Is Affiliate Marketing a Pyramid Scheme?

Have you tried to make money with affiliate marketing?

Maybe you have even tried some courses on affiliate marketing.
You joined a certain affiliate program and tried to promote a specific product, but with no success.

Don’t worry, this happens to all of us.

The affiliate marketing industry is vast and for newbies, it is not easy to spot possible fraudulent activity.
For example, some programs offer you to make an affiliate commission only if you pay for membership and promote the same membership to others.

Is that recruitment?

Well, in this case, it might be.

Does it mean that affiliate marketing is a pyramid scheme?

No, it is not.

Let me explain what affiliate marketing is, what the pyramid scheme is, and what is the difference.

Is Affiliate Marketing a Pyramid Scheme?

Affiliate Marketing is not a pyramid scheme. 

A pyramid scheme has a top-down structure whereas affiliate marketing doesn’t have any vertical structure. 

Affiliate marketing is a commission-based business model where the affiliate marketer gets paid when people purchase products or services using the affiliate link. 

It is basically an online version of “word of mouth” communication: 

  • The prospect is interested in a certain product/service
  • He searches for advice or information (on Google)
  • Lands on a website (or youtube)
  • He is informed and educated
  • Then he clicks on an affiliate link that redirects to the merchant page
  • When he buys, the affiliate marketer gets a commission. 

Result?
Everyone’s happy:

  • The customer made an educated decision
  • The merchant sold products without spending money on advertising
  • The affiliate marketer gets the commission

What is Pyramid Scheme?

A pyramid scheme is an “organization” where people make money from recruiting new members, promising them high returns in a very short period of time.

New members are “forced” to hire other members, otherwise, they won’t make any money. This is a fraudulent activity and it is illegal in most countries.

A lot of these companies know how to recruit new members without realizing so:

OK now seriously and let’s break it down.

I have mentioned above the term recruitment.

What is Recruitment?

Is Affiliate Marketing a Pyramid Scheme

According to sage.com it is “the process of actively seeking out, finding, and hiring candidates for a specific position or job“.

Now the ways I have been taught affiliate marketing don’t include actively seeking out and finding new candidates.

So recruitment is not part of affiliate marketing.

An Honest Affiliate Marketer Provides Value

An affiliate marketer makes sure to provide value first by having a for example a blog.
A blog about a topic, within a specific niche – let’s say coffee machines.

On his blog/website he describes several coffee machines, models, technical specs, pros, and cons and provides other informational content.
The blog/website is written in a form that when people search for a specific term related to this topic they find either his or other relevant content.

These people/visitors (also called audience) are informed and based on the information they make a purchase decision.

By clicking on an affiliate link and following the link they might purchase the product.

When they do, then everyone is happy:

  • The affiliate marketer gets a commission,
  • The vendor sells products and
  • The customer is happy because made a good decision.

Pyramid Scheme – Official definition

Here is exactly what FTC says about the Pyramid scheme:

Is Affiliate Marketing a Pyramid Scheme

Pyramid schemes are scams. They can look remarkably like legitimate MLM business opportunities and often sell actual products, maybe even ones you’ve heard of.”

It is actually not easy to distinguish between MLM and Pyramid Schemes.

But one can’t consider affiliate marketing as a pyramid scheme.

Why?
Let’s take a look at the Affiliate Marketing business model.

What Is Affiliate Marketing?

Is Affiliate Marketing a Pyramid Scheme

I know it is already briefly explained above, but let’s have a look at affiliate marketing from a slightly different perspective;

Do you want to be an affiliate marketer?

That means, that you can make revenue without selling anything.
Where does the money come from?

You inform your audience about specific products and services within the industry and recommend the best products.

When your audience follows your affiliate link and purchases the product/service from the vendor, you get a commission.

So it is a commission-based business model, without “touching” the product/service.

OK, ideally, you want to have some personal experience with the product or service, but quite often we become biased when it comes to the specific product.

So, therefore, it is not necessary to purchase every product you want to promote.

That makes affiliate marketing one of the simple business models there is. Especially when you enjoy creating content.

No Need To Purchase the Product?

And I know this might bring a lot of questions, but just step back and think about this:

  • when you come to your electronic store – does the seller owns every single TV or camera he sells?

Of course not.

But he or she is able to give you educative information about each model.

That’s the task of every affiliate marketer – to provide valuable information about stuff, including pros and cons.

Let me put it this way:

If you know how to properly research you can ethically become an authority within any industry (or niche). The goal is to inform people, help them solve certain problems, and to teach them.

Affiliate Marketing and Referrals?

Is Affiliate Marketing a Pyramid Scheme

Some affiliate platforms teaching how to make money online (MMO) offer you a commission when you refer someone to that specific course.

So when you find a referral that purchases the course you get a commission.
This might raise the question – isn’t this an MLM or pyramid?

No, it is not.
You don’t get a commission when your referral refers to another one.

