There are many different opinions about MLM companies.
From those saying that MLMs are pyramid schemes and people lose money – to those saying, there is no better business opportunity than Multi-Level Marketing.
The truth is somewhere in between.
And that statement also applies to the most important question – how much it is possible to make within the MLM.
Well, there are people making a ton of money, to those who lose the money.
Unfortunately, the majority of people involved in any MLM do not make any money or they make very little (that is anything below $1,000 per year).
The sad part is, that they devote a lot of time to it, with little or no results.
MLM as a business model has been around for a long time and apart from selling products the income relies on recruiting new members into the system.
Regardless of the MLM company, people who make money are those who can sell the dream to others and have good sales skills and experience.
Affiliate marketing, compared to MLM, is a different business model and part of internet marketing.
Many people just starting with affiliate marketing but there are already successful marketers who are making a lot of money without recruiting or bothering friends and families.
To be successful with Affiliate Marketing, one needs to have a website, chosen niche, and traffic to the website (ideally a lot of organic traffic).
An Affiliate Marketer with the content on his/her website should provide value to his readers.
He or she must educate the visitors, inform them about the product or service, and eventually let them know where to purchase it.
But the final decision is up to the visitor (the potential customer).
In other words, the affiliate marketer does not chase people.
It works quite the opposite.
Potential buyers use search engines (like Google, Bing/Yahoo, and others) to find information regarding the service or product.
Affiliate marketers know how to rank well in these search engines so that potential buyers find the website.
Then they click on it and while going through the content (article) they click on the link within the content and eventually make a purchase.
The affiliate marketer then makes a commission.
It is a simple business model, but let’s break down both models.
What Is Multi-Level Marketing (MLM)?
Multi-Level Marketing is a type of business where one product or similar types of products are being pushed through all the levels down to the potential buyers and at the same time, a new “business opportunity” is presented to the buyer.
In most cases, the products end up at the very last level of the structure, because it is difficult to sell them to the end user.
To join the MLM, you are required to have your direct sponsor or upline. In other words, you are approached by someone who is already a member of the MLM.
This approach is common throughout all MLM companies.
So if you become part of the MLM you join his or her team, in other words, your direct competition.
Think about it.
Everyone within the MLM is pushing the same product and at the same time tries to get more people within his or her team.
Sure there are MLM companies that sell a variety of products, but they all have the “flagship” product which is the most pushed item within the MLM.
This is what the typical MLM structure or network looks like:
Generally speaking in order to be an active member, you have to have at least 2 people below (your downline or legs).
Some MLM requires you to have 3 legs, to maintain a certain rank, which makes it even more difficult to stay in the game.
Because each member, that is your direct leg, needs to find another 3 people…
A lot of people consider MLM as a pyramid scheme. And I don’t blame them.
It resembles that shape, right?
And it is not a coincidence that MLM is often mistaken for a pyramid scheme.
What is the Pyramid Scheme?
Let’s take any MLM company, minus the product and you get an outright pyramid scheme.
Also, any MLM where the main focus is on recruiting (instead of selling the product/service) is considered a Pyramid scheme.
Some MLMs want to look legit, so they don’t offer any commission when you recruit a new member.
You get commission only from the products your downline sells. Still, you have to keep recruiting to generate revenue.
Pyramid schemes are illegal in most countries
There is no doubt that the only way how to make a lot of money within any MLM is through recruiting other people.
The products themselves are expensive, the competition is high and none of the MLM offer a revolutionary product, even though some of them claim to.
I am not saying that it is impossible to make money.
But it is very difficult and many people don’t have the skills to push the product to the potential buyer, which is in many cases some relative or a friend.
On The Other Hand…
Those who make money enjoy the process of selling and recruiting. These types of people are extroverts and usually have many years of experience working with people.
Or they are just lucky and have that “gift” to sell anything to anyone. And there are only a few individuals; for the majority of people, this MLM business model is extremely difficult.
Now, don’t get me wrong – there are certain companies, people like to be part of.
For example, Mary Kay, or Avon – There are many members that like the products genuinely.
Pros of Multi-Level Marketing
Earning Potential
If you are good at communication, or you have a lot of followers online there is a chance to earn good money.
In other words, people that are good at direct selling and personal interaction can also grow their team and make decent income.
