Customer visits publisher website.
- 2. The customer sees an advertising banner/link, then clicks on it and land on the advertiser’s sale page.
- 3. The click is tracked by a tracking software the advertiser use and a cookie is placed on the customer’s device to identify them as being referred by you (affiliate marketer).
- 4. The customer completes an online purchase and their tracking software reports the sale generated through your link to the advertiser.
- 5. The advertiser pays the commission to the publisher as a reward for generating the sale.
The advantage and disadvantages of Affiliate marketing
👍 The advantage of affiliate marketing
- ✔ Low start-up cost or zero investment to get started.
- ✔ The sky and your capacity are the limits of your earnings potential and don’t depend on someone else or a team.
- ✔ Independence and freedom – You and you only have the control of your business.
- ✔ Possibility to do it as a part-time job and make a side income without quitting your day job.
- ✔ You don’t need to create your own product or service.
- ✔ It is not a pay to play business model like MLM – You don’t need to pay for a reseller right of the product before promoting it.
- ✔ Possibility to build multiple streams of income without growing your monthly or annual expenses (your expenses are your website maintenance fees at your start).
- ✔ Easiest online business model to start earning passive income online.
👎 Disadvantages of affiliate marketing
- ❌ It takes time to get out if the ground.
- ❌ It requires hard work and persistence.
- ❌ High competition level.
- ❌ You are dependent on your merchant’s rules and conditions.
MLM vs affiliate marketing: Let them face themselves?
MLM and affiliate marketing have something in common.
For example, affiliate marketers and network marketers are all affiliates of the company they work with and they are all subject to the company rules and conditions. Both lack of independence and freedom here.
Affiliate marketer vs network marketer: 1 vs 1
Both business model gives affiliates the possibility to make passive income and to do it part-time.
Affiliate marketer vs network marker: 1 vs 1
However, there is a difference in the start-up cost, the earning potentials, flexibility & independence and the level of risk involved.
For example, the affiliate marketing start-up cost is zero or low compared to MLM.
MLM vs Affiliate Marketing: 0 vs 1
In addition, as an affiliate marketer you can build your business in a given niche, brand yourself, promote several products/services at the same time without increasing the monthly fees of your business, decide on the earning potential you want, etc.
While the network marketer is condemned to promote the products/services of the company he works with, to recruit more people if he wants to make more money.
MLM vs affiliate marketing: 0 vs 1
MLM vs affiliate marketing: Who is the winner?
After the battle, we can see that affiliate marketing has 4 points while MLM has only 2. According to this logic, the winner here is affiliate marketing.
Or maybe I’ve been a bad arbiter?
Hoo no!! Just watch this video to get a better understanding of MLM vs affiliate marketing.
MLM vs affiliate marketing: Which one is the best to get started?
Undoubtedly, both business models have their advantages and disadvantages. It’s up to you to weigh the pros and cons of each one to find the one that seems most profitable and easiest to implement.
As for me, I’ve been in MLM for 3 years and I haven’t had satisfactory results (not to say that I’ve lost more money than I’ve earned).
Affiliate marketing is what I am currently doing and I find it very rewarding and very easy to set up.
However, if you have strong communication skills and the ability to recruit more and more people, motive and teach them to do the same, then MLM will be quit for you.
And if my word counts for you I would recommend affiliate marketing because according to Robert FitzPatrick of Pyramid Scheme Alert 99% of those who join MLM companies lose their money.
You can download his survey report here.
Yes, statistics report that 95% of newbies fail to succeed in the affiliate marketing industry for many reasons:
- high expectations and end up in giving up,
- they focus on selling, not helping,
- lack of knowledge and skills required,
- bad niche choice and then are exposed to too much competition,
- Lack of consistency,…
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Affiliate marketing and MLM are both a business model you can do in your spare time and build wealth online without quitting your day job. As I pointed it out early, each has his downs and ups. Choosing the best one to get started depends on your capability, your marketing skills, and your startup budget.
I hope you have found some good insights about critical factors in MLM and affiliate marketing business model.
You know how both work, their pros and cons and I hope this MLM vs affiliate marketing post will help you choose the one that suits your need to get started.
Please share your experiences and expertise in these business models with us. And if you have any questions, drop it down in the comment section and I will be more than happy to answer them all!
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