This multi-level marketing model is not sustainable.
99% of people involved in MLM companies, lose or don’t make any money.

Is Affiliate Marketing a Pyramid Scheme

[Source FTC.gov]

Generally speaking, this kind of business model has a bad reputation and I am not aware of any legit platform teaching affiliate marketing that operates that way.

Misleading Online Courses/Platforms

I believe you have already come across some courses or systems promising you to make money online.

There are tons of them that don’t work.

For example, I have found a lot of them on WarriorPlus and many of them are on ClickBank.

First, they promise you to make money without effort, on autopilot, as they claim.
It costs only $7, or $17 bucks… After the purchase, you are literally “bombarded” with upsells, and if you are not careful, you might end up spending several hundred dollars.

In case you find the “skip” the upgrade button, (several times) you get the basic product only.

But in the end, it doesn’t matter, whether you have a basic one or an “upgraded” one – they don’t teach how to make many
The only purpose is to make money for their founders(s).

These people are considered scammers, for example, Branson Tay.

Is Affiliate Marketing a Pyramid Scheme

Quite often you don’t have a chance to ask for a refund… so the only way to get your money back is to start promoting the same low-quality-misleading piece of s… software (I mean).

And because of such systems, people might think that Affiliate Marketing is a pyramid scheme.

But please keep in mind, that pyramid schemes have a structure, where money flows from the bottom to the top.

Is doTERRA a Scam

These misleading digital courses I mentioned, do not have such a structure.

Is Affiliate Marketing a Pyramid Scheme

A founder or let’s call him an originator sells the product to person #1 #2 and #3.

You as person #3 sell it to person #4, the originator doesn’t receive any commission, whatsoever.

That is where the “structure” ends.
So even though they are misleading and scammy, technically they can’t be considered pyramid schemes.

These are in worst-case scenarios just scams.

MLMs and Affiliates

Many MLM companies operate with cryptocurrency.
They have their own referral program where you can recruit others.

They even use the term, you can become an “affiliate” and some people might think that it is related to affiliate marketing.

It is not, but It sounds better.

Recently I have done research about such an MLM/ possible Ponzi Scheme (NovaTech) where they use the term affiliate.
In my conclusion, it is only a matter of time till his scheme collapses.

How to Make Money With Affiliate Marketing?

Generally, speaking you want to have an audience that consumes your content.
Your content could be:

  • Text
  • Video
  • Podcast
  • Combination of any model above

What’s your favorite?

Regardless of the answer, you need to have consistent visitors, whether on your blog, or Youtube channel.

Let’s focus on a blog.
That is an easy thing to do.

The bit more challenging part is to get consistent traffic.

But even today, it is quite possible and within 6 months you can have enough traffic to make sales.

Related:

As an example;
You have 100 articles on your website and some of them rank on the top 5 pages in SERP.

In these articles, you describe certain products.

For example, a coffee machine for the household.
Within your text, you have an affiliate link, that directs to Amazon (It could be anywhere else but Amazon is probably the most famous one).

Is Affiliate Marketing a Pyramid Scheme

When someone purchases the coffee machine (using your affiliate link) you get a commission.

The more visitors you have, the more revenue you make.

The great thing about this business model is that there are basically no costs.
The only investment is your time and energy to craft the article.

Can you Actually Make Money with Affiliate Marketing

In the section above I explain how to make money with Affiliate Marketing.

But what are the exact steps?
Or how long does it take?

Quite frankly it is more difficult than in 2019, but it is still doable.

I explain more thoroughly how fast you can make money with affiliate marketing, but briefly here are the key points:

Niche

The more specific industry you choose the higher chances you have to gain some traffic.

Basically, you don’t want to start from scratch and compete with well-established businesses/websites.

Go specific, where the competition is not so high.

Platform

Choose a platform that suits you the best.

The most common are:

  • Youtube
  • Website
  • Or both

Generally speaking, a blog (website) is a great medium that I recommend.

Also Youtube, I have not made much with YouTube – actually only a few bucks.

Still, I need to get to Youtube soon.

Organic Traffic

Is Affiliate Marketing a Pyramid Scheme

Once you get organic traffic on a constant basis, you can do whatever you want. I mean you can add affiliate links, you and ads on your website, or collect the email addresses of your audience.

Or a combination of the above.

Once you have all that stuff right, you can expect 3 figures per month, within 8 to 12 months.
(In some cases/niches you can get over $1,000 a month).

Ste-By-Step Training?

You may have heard that affiliate marketing is a simple business model, but it is still quite complex.

You can grab a lot of information for free out there, or you can try one of the platforms that teach affiliate marketing.

The one I can recommend you can join for free without using a credit card.

Is Affiliate Marketing a Pyramid Scheme

As a free starter member, you have access to the 1st 10 lessons to try things out.

If you don’t like it, feel free to check other platforms.

Let’s wrap it up.

Is Affiliate Marketing a Pyramid Scheme?

Not at all.

