Is affiliate marketing a pyramid scheme?- Clear differences you should Know

Is affiliate marketing a pyramid scheme?-Clarified differences you should know

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Many people consider affiliate marketing and pyramid schemes to be viable alternatives to the traditional retail industry.  

The alternatives to the traditional retail market among many are affiliate marketing and pyramid schemes but these are not the same thing.  

Affiliate marketing is not a pyramid scheme at all, affiliate marketing is just another word for performance based marketing. you are only paid for action whether that be a sale, a lead, or a download.

Affiliate Marketing is a process of selling or endorsing a product in exchange for a portion of any sales that you generate. 

A company will typically give you a referral link, or some sort of unique identifier, to keep track of how many sales you have generated by referring a product to the customer. 

Affiliate marketing is basically you promoting a product or service. In exchange for a commission. 

With affiliate marketing programs like Click-funnels can get 40% in recurring commissions. 

A pyramid scheme begins with a single business transaction between two people. 

An offer is then made that person 2 can make money selling this product as well. For all sales made by person 2, there will be a commission earned on the sale.

For each additional person that person 2 can get to sell a product or service, person 2 gets a percentage of all revenues they make as well. 

This creates a pyramid where there are different levels of supposed income potential.

Affiliate marketing works because the payment model is the same for everyone, or is usually based on an objective payment amount. 

Also, a pyramid scheme is considered illegal and will end up costing you a lot of money which you’ll never get back.

Related: Is Affiliate Marketing worth it 

What is Affiliate Marketing and Pyramid marketing

We first have to be clear on how a pyramid scheme works and how affiliate marketing works.

Pyramid marketing

A pyramid scam is an unsustainable business strategy in which you invest money in purchasing a subpar product in order to join a chain and network.

Whereas your position is mainly focused on recruiting other individuals as distributors in the company’s chain by promising them that they would make money in the future,

By hiring others to work as distributors for the firm under you, rather than focused on boosting product sales and increasing the company’s income.

The main characteristic of a pyramid scheme is that participants only make money by recruiting more members. 

There are many different kinds of pyramid schemes, but the two most basic are product-based and so-called naked pyramid schemes. 

In mamy Pyramid based business you need to buy those products yourself before recommending them to others.

The payment structure is such that someone recruited later will never be able to earn any more than the person who recruited them.

Affiliate marketing

This is a performance-based marketing in which a business rewards their affiliates for helping to market the brand to drive traffic to their site, resulting in an actual purchase and increase in sale. 

Affiliates earn a certain percentage out of the total expenditure of the customers they bring in.

You can think of affiliate marketing as a distributorship model where they allow distributors to represent their brand and market their products in exchange for commission. 

This results-based payment scheme is different from the recruitment based payout structure of pyramid marketing.

In affiliate marketing you are not forced to buy the products yourself before recommending them to your Viewers.

Affiliate marketing allows marketers to SCALE and their aim is for overall revenue profit, not just increase in people within the orgnization. 

In short, no. Affiliate marketing is not the same as pyramid marketing.

Affiliates as users

In fact many companies act as affiliates for their vendors. For example, We use canva.com for design work and semrush for SEO.  

And we are an affiliate for them because with each new customer I refer to Canva, we get a kickback and my referee gets a cheaper rate, while Cavna profits from a new customer. 

Everyone wins and it’s sustainable too.

There are very few similarities between affiliate marketing and pyramid schemes.

Here are three similarities between the two.

1. Both are marketing methods used by businesses to increase sales of their products.
2. Both solutions rely on a commission structure.
3. Both have a history of deception, with one having more than the other.

Now that you’ve grasped the concept of similarities between the two marketing techniques.

Let’s take a closer look at the distinctions between the two.

What is the Secret of Affiliate Marketing

Most affiliate marketing gurus are vacuum salesmen who have graduated to a whole new level of thievery.

During the gold rush the people who sold shovels and Levi’s made all the money and affiliate marketing is the same. 

Of course affiliate marketing is legal and legit, my beef is it attracts too many bottom feeders. People who make money selling people on how to make money!I like to make a distinction between “opportunities” like Flex-offers, Shareasale.com , Impact radius, Click bank/JVZoo and Amazon. 

Digital Products vs physical products.

 Digital products are most times a treasure map to nowhere.

You would be using your time better to focus on becoming a Local SEO Web designer marketing expert.

Then you could use those skills in affiliate marketing later.

There will always be small businesses who needs your services for big bucks.

Affiliate marketing can be a dark hole and turn you into a self serving asshole. 

Human nature doesn’t fair well in that industry.

Watch every YouTube video on local SEO and a Google Maps you can and try not to bite the first hook you see in the water.

Watch 50 videos and you’ll know more than most “affiliate marketers” who are still searching for their gravy train.

Creating Residual(Passive) Income

In affiliate marketing, the primary way you make money is selling a product or service.

You refer people to the company and the company pays you based on the number of referrals or the sales from the people you referred.

For example, if you have a blog with a link to company’s product and that company pays you a commission for any sales that come from the link on your blog, then that’s affiliate marketing.

In a pyramid scheme, the primary way you make money is recruiting others.

