Affiliate Marketing vs. Network Marketing

I have years of personal experience with both affiliate and network marketing. When making a decision on what to choose: affiliate marketing vs. network marketing, you’d want to know the pros and cons of each model and compare them side by side. I’ll help you identify the advantages and disadvantages and offer you a side-by-side comparison table – so that you can make your own choice. I’ll provide my #1 recommendation for the company to partner with within each business model.

Network Marketing and Multi-level Marketing (MLM) are not exactly the same, even though lately the words are being used as synonyms. I’ll explain the difference and the rest of the article will be using the “Network Marketing” name in reference to Multi-level Marketing.

Decorative Header Image: Affiliate Marketing vs. Network Marketing

Affiliate Marketing Business Model.

What is Affiliate Marketing?

Investopedia: “Affiliate marketing is an advertising model in which a company compensates third-party publishers to generate traffic or leads to the company’s products and services. The third-party publishers are affiliates, and the commission fee incentivizes them to find ways to promote the company.”

Here is how Affiliate Marketing Model Works…

Instead of (or in addition to) paying crazy amounts of money for advertising, company XYZ joins an affiliate marketing network (such as CJ Affiliate, ClickBank, ShareASale, or other) or creates its own affiliate program (such as Amazon Associates,  Apple Performance Partners, etc.)

A third-party publisher wants to promote company XYZ’s products or services. He or she applies to become an affiliate through XYZ’s affiliate program.

If XYZ approves the publisher’s application, it provides this new affiliate with his or her unique Affiliate ID and personalized links to the company’s products or services that include the affiliate’s ID. These links are called “affiliate links”. 

Affiliate Marketing diagram: Blogger/ Affiliate Marketer promotes products; Reader/ Customer buys products; Business/ Merchant pays commissions to the marketer

The affiliate marketer shares his affiliate links and gets paid a commission when someone enters XYZ online store through this marketer’s link and makes a purchase.

In some cases, a company pays affiliate marketers for leads rather than purchases. Then, affiliates get their commissions when a prospect enters the company’s website through their affiliate links and submits his contact information.

This model is single-level. The company pays only after the task is complete (purchase made or contact information received). An affiliate is interested to find the best ways of promoting the company because only then he or she will earn money.

Is There Residual Income in Affiliate Marketing?

Yes.

The affiliate marketers usually create their own content-driven niche-oriented websites and use SEO and other techniques to bring traffic to their websites. On these websites, they offer helpful information about the products or services they promote to the consumers who are looking for such information. Thus, affiliate marketers don’t have to chase the customers. Instead, the interested potential customers find the websites, which contain affiliate links.

The content, once created and published, does not go away. People, who are interested in the topic of the article, are able to find it through the search engines today as well as years later. Thus, a quality post written once will generate income over and over for years.

There are other ways to generate residual income, such as via a YouTube channel or adding Google’s AdSense and other 3rd-party ads to the affiliate marketer’s website. These techniques work better when the marketer already established a significant following.

Pros and Cons of Affiliate Marketing 

Pros 

  1. The legal business model that generates residual Income with huge earning potential.

  2. Affiliate marketers can choose what they market and turn their passion into their business.

    You are in control of what products and services you choose to promote and what affiliate programs you join. Therefore, you can select your niche in one of the fields of your interests and do what you really enjoy doing.

  3. Ability to create multiple sources of income.

    You can affiliate with more than one vendor simultaneously. You don’t need to start over if one of the merchants goes out of business or changes direction in a way unfavorable for you.

  4. Low startup cost.

  5. No recruiting is involved.

  6. No direct sales.

  7. Affiliate marketers don’t chase their clients; clients find their websites via search engines.

  8. Affiliate marketing business can be truly global as it can run 100% online.

  9. Work anywhere on your own schedule.

  10. No sales-related hurdles. The merchants take care of the storage of physical goods, billing, shipping, returns, customer service, etc.

  11. As a business owner, with smart planning and record-keeping you can legally save big on taxes.

Cons

  1. An affiliate marketer spends many hours daily on the computer.

  2. There is some learning curve involved in order to start the business.

  3. Continued learning is required to become an expert in the chosen niche, keep up with the updates in the industry and follow the current best strategies for 1st-page ranking in the search engines.

  4. Affiliate marketers can’t keep their occupation a secret. For the true success in business, they must aim to become public figures: gain trust by being open and transparent, be clearly-present and recognizable in social networks, build their followings.