Freedom (Partially)
You don’t have to commute to work. You can work from your home and set a schedule as you want (Sure you need to be flexible according to your customer or potential clients)
Residual Income
Members high in the structure can enjoy the residual income.
People below them earn money that flows up to the higher levers.
Cons Of Multi-Level Marketing
Harassing friends and family
When starting out, you “have to” bother your friends and family members.
These are the first targets you continuously harass with sales pitches.
Expensive products
Most of the products are expensive.
Not to mention that your potential clients often have already their preferred brands. So it makes it even more difficult to convince them to buy the overpriced products from you.
High-pressure sales tactics
It can become stressful for many people, due to the working environment.
You are “advised” to use aggressive sales strategies to encourage potential clients to purchase the products.
And at the same time, you need to apply the same strategies to other participants (your team) to sell products and recruit more people into the company.
Legal Issues
There are many cases where MLM business models face legal issues. They are often accused of pyramid schemes or other fraudulent activities.
Low Success rate
The success rate within any MLM company is extremely low. more than 90% of participants don’t make any money. In fact, they lose money since they are obliged to keep buying new products in order to stay “in the game”.
If interested check specific income disclosure for the particular company. Some of them do not even reveal that information, even though they are required to disclose the average income earned by their members.
Throughout any MLM company you will see that 99% of members make on average a couple of hundred per year.
Why Success Is Rare Within MLMs?
We have already mentioned a few reasons.
Generally speaking, Multi-level marketing is not easy for most people.
You have to have a lot of friends or a job where you meet people daily – like a job in a fitness studio.
Even then, it will not be easy to sell a product, let alone recruit other people to join your “team”.
Let’s say you find people who want to work as your downline, meaning you have already jumped up in the company’s rankings.
Is it sustainable?
How long would that last?
Your new downline would have to find others to make direct sales and build their teams. If they don’t – you don’t make any money.
With that being said, you can drop to the lower level at any time (usually in the following month), and that means your income is negatively affected.
There could be another way how to maintain your level (ranking) – you have to maintain a certain “personal volume”.
Meaning you have to buy a minimum amount of products to keep your position. It doesn’t matter that you can’t sell that stuff.
You may end up having a lot of boxes in your basement that nobody wants to buy.
And here are a few facts regarding the MLMs:
Compensation plan
The majority of MLM companies have very difficult compensation plans.
They offer a video tutorial where they explain how a person can earn and climb the rankings, but often the compensation plan is so difficult to comprehend that even studying the 20 pages (of the comp. plan) PDF does not help.
One particular MLM company (Paparazzi Jewelry) tries to keep it simple and the basics are explained in a little over 10 minutes video (you can check the entire review with the video here in the Compensation Plan section).
Income disclosure
Large companies that also include MLMs should have their income disclosure available to the public.
In my research, I have found out that less than half of MLMs have such documents on their websites.
According to those that have the income disclosure available it is obvious that the majority of the members make less than $1,000 a year.
IM Mastery Academy is supposed to be one of the better MLMs, but according to the income disclosure, we see that 96.3% make less than $1,376 a year.
Other Reasons to Avoid MLM
We have covered the #1 reason why to avoid MLM in the section above.
The money you potentially earn is not worth the time and effort. The only people who generate an income are those who founded the MLM.
Let’s go through some more:
Stressful and No Control
You are being pushed to sell the product from your sponsor or upline. And it does not have to be a direct order, it is often a suggestion.
But at the end of the day, you are being asked, how much did you sell?
How many people did you speak to?
Even if you are a good seller, sometimes you don’t feel like making phone calls and throwing a party and “introducing” the stuff to your friends and relatives.
You also do have to follow instructions on how to promote the products and what to promote.
You should also ask a question – do my friends need all that stuff?
As a result of it, your days become more and more stressful, and with little to no income, you have no complete control and you get burned.
Recruiting (or building your team)
MLMs use different words for recruiting. It should give you the impression that recruiting is not what they do primarily.
You can build your team, or you can introduce the product to others and see how they like it.
OR
“…as you climb the ranks, you receive a bonus…” – They present it as it is something automatic.
This is how recruiting is introduced to you. And I am sure there are other ways how they sugar-coat the truth.
