Is Affiliate Marketing a Pyramid Scheme?

Let’s Answer

Affiliate marketing has become the go-to method for internet marketers to make money by selling other people’s products.

However, there is some debate over whether or not affiliate marketing is a pyramid scheme.

In this article, we will take a deep dive into:

• Is affiliate marketing a pyramid scheme?
• Affiliate marketing vs. pyramid schemes
• Affiliate marketing vs. Multi level marketing
• Is affiliate marketing legit?
• Tips for avoiding a pyramid scheme
• Plus much much more…

When it comes to online marketing people mistake Affiliate marketing for multi level marketing schemes, pyramids, network marketing, mlm programs and a bunch of other unrelated methods.

Reading this guide will help you stay safe online while explaining key differences before you start to promote products

Let’s get into it. 

Affiliate marketing vs pyramid scheme

What Is A Pyramid Scheme?

A pyramid scheme is a type of fraud that involves promising participants payouts for recruiting other members. These schemes often collapse when there are insufficient recruits to keep paying the older members. 

Some signs of a pyramid scheme include promises of high returns, requiring participants to recruit more members, and pressure to buy products. Pyramid schemes are more closely related to multi-level marketing (MLM)… Rather than digital marketing.

FACT: All pyramid schemes collapse when they can no longer fool people or find new recruits willing to invest.

This usually happens when the scheme has reached its natural limit, no more potential recruits are left, or the promoters running the project get caught by law enforcement.

Of the more famous pyramid schemes, Bernard Madoff (Bernie Madoff) defrauded thousands of investors to the sum of over $65 Billion over 17 years… When Madoff was caught, he was sentenced to 150 years in prison. (source 1, 2)

Affiliate Marketing Explained

Affiliate marketing is a form of marketing that involves the promotion of pre-existing products (often from established businesses and companies)

You might like to read out: How does affiliate marketing work beginners guide

These companies are called merchants.

Merchants recruit affiliates as their personal sales team.

Affiliates get paid for every actual product they sell.

It’s a win-win situation for both parties.

Affiliate marketing is the practice of marketing products or services from existing big or small businesses.

Affiliate marketing differs from advertising, as the end goal is to drive sales rather than just get people to visit the merchant’s site.

As an affiliate, you earn a commission by referring customers through your links. The referral affiliate link will take them to a product page on the merchant’s site.

If the customer buys a product through that affiliate link, you get a commission for that sale.

What’s the connection?

Affiliate marketing and pyramid schemes have a few things in common. Both involve recruiting people to sell a product, and both offer commissions for doing so.

However, that’s where the similarities end.

Pyramid schemes are illegal because they require participants to pay to join and make money only by recruiting others, not by selling a product.

On the other hand, affiliate marketing is legal and involves promoting products or services in exchange for commissions on sales.

They are very different business models.

Is Affiliate Marketing Legit?

Affiliate marketing is performance-based marketing in which a business rewards one or more affiliates for each visitor or customer brought by the affiliates marketing efforts.

So, is affiliate marketing illegal? No. It is 100% legal. Many people are sceptical of affiliate marketing because they don’t understand how it works.

If you take the time to learn and find a reputable program to join then you should be fine.

How To Find Legitimate Affiliate Program

There are a few things to keep in mind when you’re looking for a legitimate affiliate program. 

A reputable company: 

Look for a well-known and respected parent company that has been in business for a while. You should avoid affiliate marketing scams, fake product and programs that have startup costs.

High commissions and bonuses: 

Look for programs that offer high commissions and bonuses for making more sales.

A solid track record: 

Ensure the affiliate programs have been around for a while and has a good track record of paying commissions before you start promoting.

Terms and conditions: 

Read the terms and conditions carefully before joining any program to ensure you understand what you agree to.

For an up-to-date list of the highest paying affiliate niches, see here.

What Is The future of affiliate marketing

As the internet continues to grow, so does the affiliate marketing industry. This type of marketing is becoming more popular because it is an easy way for companies to reach a wider audience.

It allows companies to start promoting products & services via individual affiliates websites and blog post.

Affiliate marketing business advantages:

Reach a larger audience

Additional income

Ability to track results

Sell based on skills and interests

Low start-up costs

Despite these advantages, some challenges come with an affiliate marketing program. For example, it can be challenging to find quality affiliates. Merchants will give up complete control and there is the risk that an affiliate will not attract any real customers or make more money.

Additionally, some industries are more challenging to market than others to attract potential customers.