Some affiliate marketing courses teach how to promote themselves which might create the notion that it is a pyramid scheme.

It is explained above, that affiliate marketing is not a pyramid scheme. It just can’t be called that way.

The main difference:

  • The pyramid Scheme has a multi-level structure
  • Affiliate Marketing does NOT have a multi-level structure

Typical signs of an Affiliate Marketing (Marketer):

  • You can choose your own niche (the one you like the most)
  • You sell other’s people products
  • You don’t have a boss
  • There are no direct customers (just your audience)
  • No recruiting
  • It is legal

Of course, there is more to affiliate marketing, and therefore I have created a list of 20+ questions about affiliate marketing, including the answers, of course 🙂

One Tip:

Please keep in mind that every affiliate marketer has to have the affiliate disclosure on his or her website.

  • Affiliate disclosure and FTC Guidelines

But all these “technical” details and other tips can be learned in one particular educational platform. For more info find the link below.

So Affiliate Marketing can’t be called a pyramid scheme, nor MLM.

Hopefully, it is clear now and if you are ready to become a successful affiliate marketer, let me introduce you to one of the best affiliate marketing courses that have:

  • All the tools you need
  • Community of like-minded people
  • Video training
  • A ton of educational material
  • And the premium membership is actually quite cheap.

And yes, in case you become a premium member I receive a commission. That is the referral program, I was talking about above.

But the core training within Wealthy Affiliate is not to promote the Wealthy Affiliate.

Is Affiliate Marketing a Pyramid Scheme

It is recommended to go through training that teaches how to become a successful affiliate marker within the niche you choose.

The very first thing is to come up with the niche you like or are passionate about.

Interested?

Find out more and inside the platform, you can let me know what are your thoughts.

Oh and there is a free trial, so if you don’t like the initial few lessons, you don’t pay anything.

For a starter membership, you only need your email address.

Conclusion

How about now?
Do you still think that Affiliate Marketing is a Pyramid Scheme?

Or what are your thoughts, and experiences with affiliate marketing?

Please let me know in the comment section below.
I am sure you have some interesting stories.

Thank you for reading
Cheers,
Mike

FAQs

Why affiliate marketing is a pyramid scheme?

Affiliate marketing is not a pyramid scheme. Far from it.

A pyramid scheme is a top-down structure where money flows from the bottom to the top. A company operating as a pyramid scheme has no product to sell.
Members “make” money only from recruiting others.

Affiliate marketing is a legitimate business model where a person (affiliate marketer) promotes other’s people product and make a commission when someone purchases the product/service.
Affiliate marketing programs do not have a vertical structure.

Is there actually money in affiliate marketing?

Affiliate marketing is a billion-dollar business and many companies tend to steer to affiliate marketers rather than spending money on ads.
For merchants, it is basically free advertising with no additional effort.

With that being said there is going to be even more money in affiliate marketing in upcoming years.

Can you trust affiliate marketing?

Yes, affiliate marketing is a legitimate business model.

When it comes to courses on affiliate marketing online it is recommended to do research before investing money into such a course.

Is affiliate marketing the same as MLM?

No, Affiliate marketing does not have a multi-level vertical structure.

In MLM people make money from their recruiters and recruiters of the recruiters.
In affiliate marketing, you only make money from the products/service you recommend.

Many MLM companies resemble illegal pyramid schemes and sometimes it is not easy to spot a difference.

In affiliate marketing, there is no recruitment involved.

Is affiliate marketing illegal?

Yes, Affiliate marketing is a perfectly legal business model.
In fact, it has been known for ages.

Think about it this way;
A company does not advertise but relies on word of mouth for custom.

In the modern age, “word of mouth” is a website (blog) or a video that recommends a certain product or service.
A potential customer search for the information and learns about it.
When making a purchase the owner of the website makes a commission.

6 thoughts on “Is Affiliate Marketing a Pyramid Scheme?”

  1. Excellent post; thank you for sharing “Is Affiliate Marketing A Pyramid Scheme)”. I enjoyed reading it, and it was a beneficial comparison between them. Affiliate marketing is not a pyramid scheme; many businesses use this model to sell their products and services. Thank you for this great article. Have a great day. Regards. Vlad

    Reply
  2. Thank you very much for this valuable and comprehensive post about affiliate marketing. I actually agree with you. Affiliate marketing is a 100% legit way to make money. Mamtg is a person who earns money from affiliate marketing. Affiliate marketing is actually one of the easiest ways to make money today. Keep posting like this. I definitely share this.

    Reply
  3. Hello,

    I really appreciate the way you broke down the differences of pyramid schemes vs affiliate marketing. The differences weren’t all that clear before reading your article, but now, it makes perfect sense. 

    You explained it well, how affiliate marketing works, basically like sales, but through the internet. It makes sense that pyramid schemes are like scams and affiliate marketing are like sales. 

    Thank you for helping me understand the differences of pyramid schemes vs affiliate marketing. 

    Reply

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