Regardless of the terminology, you still need to have at least 2 people who can find another 2, and so on, and so forth.
Otherwise, you are not generating any income.
In some MLM you need to have 3 persons in your downline (3 legs).
If your weakest leg does not perform well and is not able to achieve a certain threshold, you are not qualified to remain in your current position.
So it is not only about finding 3 people but you need 3 people who are good at recruiting and selling.
Now, what are the odds that your entire team follows these requirements?
Relationships at Stake
This is directly connected to the point above.
If you join any MLM, your upline or sponsor wants you to reach out to your family members and “introduce” them to this new opportunity.
This clip is a very good example and it explains a lot of how the MLM operates (it is created by a company called My Lead System Pro and it has a different approach than regular MLM).
The bottom line is you don’t want to run out of friends and family members.
What Is Affiliate Marketing?
We have already touched on the definition at the beginning.
It is a method of making money online by promoting someone else’s service or product using your website (including social media). You get paid a commission from 4% to 75% from the merchant, or affiliate program.
The commission depends on the product. Usually, when dealing with physical products, the commission is lower but it is easier to sell them.
For example, Amazon pays from 4% to 10%.
The higher commission is offered by merchants who sell digital products, like courses or e-trainings. These products can be found for example on ClickBank, or JVZoo.
A big advantage of these affiliate marketing programs (Amazon, ClickBank, eBay, Warrior+, Walmart, and so on) is that you sign up with one or more of them, and you can promote any product within the affiliate program.
Everything is taken care of
Meaning, that you get your affiliate link (in ClickBank they call it HopLink) for a product and paste it on your website.
For 1 product there is 1 affiliate link.
When someone buys it using your link, you get a commission.
What I also like about affiliate marketing is the freedom of product choice.
You can build your own website around any product or service you genuinely have an interest in or passion for. Also, it is much more relaxed compared to MLM.
There is no product you have to keep pushing, there is no recruitment
On the other hand, this business model is not easy either.
You can find many gurus promising you to earn a few hundred within a week. It does not work that way, especially when you’re a beginner.
It takes time to build up an affiliate business, usually from 6 to 18 months. Again it depends on the specific niche you are involved in and the effort you are willing to put into it.
Benefits Of Affiliate Marketing
Low startup costs
It is one of the simplest and cheapest ways to start making money online.
It does not require any large investments. You can even start for free or if you are willing to invest a bit in education, you probably would need a couple of hundred at the beginning ($300 to $500 per year)
Low entry barrier
Affiliate programs are easy to join and require no fees, and no previous experience.
In some, you don’t need to have a website. Although it is highly recommended to create one down the road (but for example Amazon Affiliate Program does not require you to have a website)
No direct selling
No face-to-face selling, no phone calls to make the sale.
It is an indirect form of selling where you show people what product to choose and where to buy.
You educate your visitors about the opportunity.
Your Niche – Your Business
You have freedom regarding the product and/or affiliate program. You choose your niche, and your products, and join the affiliate program you want. And you can even join more of them.
It is also up to you how you promote these products.
Scalable business
As you become more experienced, and your income grows, you can re-invest a portion of your income.
For example, hire a writer so you have more free time (or you can start with a new website)
If you are tired of the website/business, you can sell it at a profit.
Also, it is a great source of passive income.
Drawbacks Of Affiliate Marketing
Consistent effort
You must be willing to work consistently on your content. At least at the beginning. That means for about half a year to 16 months you only create and optimize the content.
It is absolutely normal that getting organic (free) traffic requires some time. For the first 4 to 6 months you might not see any sales.
Learning Curve
There are certain skills you must master.
More specifically, you need to learn how to build a website that will rank in google and other search engines. (Once you master that, you can sell anything, anytime – you are an SEO expert with tangible results)
Loneliness
It can be lonely, especially in the beginning when you are in the stage of content creation (check your location for a coworking space where you can rent a desk where other freelances gather)
How Is Affiliate Marketing Different?
To me, the first thing that comes to my mind is freedom of choice.
I mean you choose the product you want to promote and you choose the affiliate program you want to become a partner with.
As I mentioned, many affiliate programs accept newbies, that include Amazon, eBay, or ClickBank.
