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
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.
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)
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.
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.
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:
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).
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.
“…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.
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
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.
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)
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
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