  5. Expect to work for free for at least first 3 month

  6. It takes 1+ years with the full-force investment of your time and energy to build a full-scale business with meaningful income

Affiliate marketing does not require any association with a single company. You could purchase your domain name in one place, host your website somewhere else, take website administration training in third place, affiliate marketing training in forth, purchase keyword research tool and other helpful tools from yet other companies, and search for affiliate programs individually. 

But wouldn’t it be much easier to have it all in one place? And what if I told you that I know of such a place, and it’s not only easier to start your business using this platform, but also much cheaper than buying all pieces separately?

Wealthy Affiliate: The Feature You Need to Succeed

My Number 1 recommendation of a platform that provides comprehensive affiliate marketing training, the easy automated 30-second build process of WordPress websites, incredible 24/7 technical support with average response time 5 minutes, training on website administration and content creation, fast and secure web hosting, advanced keyword/ niche/ domain name research tool, affiliate programs directory, and the supportive worldwide community of affiliate marketers from top-experts to newbies – all is included in the low monthly fee of $49.00 (or $30/month on annual billing option):

Wealthy Affiliate

Click the name of the company above to read a review. 
Join for free and explore the platform yourself before you upgrade to Premium membership. 

Network Marketing Business Model

What is Network Marketing?

Per Investopedia, “Network marketing is a business model that depends on person-to-person sales by independent representatives, often working from home. A network marketing business may require you to build a network of business partners or salespeople to assist with lead generation and closing sales.”

What Is Multi-level Marketing (MLM)?

Investopedia: “Multi-level marketing (MLM) is a strategy some direct sales companies use to encourage existing distributors to recruit new distributors who are paid a percentage of their recruits’ sales. The recruits are the distributor’s “downline.” Distributors also make money through direct sales of products to customers.”

Let’s set terminology straight!

You can see from the definitions that both Network Marketing and Multi-level Marketing depend on person-to-person or “direct” sales. Direct Sales and Network Marketing do not necessarily involve recruiting while Multi-level Marketing always does.

Network Marketing, Direct Sales, and MLM diagram

Originally, Multi-level Marketing, or MLM, is not the same as Network Marketing or Direct Sales. However, nowadays people use these 3 terms interchangeably.

Why?
MLM is often confused with the “Pyramid Scheme”.

A legal MLM model emphasizes sales of goods and services to the consumer. The commissions to independent distributors are being paid only from product sales. The startup cost to join an MLM is low or sometimes even free.

Pyramid Schemes rose out of the Ponzi Scheme. They focus on recruitment, have high membership fees and other startup costs and nowadays cover their fraudulent activities by having overpriced products for sale. Pyramid Schemes are illegal. Unfortunately, they use an MLM model to cover their scam.

Because of this surface similarity, a lot of people prefer to avoid MLMs altogether; many don’t understand the difference and don’t want to investigate whether the company is legitimate or a Pyramid Scheme. 

The MLM Associates earn commissions on their direct sales, and also on sales made by other associates in their downline. The commissions made from the sales in the downline create passive income. Therefore, building a strong team is one of the two main goals for the associates: the bigger your team is, the more passive income it generates for you. 

However, since new people are scared of the “MLM” term, it’s hard for the associates to even get attention from the new people and make them listen about the Company, its products, and income opportunity. 

That’s the main reason for the associates to veil the MLM name at least at the beginning of each new conversation and thus gain the attention of their listeners. They adopted the “Network Marketing” and “Direct Sales Company” terms to represent MLM business.

Multilevel or not, network marketing is a social model, which requires “people” skills from the associates and one-on-one communication with the prospects, customers, and other team members whether in person, on the phone, email, or other types of private messaging.

Network Marketing: group of people in front of a building wall.

Pros And Cons of (Multi-level) Network Marketing

Pros 

  1. Legal business model

  2. The potential of creating passive residual income and growing wealth. 

  3. Work from home on your own schedule.

  4. Easy to start with low investment.

  5. Most (but not all!) modern MLM companies have digital stores and handle all sales-related hurdles for you. You don’t need to worry about the storage of goods, shipping, returns, billing, customer service, etc.

  6. If you plan smartly, as a business owner you can deduct most of your regular business expenses and legally save on taxes.

Cons

  1. Low rate of success.

  2. It takes 5+ years with the full-force investment of your time and energy to build a full-scale business that brings essential income. Yet, success is not guaranteed because it depends on whether other people in your organization are also willing to commit and able to produce as well as you do.

  3. The associates are not in full control of their business. They depend on one mother-company and must follow its rules and direction.

