Is Affiliate Marketing A Pyramid Scheme?

is affiliate marketing a pyramid scheme?

Affiliate marketing is not a pyramid scheme. However, many multi-level companies and schemes pretend to be affiliate marketing companies to get more sales and target a more motivated audience. So, there is some confusion to many people about the differences between these business models. In this article, you will learn to recognize a real affiliate program.

What Is Affiliate Marketing?

Affiliate marketing is a simple process that a marketer promotes other people’s products and earn a commission per sale. Affiliate marketing has three parts. First, the seller or the vendor that creates and delivers the product. Second, the affiliate marketer that promotes the product. Third, the buyer.

The vendor creates an affiliate program, and the marketer needs to join it before he promotes the product. He will get an affiliate link, and if someone buys a product through this link, the affiliate marketer earns a commission. Some websites include many vendors and affiliate marketers. These sites are called affiliate networks and are responsible for the links, tracking, and payments. They make the process easier for every part.

There are many big online retailers that have created affiliate programs like Amazon, eBay, and Walmart. These names are enough to build trust in the process of affiliate marketing. It’s unlikely to find big brands that create pyramid levels to promote their products. Affiliate marketing is only about promoting the product. You don’t have to teach someone about the product, and there is no obligation between the affiliate marketer and the buyers unless they have promised something to make the sale.

For this reason, an affiliate marketer can focus on his marketing methods alone. Many websites use affiliate links to recommend products on their articles and emails, and it is a big part of the income of many online businesses. Also, affiliate marketing can’t work offline. It requires a link to make sales.

Some programs use unique referral systems or other methods to track sales. However, an affiliate marketer can find programs that require only marketing and not other efforts from his part. Also, the earnings on affiliate marketing do not depend on a specific program because marketers can promote multiple products through their marketing methods.

What Is A Pyramid Scheme?

A pyramid scheme is a business model with multiple membership levels that requests money to allow you to get payments in the future. Usually, they don’t include a real product, and the members must recruit other people with the promise of the business opportunity. The new members must repeat the process as well.

The main difference between a pyramid scheme and a legit multi-level company is the lack of a product or service. In many cases, pyramid schemes claim to have a product, but they give you poor training and simple guides once you upgrade. In online pyramid schemes, this is a common issue. They ask thousands of dollars to show you a few videos than you could find for a few dollars or even for free.

Pyramid schemes and multi-level companies have many levels of memberships. If you want to qualify for a higher level, you need to pay more money. If you don’t pay the requested money, you will lose commissions for your referrals that will move on to these levels. I want to mention here that there are many legit multi-level companies. However, not every multi-level company is legit.

On a pyramid scheme, the payments of the members will pay the commissions of other members on higher levels. When new people stop entering a pyramid scheme, it can’t work anymore, and the members lose their investments. A legit multi-level company has some products that add value, and people can keep buying them even if they don’t join the business opportunity. However, most multi-level companies focus on recruiting.

As you can understand, the higher levels in pyramid business models require investments of thousands of dollars, and they pressure the members to update because they earn money from their payments. Pyramid schemes and multi-level marketing have nothing to do with affiliate marketing, and there are some more obvious differences.

Differences Between Affiliate Marketing And Network Marketing

These differences are a few guidelines to recognize an affiliate program. There are companies that have characteristics from many business models, but here is what you can expect as an affiliate marketer:

Affiliate Marketing Is Free

The first obvious sign of a pyramid scheme is that you have to pay a membership fee before you promote the program and earn commissions. Then, you will see more membership levels and fees in the future.

If you join an affiliate program, there are no levels and membership fees. You can choose a product, grab your links, and start promoting it. There are affiliate programs with specific requirements, but paying a membership fee is not one of them. Every beginner affiliate marketer can create an account on Amazon Associates or Clickbank for free.

Next, there are some training programs for affiliate marketers that require payments. However, you don’t pay them to promote their program but to get the training. It is a different concept than a network marketing company. Most of these training programs allow you to promote them even if you are not a member that is not possible for a pyramid scheme or multi-level company.

Affiliate Marketers Promote Multiple Products

Most affiliate marketers promote many products with no limitations. They just make sure that a product is good enough for their audience and has good commissions. Usually, they have a method to communicate with their audience and, through that method, promote their products.

For example, affiliate marketers have websites, social media pages, YouTube channels, email lists, etc. If you have an email list, you can send a different recommendation on each email. 

Network marketers have to promote the product or the products that are available from their company. In many cases, they promote only one product. Also, if something goes wrong with the company, you will not be able to keep making money because your marketing methods are based on a product and not on an audience.

Affiliate Marketing Is Not About Recruiting

While there are affiliate programs that allow you to have referrals and communicate with them, this is not a requirement. It is only optional. Most big affiliate networks do not have a referral program at all. For example, Amazon Associates is only about promoting, and you don’t know the people who used your links. 

On the other hand, pyramid schemes and multi-level companies work with the concept of recruiting and mentorship. You need to put members on the company. Then, you will be the mentor that will show them how to use the products and the available resources. Also, you have a mentor that is the person who added you to the company. Of course, they use different words for mentors in many companies. A common one is the word sponsor.

Affiliate Marketing Has No Membership Levels

Another sign of a pyramid business model is the multiple levels of memberships. Affiliate marketing has no membership levels at all. Many people get confused about the upsells of different products and assume that they are membership levels. 

There are tools for marketers or training programs with multiple upsells. I am not a fan of these upsells unless they are necessary. However, if you don’t get higher commissions for these upsells, it is not a pyramid scheme but only extra products. An affiliate program has only one membership level, the free one.

Is Affiliate Marketing A Better Option Than Multi-Level Marketing?

Multi-level marketing has not any advantage over affiliate marketing. In my opinion, multi-level marketing is outdated and not the best option for people who want to start an online business. It was a good option for beginners a few decades ago because you could get a product and a step by step guide. But these days, it’s quite easy to find a product to promote and a few resources to get started even for free.

Multi-level marketers will tell you about passive income and bigger commissions. However, you can achieve the same thing as an affiliate marketer if you choose the right products. There are products with recurring commissions that will help you to earn passive income and high-ticket products for bigger commissions per sale.

You don’t need a budget as an affiliate marketer because you can promote high ticket products without buying them first. This is not possible with pyramid business models. Also, affiliate marketers do not have to teach other people. 

Lastly, there are more products that you can promote as an affiliate marketer. There are available digital and physical products in every niche. For example, if you join the affiliate program of Amazon, you can promote any product from this huge marketplace. Almost every big brand on the internet has an affiliate program, so your options are really unlimited.

Conclusion

As an affiliate marketer, you need to find one method to make sales, and then you can repeat it over and over again for any product you want. Multi-level companies show you one method that works with their products alone. If something goes wrong with the product or the company, you must start from zero again.

So, affiliate marketing is an easy suggestion for a beginner, but every person decides based on their experiences. If you want a guide to get started with affiliate marketing, you can get the free training of Wealthy Affiliate.


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