Also, you don’t have to buy any of these products. You simply create a link to that specific product (with your ID in it, so it is trackable) and you want to make sure that you have enough traffic to your website.
You don’t need to throw parties or meet people face to face. You don’t need to schedule an appointment.
With that being said, affiliate marketing offers freedom of working schedules. If you prefer working later hours, you can do so.
Many people prefer creating content from 8 pm to midnight or even later. They are not bothered by anyone.
You can also work from any place on earth as soon as there is an internet connection. The internet does not sleep, so regardless of your geographical position and time, people still come to your website.
You don’t sell anything
People search for a term (keyword) on google, let’s say a product. They are already interested in purchasing it. You only show them where to buy it.
Say, they search for “Comica CVM-V30 PRO” – they are almost ready to buy the Comica Microphone for the camera.
They land on your website and you don’t even know about that.
You don’t even know when the purchase took place until you check your data. That means you can wake up and you see that you made a sale in the night.
That is the beauty of affiliate marketing, compared to any MLM.
Do You Have Questions About Affiliate Marketing?
Which Model Do You Prefer?
I have covered what are the key differences between affiliate marketing and the MLM business model.
Quite honestly, there is no such thing as a perfect business model. You have to make your own decision. Do your research, and write all the pros and cons.
The right path won’t be easy, but it must have fewer cons than pros.
Affiliate marketing is also a great way to learn how to promote the products, without going through potential troubles with customers and suppliers so you can solely focus on the promotion part.
Once you master that, you can outsource the most time-consuming part of your work, which would be probably content creation.
With that spare time, you can do whatever you want, whether it is building a new website and increasing your revenues, or you want to start with your own product.
It does not have to be a tangible product (physical) you can create a digital course or a valuable training program.
Now, with your experience in affiliate marketing you should not have a problem promoting your course – and let’s say if you bump into a customer who does not like it, you can give it for free – make sure you ask for feedback from him.
That feedback (as soon as it is constructive) has tremendous value so you can improve the 2nd version.
And here, we are talking about a real business right now, don’t you think?
So that is the power of affiliate marketing – it can be your first step towards building a huge business.
This is a course or platform where I have learned a lot about affiliate marketing and I am still learning new things every day.
With MLM, I don’t see where you can improve, other than potentially climbing through the many levels above you.
Now it is your time.
Let me know what you prefer.
Which model do you think is more sustainable in the long run?
I would love to hear from you, so please leave your comments and thoughts in the comment section below. This can be an open discussion.
Thank you for reading
Cheers,
Mike.
About the Author
Mike is an affiliate marketing analyst, content creator, and the founder of SetAffiliateBusiness.com.
Consistently producing in-depth and insightful articles. 📚💻
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Good day Mike
Pls kindly review stakexchain.com for me
It seem it has different business model.
Hello,
I will take a look at that.
Thanks for stopping by.
Mike
For me I don’t really like MLM as I see it to be a total waste of time because you can invest all your time and never get anything in return, but for Affiliate marketing if everything is done the right way them there must be return, so for me Affiliate marketing is the best.
I agree with you and thank you for your thoughts.
Have a nice weekend 🙂
Mike
Awesome website and an enriching content indeed. I have been searching for a way to differentiate both topics, due to the various opinions that have existed as regards the topics. But with the explanations from this site. i don’t thin understanding and differentiating both will be any difficult for me and those interested. Thank alot
Yeah – people do have a different opinion about both business models.
But my guess is, the majority is of an opinion that no MLM is worth it unless you are passionate about recruiting and working within the multilevel structure.
Glad you find the content helpful.
Thank you for your comment.
I have tried both… Both needs dedication but MLM requires way more ‘physical’ dedication and effort than affiliate marketing. Most Affiliate Marketing are done online but many MLM’s products are physical and requires physical selling..
Though it scares me in MLM if your Team/Group are becoming cult-like. This is when people loss money. They realize they’re losing money but they still thrive because ‘Cult’ is still pushing for sales.. This is the point I think people should quit MLM.
I understand their method but it’s not really for me. And if people just look closely, the math and the odds says it all.
Very well said, Jasper.
You are exactly right.
In my opinion, the MLM business model fits well only for a few people.
It would be interesting to see what successful people within the MLM can achieve if they become affiliate marketers.
I believe most of them would earn 4, 5 figures within 10 to 12 months.