You may make a little bit on sales of a product or service, but the real money is recruiting others to sell the product or service and for them to recruit others.

Usually, the pitch goes something like “If you recruit ten people and they each, in turn, recruit ten people, then you could make a lot of money!”

Affiliate marketing is a legitimate business model.

Affiliate marketing is a legitimate business model, not a pyramid scheme.

You can join a company as an affiliate and you will receive a commission (a percentage of the sale) every time a sale is made through your personal affiliate link.

For instance, Amazon works on this principle.There are many like share a sale and so on.

Affiliate is Make No Product but focus on Driving Traffic to their website

My favourite thing about affiliate marketing is that you can get started right away.

It’s not like making software or anything else because the product is already made.

All you have to do now is drive traffic to your affiliate offers.

Not sure where to start with marketing your service-based business?

What you need is a simple marketing strategy and plan that focuses your attention on the right things and gives you the clarity and direction you need to grow your small business. That’s where I can help.

Is affiliate marketing a Pyramid  scheme?

No way, not at all..Although these marketing methods appear to be comparable, there is a 180-degree separation and distinction between them.

The most significant distinction between the two tactics is that,In affiliate marketing, you receive money based on the things you sell for the company, rather than on the individuals you recruit, as in a pyramid scheme.

Affiliate marketing gives you entire control over the product before you begin advertising it, whereas a pyramid scheme or MLM business gives you no control over the product.

Another significant distinction between affiliate marketing, pyramid schemes, and MLM is

Affiliate marketing requires no initial commitment, as opposed to a pyramid scheme or multi-level marketing.

Because you must first invest some money in purchasing the product before you can either sell it to others or recruit others to generate money.

How do you spot a pyramid scheme?

Here are five characteristics to keep an eye out for in order to readily recognize a pyramid scheme in a business or marketing approach.

1. Your income is determined by the number of people you recruit and how many of those people bring new people into the business, extending the chain, rather than the number of independent sales you drive to the company.
2. Before you join the business, your friends or people who recruit you will tell you that you will make millions of dollars passively and be your own boss, and all of that excitement will revolve around the idea of selling the product.
3. You will attend a seminar where you will learn about the magical product that has changed thousands of lives with proofs where people associate their success by buying the product and selling it to others as a lot of emotions are used to convince you, be skeptical about it as this is the normal process of recruiting people in most pyramid schemes.
4. You are compelled to visit places, attend seminars and events, buy the products yourself and acquire a variety of things and resources that you do not require.
   Now that you understand how to spot a pyramid scam in any industry.

It is recommended that you use the four points in this section as a guideline and make your own decisions, and that you avoid joining pyramid schemes and MLMs since you will lose your time and money at the end of the day.

What’s the issue About Pyramid Schemes?

The issue with pyramid schemes is that they are frequently deceptive or fraudulent. 

Consider how many people can fit on top of a pyramid. 

That’s true, the whole pyramid has only one person at the summit, and that person is usually the firm owner himself. 

Sure, you might make a little money, but how much time and effort have you put in to generate any money at all? 

How much help do you get in selling the product? Usually, you are just a pawn used to make money for those at the top. 

Consider the fact that you are usually requested to market an unknown product to your friends and family initially. 

If this thing was so fantastic, why wouldn’t your marketing pitch work with the neighbours, and why don’t they already have whatever it is being marketed if it is so fantastic?

What Makes Affiliate Marketing Unique

Affiliate marketing works because the payment model is the same for everyone or is usually based on a fixed payout amount. 

Typically, an affiliate will be paid a percentage of each sale made, or a percentage of the money generated by ads on their page. 

When it comes to affiliate marketing, multi-level marketing is almost non-existent. This eliminates the appearance of pyramid-like activity. 

An affiliate marketer is similar to an extended sales force, except they have less control over real sales methods.

Why Is Affiliate Marketing Legal? (And Likely The Future Of Marketing)

Affiliate marketing is legal because you are not attempting to encourage others to click on your referral link only for the purpose of earning money. 

You are selling a legitimate product on behalf of the firm that manufactures it. 

You are relying only on your personal experience and endorsement of the product. 

Consider it similar to leaving a review for something you’ve used and appreciated. 

You’d like other people to see this product and use it to make their lives easier, but you’re paid as an incentive to do so more openly. 

It is essentially free exposure for the firm that manufactures the goods, and free advertising lowers the cost of a good in the marketplace.

Final Thoughts

Affiliate marketing is one of the most effective digital marketing tactics used by brands and businesses today to increase revenue. 

Even today, many individuals confuse affiliate marketing with pyramid schemes, and many people feel that affiliate marketing is the new pyramid scheme of this decade.

Affiliate marketing is not a swindle. And it’s not going away anytime soon.   

In fact, as a marketer who has been openly involved in the industry for the past 5  years.

I want to address some of the misconceptions raised in Ruslan Kogan’s recent VentureBeat piece, “The Big Ugly Affiliate Marketing Scam,” as well as those raised in the comments section.

 I want to stand up and educate the masses about how fantastic affiliate marketing is and how it can be done profitably for both publishers and merchants.