Monday, August 4, 2008

Is Affiliate Marketing The Same As MLM?

Briefly the answer is no.

To answer this more fully it is important to know what MLM is. MLM stands for multi-level marketing. It is basically a pyramid scheme, which, in most cases, is illegal. Someone starts at the top (level 1) of a pyramid and sells something to level 2. Those in level 2 now need to sell to level 3 members. When that happens, level 1 makes a commission on the sale. This continues through multiple levels, with levels above earning a commission on the sale. At some point (the bottom of the pyramid) there are so many people trying to sell the product that the market is just about worn out. So they are stuck, having paid for a product they can’t sell, while those above have made money.

Affiliate marketing does not even remotely resemble MLM marketing. With affiliate marketing, the marketer is being paid to sell another site’s product. The marketer does not have to buy the product first. All they need to do is advertise the product and promote the product. The interested site visitor is directed to the site selling the product. If a purchase is made, the site directing the traffic is paid a commission.

What causes some confusion is that there is multi-level affiliate marketing. What clearly differentiates multi-level affiliate marketing from an MLM is that each level in an MLM has to buy the product in order to resell it. That is not the case with multi-level affiliate marketing. One site directs traffic to another site, which directs traffic to a third site. If a purchase is made, the directing sites are paid a commission. Multi-level affiliate marketing is just another way to drive traffic and create revenue. At the very end, the customer (hopefully) makes their purchase and the directing and selling site make money.

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