Thanks a lot for sharing your opinion about the MLM.
I really appreciate this clarity of information, i joined network marketing 5 years ago, there’s some benefits like personality development, and so. But i have a question is it affiliate marketing can make you financial independence like network marketing does if get succeed.
Hello and thank you for your comment.
I am sure you have learned a lot in the last 5 years.
Regarding the affiliate marketing – Yes it is very possible to be financially independent with affiliate marketing.
I believe you understand that no path to financial independence is easy. It requires new skills to be learned, effort, and of course time.
But I know people who within a year make 4 digits per month. But in some cases, it takes longer.
There are many platforms that teach affiliate marketing, but I have found that many of them are misleading or they cost too much.
But finally, in late 2017 I have found one particular educational platform that in my opinion offers the most thorough training there is.
Currently, there are more than 300,000 active members and many of them are successful. Some of them are OK to share their success within the platform and you can read them as well – check the blog here ( – Scroll down to see the links to specific posts created by WA members).
(there will a pop-up window asking you to sign up. It is for free, you can do so, or you can just close the popup and continue to read the blog).
If you have any further questions, let me know,
cheers,
Mike
All of the feedback I’ve seen from people that have joined MLM platforms have been negative. If there’s no investment on the other side from the person selling the product then it is impossible to make any income. You can see that with a lot of MLM companies such as PureRomance and Monat (from what I’ve seen on my Facebook profile). Affiliate marketing will save anyone the trouble of face-to-face interactions, gas money, time, and frustrations.
Exactly right.
Wilh the MLM, at first, it seems that not much of an investment is needed.
But at the end of a day, one must calculate 3 or even 6 months in advance.
Not mentioning that it is almost impossible to make living without recruiting others.
Good that you mention the Monat– I have only recently finished the review and it is like you are saying. The success is rare.
Thank you for your comment.
This is such a good read thank you. I started my online journey about 2 years ago now and literally didnt know the difference between the two lol its actually quite nice looking back and realising how far I have come! I actually started off back in the day with Digital Altitude (I’m sure you’ve heard of them lol but they are no longer around), and didn’t have a great experience with them, but they got shut down before I even got to give it a good chance. MLM is definitely something that can make you a decent amount of money for sure, but I think it’s selling false dreams to people who simply will not make it in the online world (harsh, but a reality). I think affiliate marketing is a much harder and more skilled thing to do, but definitely works out better in the long run is a more sustainable income and lifestyle. Thank you for this article and explaining the two!
Awesome Great you have made huge progress.
The progress is what makes people happy!
Yeah, I remember the Digital Altitude but have not done too much research on that.
Regarding the MLMs, the more I do the research the more I realize that they are pretty much the same – selling the dreams, exactly as you are saying.
Affiliate Marketing is more complex, no doubt about it, but the earning potential is much higher.
I see we are on the same page 🙂
Wishing you all the best Kelly,
Cheers Mike
I agree with you. But there are some specific sides to MLM that only a networker could see. Of course that totally depends on the company you’re working in and the type of products it sells. 90% of MLM companies sell the products that people don’t need but if you’re in 10% of the companies that sell genuine products that the people in the country actually need and the cost is also not very high, then with hard work and proper strategies there’s no doubt that you’re going to succeed and make a lot of money but you should have proper strategies and training system. But I want to ask what would happen if you do both of them at the same time and later shift to whatever side full time that gives you better result because the amount of time you require to succeed in a proper MLM company the meet all conditions I mentioned above and the time required to succeed in affiliate marketing is pretty much about the same.
Hi Shivam,
Yes for the kind of products that are in that 10% you are mentioning, I agree.
With Affiliate Marketing you can choose whatever niche you like and you are not limited to one kind of product only.
Therefore I believe that affiliate marketing is a better way to go.
Also, you don’t have to recruit others to work for you in order to make more money.
A.M. is a more relaxed way for most people.
Regarding the thing of doing both – well I am not sure how would that work.
Here is what I mean:
Let’say you want to do both at the same time.
So, instead of writing the content, you can make videos from parties or from the interview with people you are offering the product to.
So you have both:
– talking with your potential customer/downline
– and content – in this case, video (if they agree to be recorded)
You upload the video and in the description, you want to add the affiliate link.
