Quick Answer: Affiliate marketing is not a pyramid scheme, but a legit and lucrative business model where you get paid based on direct product sales only. There are no multi-level compensation plans, no recruitment and no need to pay to promote products.
No doubt about it, you can make good money with affiliate marketing.
Freedom-giving, life-changing amounts of money.
This is why at Commission Academy, we offer aspiring affiliate marketers like you to follow step-by-step training so you can start banking affiliate commissions in the shortest time possible.
It’s also why we try our best to answer beginner questions like:
- Is affiliate marketing fun?
- Is affiliate marketing dead?
- Is affiliate marketing safe?
- Is affiliate marketing a scam?
- How much money do you need to start?
- How much money can you earn?
It’s always nerve-wracking venturing into unknown territory and essentially, you want to know if affiliate marketing is a legit moneymaking method before you invest any time and energy into it, and I totally get that.
So today I’m going to answer the question: is affiliate marketing some kind of shady pyramid scheme, multi-level marketing (MLM) or Ponzi scheme?
Let’s start with some clear definitions of how affiliate marketing works and how pyramid schemes work so you can see the vast differences between the two…
What Is Affiliate Marketing?
Affiliate marketing is a legit way many have used to make money promoting products and services online for a commission on every sale generated. It’s a simple business model with no complex compensation plans and there’s no recruitment involved.
Investopedia describes affiliate marketing this way:
“Affiliate marketing is an advertising model in which a company pays others (e.g., bloggers and Youtubers) to advertise their products and services and generate sales.”
Affiliates only get paid when an actual product or service is sold. There’s no face-to-face selling or recruiting, no building a downline and you’re not limited to a narrow product range.
There are 10,000s affiliate programs out there with 550 million+ products and services: Drones, vacuum cleaners, fridges, flights, laptops, clothes – there are affiliate programs for absolutely anything you can buy online.
Big-name brands like Amazon, Apple, Honda, H&M and Yamaha all have affiliate programs that are free to join meaning you never have to pay to promote their products and earn commissions.
Read more about affiliate marketing:
- Affiliate marketing beginners guide
- 4 reasons you’ll love affiliate marketing
- How do you earn commissions online?
- How to master affiliate marketing [25 dos + don’ts]
What Is A Pyramid Scheme?
Though they come disguised in many forms, pyramid schemes are when the majority of income comes from recruiting new members into the program, rather than the sale of actual products.
Members of pyramid schemes have to pay to play (usually via some kind of training package or starter kit) and are strongly incentivised to recruit a team and build a downline. Compensation plans are often extremely complex and require members to spend a minimum amount on products each month.
Wikipedia defines a pyramid scheme as:
“… a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products or services.”
And here’s a good definition from the US Federal Trade Commission (FTC):
“Pyramid schemes promise consumers or investors large profits based primarily on recruiting others to join their program, not based on profits from any real investment or real sale of goods to the public.”
Here’s a quick 5-minute video that I think gives a really good demonstration of how pyramid schemes work:
The Problem With Pyramid Schemes
Pyramid schemes are not only unethical, they’re illegal in most countries and for good reason. Forget about making money, 99% of people who join pyramid schemes lose everything they put in.
There have been a number of studies and investigations into pyramid schemes – Wikipedia has a handy list – and they don’t paint a pretty picture.
The most recent survey was published in 2018 by Magnify Money where they asked 1,049 pyramid scheme/ MLM participants about their earnings. Here’s what they found:
Are pyramid schemes a good way of making money?
Not at all and you should run for the hills if anyone tries to recruit you.
5 Reasons Affiliate Marketing Is Not A Pyramid Scheme
1. No Recruiting
Pyramid scheme members are notorious for harassing family on social media, losing friends and alienating themselves from the people around them because of the relentless push to recruit when no one’s interesting in joining their “business opportunity”.
Affiliate earnings come from the sales of actual products. There’s no face-to-face recruiting or selling whatsoever and you don’t build a downline. You join an affiliate program, get your affiliate link and include that link within your blog posts. Someone clicks on your link, buys something and you get a percentage. That’s it.
2. No Complex Compensation Plans
You need a degree in mathematics to understand the compensation plan of a pyramid scheme whereas affiliate programs offer a fixed commission rate for products sold.
MLM and pyramid scheme compensation structures are so complicated firstly because they’re trying to pay you as little as possible and secondly because there’s a strong push towards recruiting with higher percentages paid depending on how many people you have recruited into the business.
3. Anyone Can Make Money With Affiliate Marketing
Affiliate marketing is a level playing field where anyone can get in on the game. Not just the top 1%.
Because affiliate marketing is all done online, you don’t need that much money because start-up costs are so low and you don’t need to be an extrovert or a power salesman to succeed.
4. Sustainable In The Long Term
Hype bubbles burst and pyramid schemes inevitably collapse. That’s just the nature of the beast.
Google is here to stay and we’re buying stuff online now more than ever so affiliates will continue to make money. Unlike pyramid schemes which are here today and done tomorrow, affiliate marketing is very much alive and stats show the best is yet to come.
Build an affiliate marketing business and you’re setting up your financial future on a rock-solid business model that will give you a consistent and lucrative income for many, many years.
5. You Actually OWN Your Business
People in pyramid schemes often refer to themselves as “independent business owners” when that couldn’t be further from the truth. With MLMs and pyramid schemes:
- You’re representative of a company but you own nothing
- You may have a website but you can’t change it
- You’re limited to a very narrow product range
- You’re left with nothing when the pyramid goes bust
As an affiliate marketer, you are in FULL control of your business:
- You choose what affiliate marketing niche to go into
- Your website is your website and you keep full creative control
- You choose what affiliate programs to join
- You decide what products to promote
With affiliate marketing you can build a thriving online business you can be proud of, around any topic you are passionate about, selling products you truly believe in.
What’s The Easiest Way To Start Affiliate Marketing?
Affiliate marketing isn’t a pyramid scheme, but a legit and lucrative way to replace your income online.
Join 53,000 aspiring entrepreneurs who are building successful affiliate marketing businesses today.
Take the Commission Academy free Fast-Start training and discover the exact 3-step process we follow to make $10,000s each month in commissions and how you can too.