When searching for ways to earn additional income, you’ll probably encounter affiliate marketing and multi-level marketing (MLM).
They are two of the most popular types of single-person marketing businesses. Both affiliate marketing and MLM involve the promotion of another company’s products or services.
They differ, however, in several ways. By understanding the differences between affiliate marketing and MLM, you can decide which type of business is right for you.
What Is Affiliate Marketing?
Affiliate marketing is a type of marketing business where you earn a commission for driving sales or leads to a company’s offer.
It’s typically performed exclusively online.
If a company wants to generate more sales or leads, it may enroll in an online affiliate network or launch a affiliate program on its website.
The company will then publish one or more offers while seeking the assistance of affiliates to promote them.
As an affiliate marketer, you’ll promote a company’s affiliate offers. The company will reward you with a commission for each conversion action that you drive to their offers.
Depending on the offer, you may earn a commission for driving sales or make a flat fee for driving leads.
Offers can consist of physical products, digital products, services, downloads, and lead forms.
When you promote an affiliate offer, you’ll advertise a unique link that tracks all visits and conversion actions.
You won’t get paid simply when someone clicks this link. Rather, you’ll only earn a commission when someone follows the link and then performs the conversion action, such as making a purchase or completing a lead form.
What Is MLM?
Also known as network marketing, MLM is a type of marketing business that involves promoting a company’s products and recruiting other marketers to do the same.
It’s similar to affiliate marketing but offers two ways to make money.
You’ll earn a commission on all direct sales, and you’ll earn a commission or a bonus on sales generated by the marketers you recruit.
MLM uses a pyramid-like structure for recruitment. Upon joining an MLM program, you’ll be at the bottom of the pyramid.
If you recruit a marketer to join the same MLM program, they will be one level below you on the pyramid.
If they go on to recruit two new marketers, they will be two levels below you on the pyramid.
Known as your downline, you’ll be compensated with either a commission or a bonus for sales generated by the marketers below you on the pyramid.
While affiliate marketing is an online business, MLM is performed both locally and online. Many MLM entrepreneurs work from home. They’ll invite their friends, family members, and coworkers to their home, where they will attempt to sell or recruit them.
Advantages of Affiliate Marketing
Affiliate marketing offers several advantages. When compared to MLM, it offers a higher rate of success. The U.S. Federal Trade Commission (FTC) found that only 1 percent of MLM entrepreneurs make money.
The majority either break even or lose money.
Not all affiliate marketers make money either, but they typically have a higher success rate than their MLM counterparts.
According to Fetch Profits, up to 16 percent of all e-commerce sales are driven by affiliate marketers. Since it’s performed online, it’s easier to succeed at affiliate marketing.
You can use data to optimize your landing pages and your paid ads, for a higher return on investment (ROI), which isn’t possible with MLM.
There are fewer startup costs with affiliate marketing. Many MLM programs require you to purchase products before promoting and selling them.
Some of them even require you to buy a bulk number of products, known as a starter kit, upon joining.
If you’re unable to sell all of the products, you’ll have to absorb that expense, which is why so many MLM entrepreneurs ultimately fail to make money.
Affiliate marketing offers a wider range of products and services to promote. If you join an MLM program, you’ll be limited to promoting a single company’s product or products.
There are affiliate networks, though, that contain offers from hundreds of different companies. If you aren’t successful with an offer, you can ditch it and try a different company’s offer.
Commissions are more straightforward with affiliate marketing. MLM programs often have a confusing and complicated commission structure that’s difficult to understand.
They typically pay a different commission for each level of your pyramid. If you have four levels of recruits below you, that’s four various commissions.
Affiliate marketing doesn’t have multiple commissions. When you’re ready to promote an offer, you’ll see a single commission that defines precisely how much you’ll get paid per each conversion action.
Advantages of MLM
MLM does have some advantages, primarily the ability to earn money through recruitment.
If you’re able to fill your downline with active recruits, you’ll reap the benefits of passive income.
You won’t have to do any promoting. Instead, you can sit back while earning a commission or bonus on sales generated by the recruits in your downline.
With MLM, you may recruit a highly active and successful marketer who becomes your golden egg. If the marketer continuously generates sales or recruits, new marketers, he or she will help you succeed at MLM by creating passive income.
Of course, most MLM entrepreneurs fail, so the chances of recruiting someone successful is slim at best.
Some people prefer the face-to-face nature of MLM. As an MLM entrepreneur, you can host gatherings at your home or elsewhere that allows you to socialize in person. Affiliate marketing is performed online, so it doesn’t offer this same face-to-face socialization.
Affiliate marketing and MLM aren’t the same. Affiliate marketing focuses on driving conversion actions through a unique link, whereas MLM focuses on face-to-face product sales and the recruitment of new marketers.
While they both offer opportunities to make money, affiliate marketing comes out on top.
It’s easier, has fewer startup costs, allows you to promote hundreds of offers, and has straightforward commissions.