Affiliate marketing is classified as a form of advertising other people’s products and services. But is affiliate marketing a pyramid scheme? It is a legal business model or not?
No worries, affiliate marketing is not a pyramid scheme. It is a legal business where you invest time, and effort to promote other people’s products (physical and digital) or services in return for a commission after the sale.
Just like in the real world, marketers of the online world earn income by creating advertising campaigns for other products.
If you are interested in learning the real difference between affiliate marketing and pyramid scheme, as well as how to start your own affiliate business, keep on reading this post!
Affiliate Marketing Meaning
Affiliate Marketing is where you agree to offer or endorse an item in exchange for a part of any sales that you create.
First, you join the company’s affiliate program. A company will usually give an individual a referral link, or some sort of special identifier. This is to keep track of the number of sales that were created due to you referring a customer to the product.
Affiliates are not paid spokespeople or employees, so there is little conflict of interest for anyone generating income as an affiliate.
Key Points About Affiliate Marketing
- Fully legal enterprise used by leading global organizations as a marketing channel
- Products and/or services are exchanged from a business to customers with a need, desire or want
- Affiliate marketing businesses can be run by one person, or by a team
- Customers are actively looking for products/services and want to buy
- Assets are commonly built, like websites, which can be sold to potential buyers and/or investors
- Can be operated passively online and become a career
Pyramid Scheme Meaning
A pyramid scheme is a kind of “business” that funnels cash from brand-new members to older members. As each member pays something to sign up with and then recruits at least two new members into the plan to continue the cycle.
In other words, a pyramid scheme is an “organization” where individuals earn money from recruiting new members. Usually by assuring them high returns in an extremely brief time period.
New members are “required” to hire other members. Otherwise, they won’t make any cash. This is a fraudulent activity and it is illegal in most countries.
Key Points About Pyramid Scheme
- Illegal in many countries, locations and states
- No products or services are usually sold (some pyramid schemes can involve products, but these are not the primary method that income is generated)
- Expanding structure; new people are required to join to maintain and continue the model
- New members are persuaded to join, but with a level of deceit as to what is involved
- Cannot be sold as a business entity through legal channels
- Requires face-to-face interactions
Difference Between Affiliate Marketing and Pyramid Scheme
Affiliate marketing is different from a pyramid scheme due to the fact that the payment model is the exact same for everybody, or is generally based on an unbiased payment quantity.
Generally, an affiliate will be paid a percentage of each sale made. Often they will get paid a portion of the profits that ads on their page will produce. Some affiliates used the model to become wealthy.
The multi-level marketing aspect is mostly non-existent in affiliate marketing. This gets rid of any form of pyramid-like activities.
Another distinction between affiliate marketing and a pyramid scheme is that you do not need to pay any money upfront as an affiliate.
The amount of money you need to start with affiliate marketing is small and goes toward tools.
All you need is an internet connection and your own platform (be it a website, social network page, or YouTube channel). You can become a merchant’s affiliate simply by selling their services or products.
Moreover, to become a successful affiliate, you don’t need any specific skills or marketing experience.
When we compare pyramid scheme vs. affiliate marketing, with the latter, you are not needed to hire others. You can merely sell items through your website and make commissions from the sales.
And why would you recruit competition anyhow?
In a pyramid scheme, nevertheless, recruitment is vital for earning money. You will need to persuade individuals to sign up under you so that you can make a commission from their efforts.
Therefore, this can be rather challenging, and typically results in people losing money instead of making it.
I have also answered what is the difference between affiliate marketing and network marketing if you are interested in learning more.
So, Is Affiliate Marketing a Pyramid Scheme?
No, affiliate marketing is not a pyramid scheme. As said, it’s a legitimate method to earn commissions on sales made by promoting items or services online.
Unlike pyramid schemes, there is no recruitment associated with affiliate marketing. You just promote the services or products of a company and earn a commission on every sale you make.
There is a real item that you are selling on behalf of the business that makes the item. You are using absolutely nothing except your own experience and endorsement of the product.
Consider it as posting a testimonial about something that you utilized and took pleasure in. Is this worth it?
You would like other individuals to see this product and use it to make their own lives easier, but you just occur to make money as a reward to do so more publicly.
On the other hand, with a pyramid scheme, you don’t sell or promote anything but a dream or a lie about earning a ton of money by joining the same scheme.
Is this something you would want to do? I know I don’t…
So there you have it! Now you know what is the difference between the two business models and why affiliate marketing is not a pyramid scheme in any way, shape, or form.
By the way, I love affiliate marketing and thus recommend it to everyone who is interested in learning how to make money online!
So if you want to learn more about how to start your own affiliate marketing business and make money, keep on reading this article…
How I Make Money With Affiliate Marketing
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In other words, you could be earning an income from your affiliate business for years and years to come because this method is so POWERFUL and overlooked by many marketers.
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If you need any help or you have a question, feel free to contact me.
And feel free to share this article with your friends and family!
All the best, Ivan. Founder, and CEO @freeaffiliatemarketingbusiness.com