Is Affiliate Marketing A Pyramid Scheme?

pyramid scheme

An affiliate program is one of the most effective methods used by companies to advertise products nowadays. Affiliate marketing can quickly increase sales and even earn money selling someone else’s product or service.

Is affiliate marketing a pyramid scheme? That’s the big question. Well, affiliate marketing should not be confused with a pyramid scheme or MLM because both strategies are different. We’ll differentiate them in this guide.

How Does Affiliate Marketing Work?

Let’s address the elephant in the room first. Is affiliate marketing a pyramid scheme? The simple answer to this question is a big NO!

Simply put, affiliate marketing works as a form of advertising where a company pays partners to promote products or services. So, there are no direct sales in this business model. Those who agree to advertise a company’s product or service are commonly known as affiliates.

Affiliate marketing is undoubtedly one of the best alternatives to the traditional retail market. And starting an affiliate marketing business is a great way to earn money online by referring customers. You can do it through an affiliate link in a blog post, social media, email marketing, search engine optimisation (SEO) or search engine marketing (SEM).

Your affiliate link is a unique identifier that the company uses to determine how many sales you have generated by promoting products or services. If the company manages to sell a product or service through your referrals, then you will earn a commission on sales.

The more sales you make, the more money you earn. But you’ll not be paid upfront to promote a product. Thus, you’ll only start making money when clients who follow your referral link pay for the services or products you are promoting.

What Is A Pyramid Scheme?

Now, let’s talk about pyramid schemes so you can have a better understanding of how they differ from affiliate marketing. A pyramid scheme relies on an unsustainable business model that starts when two people make a single business transaction.

The business owner (person A) recruits a distributor (person B), and the latter begins to sell the product or service to start making money. Then, person B is required to recruit more distributors and is promised to earn a commission for all sales made by each additional person.

As you can guess, this business model results in a multi-level scheme with supposed income potential. But it’s one of the biggest marketing scams that ultimately benefit an individual. With a pyramid scheme, members generally earn money by convincing their recruits to invest. It’s like borrowing other people’s money to repay your debts.

Remember that a pyramid scheme begins with one person who will remain on top of the pyramid. This means that the owner benefits more than everyone when it eventually collapses. And this is a fraudulent way of making money in the name of marketing. It makes no sense at all if you think about it carefully.

Is Multi-Level Marketing (MLM) Different?

If you are passionate about online marketing, you’ve probably heard of multi-level marketing or MLM. This network marketing strategy is quite similar to a pyramid scheme in specific ways.

MLM companies also adopt the features of a pyramid scheme to reach as many customers as possible. So, it’s possible to get confused if you don’t have the correct information. Well, let’s find out what differentiates the three types of marketing methods from each other.

MLM Vs. Affiliate Marketing

First of all, it’s important to mention that multi-level marketing schemes are technically legal as opposed to pyramid schemes. With that said, companies use MLM marketers based on a performance system. As with affiliate marketing, you earn a commission based on the sales made through your referrals.

MLM also uses a multi-level compensation system. This means that you can profit from sales made by other members. In other words, you can benefit from commissions by recruiting other people.

Multi-level marketing is a system where individuals must pay to join. Unlike MLMs, you are not required to pay anything to participate in an affiliate program. Also, MML entails selling products and services, whereas affiliate marketing is all about promoting them.

What You Need To Know About Affiliate Marketing

Basics of affiliate marketing

You already have an idea of what affiliate marketing and pyramid schemes mean. But it helps to have a better understanding of how these two work to stay on the right side. Gaining the required knowledge will help you become a better affiliate marketer. Learn more about the key features of affiliate marketing below.

An Affiliate Marketing Program Is Completely Legal

Is affiliate marketing legal? This is certainly one of the questions you might ask if you want to help companies sell products or services through affiliate advertising. Well, you can join an affiliate program with confidence, knowing that affiliate marketing is legal. With this form of advertising, there’s no need to look for dubious means to earn money.

One of the biggest problems with pyramid schemes is that they are illegal. We can say this without hesitation because they almost entirely thrive on fake promises of getting rich in no time. While participants may sell products on behalf of the owner, the main objective is to recruit many people. The focus is not on selling products or services.

An Affiliate Marketer Earns Money Through Commissions

As you will learn throughout this article, affiliate marketing can work for you if you want to earn money legally. If this makes sense, you only need to learn how to turn your marketing skills into profits.

The payment model used in affiliate marketing is the same for all participants. Most companies normally offer an objective payment amount calculated based on sales. In return, the affiliate receives a percentage of the sales made or revenues from successful advertisements.

Your job is to generate leads by driving traffic to the selected company’s products or services. You will then earn a commission according to the sales the business owner makes from your referrals. So, you can increase your affiliate income if your referral generates more sales.