Affiliate Marketing vs Multi level marketing

Many people confuse affiliate marketing with MLM programs. MLM is short term “multi-level marketing”. This myth is preventing some individuals from starting what would otherwise be a profitable side business.

The definition of MLM Businesses is: 

The practice of selling goods or services on behalf of a company in a system whereby participants receive commission on their sales as well as the sales of any participants they recruit.

While it is a proven way of making money. MLM involves far more personal interaction and direct communications.

Some of the pitfalls include an overpriced product (hard to sell) and hefty start up costs. Since an MLM businesses main goal is network recruitment and getting as many mlm participants – Many new members don’t make enough to recoup that upfront expenditure.

Unlike MLMs, Affiliate marketing is the safer method to begin making money online.

We go over some further advantages and disadvantages of affiliate marketing here.

Why Pyramid Schemes Are Illegal Activities

Pyramid schemes are illegal because they focus on recruiting rather than selling products. This means that participants only earn money by recruiting more people into the scheme, which is not sustainable and eventually leads to people losing money.

Pyramid systems are often disguised as legitimate businesses, but there are a few key things to look out for that can help you spot them.

For example, if participants are promised high returns with little or no risk or are told they can make money by recruiting others into the scheme, it’s likely a pyramid scheme.

Pyramid schemes are illegal in many countries because they are based on fraud. The people who run them promise potential recruits that they will make a lot of money, but in reality, most people lose money. (1, 2)

Pyramid schemes are also illegal because they often involve other crimes, such as money laundering and tax evasion. Many people have been arrested and jailed for their involvement in pyramid schemes.

Why you should avoid a high ticket affiliate marketing pyramid scheme

The majority of people who get involved in marketing a pyramid scheme usually end up losing. 

Pyramid affiliate marketing scams are unsustainable and inevitably collapse.

Eventually, there aren’t enough new recruits to pay those at the bottom of the pyramid.

So why would anyone get involved in a high ticket affiliate marketing pyramid scheme? 

There’s no easy answer, but often it’s because they’re desperate to make money quickly and willing to take risks. False promises of easy money may also lure them in.

Tips for avoiding a pyramid scheme

Be wary of any opportunity that seems too good to be true. 

If someone is promising you easy money with little effort on your part, it’s likely a scam.

Do your research before getting involved with any business opportunity. 

Ensure you understand how the company makes money and how you will be compensated for your efforts. Be sure to ask questions and get clarification if anything seems unclear.

Finally, trust your gut. It probably is if something feels off or too good to be true. 

Don’t let yourself be pressured into anything; don’t be afraid to walk away from a bad situation.

Key Differences

Regarding earning money online both can be profitable.

The main difference between the two;

• Pyramid schemes are fraud. Once there are no more new members, the whole structure crashes, and almost everyone loses.
• Affiliate marketing is a sustainable and legitimate business model.

Affiliate marketing

The structure of affiliate marketing: To make money as an affiliate marketer, you need to promote someone else’s product or service.

You can promote them from your own website, blog, social networks, and other online media.

You receive a commission for every product sold that you’ve advertised.

Free to sign up: Most affiliate programs, have zero start-up costs and you don’t have to pay a subscription fee.

Legal: Most affiliate programs are legal in the US and other countries.

The company that runs the program is responsible for collecting and paying out commissions to its affiliate partners or affiliate networks like Amazon Associates, and ClickBank.

In some cases, you can earn a higher commission by sending customers through specific affiliate links or ads.

Pyramid Scheme

The structure: Recruit via network marketing. There’s no limit to how many people you can recruit; everyone is encouraged to recruit as many members as possible.

Get compensated for recruiting: A pyramid business model is where people make money by recruiting others into the scheme.

Recruited members pay fees to the people recruited, and so on up the pyramid.

Buy-in required: Often you pay a fee to join, or you can be rejected.

That’s the way it works in theory. In practice, some schemes do charge an entry fee, but others don’t.

You may also have to buy expensive starter kits.

Illegal: Yep, pyramid schemes are illegal, don’t do it.

Conclusion

Finally, we can say that affiliate marketing is not a pyramid scheme.

It’s a legitimate way to make money online and can be quite profitable if done correctly. Affiliate programs are the best way to earn passive income. However, it takes hard work and dedication to succeed like any business.

There’s no need to be afraid of affiliate marketing – just be sure to do your research, have a solid plan before you start, and choose a reputable program to join.