If you’re looking to make some extra money online, you may want to compare affiliate marketing vs. multi-level marketing. Both are surprisingly popular, but they’re quite different.
Now, I have to admit that I’m not a fan of multi-level marketing, but I am a fan of affiliate marketing and use it on this very blog. But consider the differences for yourself to decide which is better.
Before we get into the comparison, this post contains affiliate links. Read my full disclosure policy to learn more.
Getting Started
As you compare affiliate marketing vs. multi-level marketing (MLMs), you should know what it takes to get started. I’m an affiliate for multiple programs.
Almost all (if not all) of them required me to apply. Some programs will ask for information like your website traffic, social media following, or promotion plan.
On the other hand, most MLM companies will let anyone 18 years and up join. As long as you have a social security number and are willing to pay the startup fee, you can become a representative.
Startup Costs
Another significant difference between affiliate marketing and MLMs is the cost to start. Most affiliate marketing programs and networks are free to join.
Now, there are some programs that require you to buy the product. I’ve found this is often the case with affiliate programs for online courses and similar products.
To join an MLM, you’ll usually need to pay some sort of startup fee, and that could be anywhere from $50 to $5,000. The higher fees usually come with products so that you can try them before you start to sell them.
Recurring Costs
Once you start affiliate marketing or an MLM, you should know what to expect to pay monthly or yearly. This is another major difference, and the costs can add up.
As an affiliate marketer, the only costs I have are those of products I want to try for a review for a blog. Sure, I have to pay for website hosting, but that’s for blogging, not just affiliate marketing.
Many MLMs charge an annual or monthly fee for you to remain active and eligible for commissions. In some MLMs, you may also need to buy product regularly, such as with older MLMs, like Mary Kay.
Exclusivity
When you want to make money online, you need to diversify your income streams. So exclusivity can be a real bummer, and it can hold you back from making more money.
I haven’t heard of a single affiliate marketing program that requires exclusivity. Now, I have come across one program with a non-compete, and I turned it down because of that, but I can work with multiple companies without a problem.
On the other hand, most MLMs have some sort of exclusivity clause. You should review the representative contract to be sure, but you may not be able to promote products for more than one brand.
Commissions
Of course, you may wonder how much you can make from each sale through affiliate marketing vs. multi-level marketing. The exact rate will vary between companies with both types of sales.
Some affiliate programs, such as Amazon Associates, pay as little as 1% of the total sale, depending on the type of product you sell. But other affiliate programs pay as much as 80%, usually in the tech and software sectors.
MLMs pay anywhere from around 10% to over 50%. The rate will vary based on the company, but it also depends on your rank within the company, so again, review your contract.
Other Ways to Make Money
Aside from getting commissions, it helps to be able to make money in a few ways. That can help increase your earning potential which can help you justify spending more time on your marketing side hustle.
In affiliate marketing, commissions are the main way to make money. However, you can find programs that pay a small amount, such as a few cents, for clicks, even if you don’t generate a sale.
There are also some two-tier affiliate marketing programs. These appear to be very similar to MLMs, but it looks like the bonus is only a one-time deal, and it’s a very small part of making money.
The option to recruit other sellers is what gives MLMs the “multi-level” name, and it’s often treated as the main way to earn. Most companies offer bonuses based on how many people you bring on to your team and how much those people buy or sell.
Making Sales
Of course, you should consider how you’ll go about making sales so that you can earn money as a marketer. This mechanism is pretty similar between affiliate marketing and multi-level marketing.
With affiliate marketing, you’ll get a specific link (or a dashboard to create such a link) to the product or service. You can share that link on your website or social media, and you’ll get a commission whenever someone buys something through your link.
Newer MLMs work similarly, but some give you your own mini-website where you can make sales. However, some MLMs are inventory-based meaning you buy product that you then resell to your customers.
Inventory
Another significant difference to note is related to inventory, including buying and stocking products. Affiliate marketing doesn’t ever require you to hold inventory or ship products to customers.
However, you can purchase products that you want to review so that you can write a better review. Still, that’s not required, and you can stick to reviewing products you already own.
As I mentioned, some MLMs require that you hold inventory to ship to your customers when you make a sale. But plenty of MLMs don’t require any inventory.
The thing is a lot of the non-inventory-based have a monthly sales requirement. If you don’t meet that with customer orders, you can very easily buy more product to hit your quota. A lot of MLM reps end up with back stock because of this.
Time Commitment
Making money online isn’t easy no matter what you do. Whether you decide go try affiliate marketing or an MLM, you’ll need to put in a decent amount of time to start earning. The difference is in the flexibility of that time.
As an affiliate marketer, you’re on your own. You have complete control over when you work and how often you work. Depending on the program, you may have restrictions on where you can use your links, but you still have more autonomy.
I’ve never been in an MLM, but I’ve watched a lot of MLM commentary. From what I’ve seen, a lot of MLM reps are encouraged or even required to participate in multiple hour-long (or longer) Zoom calls per week, so you have to be able to work at those times.
What’s more, a lot of those calls aren’t necessary, so they just waste your time. If you go into affiliate marketing, you don’t have to worry about wasting time.
Rewards
Even as an independent contractor, it’s nice to be recognized and get some rewards, right? This is another difference between affiliate marketing and MLMs.
With affiliate marketing, the only reward is getting paid your commissions. The company will send the money to your bank account or PayPal or something once you hit the payout threshold.
A lot of MLMs offer incentive trips, so you can get some or all of the trip paid for if you reach certain sales goals. Some of these trips are lavish, so that can seem inticing.
Unfortunately, a lot of these trips are very expensive. If you don’t reach certain goals, you may have to pay out of your own pocket for flights, food, and other expenses.
Staying Active
Another thing to keep in mind is what it takes to stay active in an affiliate marketing program or MLM. Some affiliate marketing networks and programs require that you make a sale every few months.
Amazon, for example, requires three commissions within your first 180 days for you to stay an affiliate. I’ve been deactivated from some networks, like CJ, for not making sales in a certain period.
MLMs have similar requirements to stay active. Some of these companies have a minimum personal volume that you have to sell, and some reps will buy products to make up the difference if they can’t sell enough.
While you could do that with affiliate marketing, clicking your own links is usually against a program’s terms. Be sure to review the agreement before you click your links or ask your family or friends to do so.
Profit Potential
Obviously, you’re probably comparing affiliate marketing vs. multi-level marketing because you want to make money. It’s hard to know exactly how much people make from affiliate marketing.
However, one chart shows that about a third of affiliate marketers make at least $10,000 per year. That may not be a full-time income, but it’s great for a side hustle, and you can combine it with other things to make a full-time living.
Unfortunately, the story is very different for multi-level marketing. A study from the Federal Trade Commission (FTC) found that 99.6% of MLM reps lose money. That means 4 out of every 1,000 reps breaks even or makes a profit.
If you want to lump affiliate marketing in with other small businesses, the same study finds about 39% of people make a profit. That comes out to 390 people out of every 1,000, so almost 100 times higher than the rate of success in MLMs.
The Obvious Choice
When comparing affiliate marketing vs. multi-level market, look at all of the facts. Of course, you want to consider how much it will cost to start, but don’t forget about your earning potential.
With that fact alone, it’s clear that affiliate marketing is the better choice. You have almost 100 times better odds compared to if you join an MLM.
If you’re ready to start affiliate marketing and want to use Instagram, check out the Instagram Marketing and Sales Academy!