Affiliate Marketing Is Free, Unlike Pyramid Schemes

One of the challenges experienced by prospective marketers is the risk of being conned on the internet. Chances are you’ve encountered ads posited by people who claim to help you make money with no investment. But many of such advertisements are only meant to deceive you. The worst part is that uninformed people are easily duped into paying money to join. And that’s one of the characteristics of scammers who use pyramid schemes.

A trustworthy affiliate program is supposed to be available to you free of charge. Affiliate marketers should be able to create a free account in affiliate networks or the company’s website. Once you get your account, you only need to agree to the payment terms. The business will then give you an affiliate link so you can use it to bring in new customers.

How To Identify Pyramid Schemes And Affiliate Program Scams

Ways to find reliable affiliate programs

Without the necessary knowledge, anyone can easily become a victim of pyramid schemes and other scams. As long as you are using the internet, you’ll often come across online marketing schemes for making money with little effort needed.

But that does not have to be the case. You should avoid potential affiliate marketing scams by checking the following red flags.

Promises To Earn Big Bucks Easily

One of the biggest red flags of a possible affiliate marketing scam is the promise to get rich quickly. Pyramid scheme scammers will promise huge profits if you keep recruiting more distributors. But most of their pledges are too good to be true. In fact, this is one of the most common messages propagated by people who promote pyramid schemes.

While it’s possible to earn a decent amount of money through an affiliate program, it doesn’t happen overnight. Be careful when you come across people or companies that promise to help you make money online via get-rich-quick schemes.

Pay To Make More Money

If you are new to affiliate marketing, you’ll be delighted to know that you don’t need to make any payment to join the program. That’s because virtually all reputable affiliate programs are free.

Therefore, you should think twice, do your research or even run away if you must pay to join. Affiliates only need to find a reputable company and offer to promote its products or services via a referral link.

Questionable Products Or Services

Before you start selling products or services on behalf of a company, ask yourself if it’s a genuine business. The kind of technology we have today makes it difficult to identify scammers who use eye-catching websites.

Their products and services may be fake even though they look legitimate. Don’t agree to promote products until you establish the legitimacy of the business and its offerings.

Unclear Payment Terms And Conditions

Perhaps you’ve heard of marketing campaigns where people have spent money, and the business owner disappeared with it all. They will entice you with life-changing rewards without telling you exactly how you’ll get your money. That’s the kind of trouble you want to avoid in affiliate marketing.

On the other hand, legitimate affiliate marketing programs have clear terms with no hidden conditions. As a business owner, your advertising scheme should be based on transparency if you want to stay in business. And if you are a marketer, you must read and understand the payment terms before joining an affiliate marketing program.

Starting An Affiliate Marketing Business

Guide to getting started with Affiliate Marketing Business

With the information you’ve gathered in this guide, nothing should stop you from starting affiliate marketing today. Many big and small businesses that sell different products and services to their clients advertise through affiliates.

They have their own affiliate programs, allowing interested marketers to advertise on various platforms. The startup costs are low because you can sign up without investing any money. All you need is an internet-enabled device such as a smartphone, tablet or computer.

The first step is to identify a company that offers the products or services you want to promote. Be sure to check the company profile to confirm it’s legal. Rather than selling the products, you only need to advertise them to potential customers. And you have complete control over how you want to promote whatever product the company is selling.

Best Channels For Affiliate Marketing

You may use different channels to market to the target audience once you get your affiliate link. Many affiliate marketers have successfully attracted clients by posting referral links online.

If you want, you can write a blog post or share your link with members of Facebook groups. This option normally requires you to write articles that relate to what your readers are likely to be searching for online. Other social media platforms such as Twitter and Instagram are also a great choice. In addition, you can use email marketing to send links to people via email addresses.

Regardless of the approach you choose, you must take advantage of keywords and SEO tools to make your content relevant. Since we are talking about advertising, you should also capitalise on SEM to drive traffic through paid ads.

Final Words

So, is affiliate marketing a pyramid scheme? Absolutely not! Affiliates engage in legitimate business activities that entail promoting other people’s products or services. This form of marketing does not rely on a chain system or pyramid scheme.

Members of pyramid schemes are usually promised to get rich quickly by recruiting more people. That’s generally illegal, as well as a big scam where the key beneficiary is the business owner.

On the other hand, affiliate marketing is a legal way of promoting a product or service by partnering with companies. An affiliate marketing expert agrees to help business owners attract customers and consequently make profits by driving traffic, referrals or sales.

Unfortunately, some rogue individuals and businesses have disguised themselves, promising to help you profit quickly, like in an MLM system. The good news is that you can start promoting products and earn commissions if you choose a reputable affiliate marketing plan.