    The company may change its terms and conditions at any time. If you disagree with its new path, your choice is either to continue and comply against your personal strategies or principals, or quit and lose what you’ve built so far.

  4. The associates are restricted geographically by the area of shipping and overall operations of the MLM company. Not many MLM businesses are truly global.

  5. MLM companies oblige their associates to sign up for an auto-ship and buy the company’s products on a monthly basis. Most companies set a high threshold on the minimum price of monthly purchases.

  6. The associates’ income depends on the size and quality of the team members in their downline. Without a strong team, a reasonable income is impossible.

  7. MLMs encourage associates to use their “warm market” – family and friends – to promote products to and use as the main source for recruiting.

    By doing so, you may damage your relationships and people in your social circle may start avoiding you.

  8. In some cases, the associates might need to keep a stock of goods and take full care of sales themselves.


  9. An associate must have natural qualities and willing to obtain skills of a good salesperson and recruiter in order to have a chance for success in this business model.

  10. An associate must learn to take “No” as a positive answer.

    You’ll hear “No” 99% of the time. If you can’t manage to genuinely think of it as one step closer to the desired “Yes”, then MLM is not for you.

  11. Even in the best legitimate MLM business, there is still too much hype. A good positive approach to running a business turns into over-positivity. There is usually much push for participating at your own expense in the corporate events. In addition to sharing valuable information, these events, as well as any communication from the leaders with the associates, are full of brainwashing.

  12. Too much hustle
    When building your branch of the MLM business, you must think of it every minute of your day and even in your nightdreams. You need to be creative in finding ways of meeting new people and promoting your products online, and most importantly, offline. One-on-one communication with each prospect is a must. Whether you do it in personal meetings, over the phone, via email, or private messaging, you have to personally encourage everyone to join your team and buy your products. This might feel like chasing people…

None of the network marketing opportunities can be free of these disadvantages. 
Click this link for the video that introduces to you the company that has the shortest list of them. 
Please also subscribe to my YouTube channel.

CTFO is my Number 1 recommendation to those of you who consider an MLM opportunity – no financial risk is involved: free to join, optional low obligations on monthly purchases, and impressive compensation plan.

Affiliate Marketing vs. Network Marketing [Comparison Table]

Please watch the video for graphical presentation and more details.

Affiliate
Marketing
Network
Marketing
Legal business model YESYES
Potential of Passive/ Residual Income YES
Website-generated
YES
Team-dependent
Work From Home YESYES
Meetings with customers and prospects are required
Work From Anywhere In the World YESYES
Limited Time, depends on MLM company
Low Startup Investment YESYES
Tax Deductions For Business Expenses YESYES
Full Control of The Business YESNO
Your business direction is defined by the MLM company
Multiple Income Source YESNO
Rate of Success MEDIUMLOW
Commission Rate VARY
1% – 75%
LOW
Com. fee on direct sales usually under 10%, especially on start
Time Required Until Seeing First Earnings 3+ MONTHSImmediately
Time Required to Start Earning Meaningful Income 1+
YEAR
5+
YEARS
Keep Stock, Manage Sales Operations NOSOMETIMES
Website Required YES
Your own website is a foundation of your business
DEPENDS ON MLM Co.
When required, replicated website is provided by the company.
Recruitment Required NOYES
Your revenue depends on the size of your team
Direct Sales/
Person-to-person promotions
NOYES
Obligation to buy products or services NOYES
Multi-layer Compensation Plan NOYES
Targeted Audience “Cold Market”
(Internet Users)
“Warm Market”
(Friends & Family)
Required
Skill Set
Researcher, blogger, learner, teacher, reviewer;
basic computer skills, ability to spend long hours on a computer.
Salesperson, recruiter, leader;
ability to disregard rejection, high-energy and social engagement.
Hype & HustleNOYES
Affects Personal Relationships NOYES
Your social circle may start avoiding you because you always pitch your business or your presence in a social gathering gets interrupted by business calls

Conclusion.

What’s better: Network Marketing or Affiliate Marketing? It’s up to you to decide. It depends on your personality, skills, and interests. 

If you are a person with high energy and strong sales and recruiting skills, and it’s hard for you to spend hours alone in front of a computer, then perhaps Network Marketing or Multi-Level Marketing is a better choice for you.

If you like learning, researching, writing and are able to spend hours doing so, if you are comfortable offering help to people you may never get personally in touch with, then Affiliate Marketing might be a better fit.

What do you think? Which model is more appealing to you?
Please let me know in the “Comments” area below and share your thoughts on both.

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