But does the MLM company allows to sell the products this way?
Do MLM companies have affiliate programs?
I don’t think so.
Can you sell the products on Amazon?
I don’t think MLM allows that. (I know Mary Kay does not allow that)
So if you want to do both MLM and Affiliate Marketing, within 1 niche, I find it hard to be executed.
So you end up with 2 different niches.
Sure, you can try both at the beginning and down the road, you will see which one works better for you (which one you prefer the most).
But at the end of a day, you want to focus on one business model and niche only. As you correctly pointed out, the amount of time to succeed is the same (give or take).
With Affiliate marketing, once you master one niche (meaning you generate a full-time income) you can fully outsource it and start with a new project (niche).
You can rinse and repeat and have several websites/business generating you “passive” income.
OR you can just relax, keep an eye on your website(s) for let’s say 3 or 4 hours per day (maybe even less) and call it a day.
Hope it helps.
And thank you for your thoughtful comment.
Really appreciate it.
Mike
Thank you Mike for the wonderful review. Your research and conclusions about MLM and Affiliate Marketing are very clear and concise. I personally do not like MLM because it is a total waste time, effort and personal cash. One of my colleagues did sign up with an MLM Firm but never made a dine in 12 months. Though Affiliate marketing is not equally easy but ever since I signed up with Wealthy Affilate, I have made plenty of success.
Thanks a lot for your comment.
As much as I want to see the positive sides of the MLM, I just can’t find many. And I am glad that it is not just me.
Direct marketing is very difficult and in many cases requires years and years of experience.
Besides, how many customers can you approach personally per day?
Maybe 10, maybe more if you throw a party – but that means additional costs.
And How many people visit the website that is properly built up?
It can be 100 a day, it can be 1,000 a day – even more.
Affiliate Marketing requires also time and effort, but everybody goes online these days and there will be more and more people searching for help, for reviews, for information regarding different products.
That is why today is the best time to invest a little bit in education, so within a year or two one can be financially independent.
Such knowledge is evergreen.
The IM Academy supposedly gives you the appropriate tools and information to learn how to make money buying and selling money.
Obviously the more ppl you recruit the more money you make.
But looking at the trading side of this, would you say that there is money to be made?
Thank you
Hi Nicola,
The knowledge one would get from IM Academy is not enough (in my opinion) to become a really successful trader.
You can learn a few tips, which might not be available for free, but still, there is this MLM aspect of the company.
I believe you can learn a lot from free sources, like Investopedia, or even on Youtube, there are a lot of videos regarding this topic. As you gain more info, you can build on that and seek for other courses, even paid ones.
But avoid the MLMs!
Hope it helps
Mike
Wow.
I certainly wasn’t expecting to get this level of information from this article, it’s simply mesmerizing. It appears that people who prefer or are already involved with MLM are not being straightforward in their sales pitches. I was recently cajoled by a close friend to join an MLM but this article makes it very clear that he left out a whole lot of details. I really don’t think I’m up for it. Affiliate marketing sounds more flexible and appealing to my personality. Thanks
Glad you like it.
Regarding the people with MLM not being straightforward – I am of the same opinion. Or they just don’t see the whole picture, maybe they don’t want to see it.
Yes, Affiliate marketing is a model suitable for the majority of people.
Generally speaking, there are no restrictions on how to write, how to promote, what to promote and when to do the job.
You don’t have to report to anybody how much of work you have done and how you did it.
Each person is different and each has a different style. With that being said, 2 persons in the same niche can’t be considered as competitors.
They both attract different kinds of visitors.
I personally have tried both MLM and affiliate marketing. In my opinion, Affiliate marketing is better. However, there are some good skills that you can learn from MLM which is the direct marketing strategy. I have to say that it shaped me into a person that I can talk to anyone. However, it is hard to make money if you are in in the right program. Also the customer aspect part of MLM is grueling.
While affiliate marketing you just keep on promoting and do not have to deal with the running business aspect just yet. Just like you said, affiliate marketing Is definitely better and sustainable. Plus you do not have to share your earning to the top tier people or the owner.
Thank you for your valuable comment.
I appreciate your honesty and being objective about both possibilities.
Affiliate marketing is much easier and success is more likely than being part of the MLM.