Affiliate Marketing Versus Network Marketing (MLM): Income
By Evelyn Lim
Both affiliate marketing and network marketing pay people for referring a
product or service. What then is the difference between affiliate marketing and
The difference is best explained in terms of the way compensation is structured
to pay for performance. Because of the many hybrid forms of compensation
payments available now on the internet, to a newbie scouting for business
opportunities, it is easy to get confused over the many terms and definitions
used. In evaluating compensation plans, it is essential to understand the subtle
difference between the two models. Ultimately, you want to understand…which
model yields more income?
What is affiliate marketing? Affiliate marketing is usually done online. In its
simplest form, affiliate marketers are compensated on a one time transaction
only. Unlike products offered in a MLM business, affiliate products are often
ones that a customer would only need to purchase one time. Thus, the more the
affiliate marketer sell, the more they make. This is quite akin to direct sales
albeit made via the internet.
Affiliate marketing has a compensation plan based on performance measures. For
instance, if the affiliate marketer is successful in the form of sales, clicks,
registrations, etc, he/she gets rewarded. The desired action as a means of
compensation is already pre-agreed upon by the affiliate merchant and him/her.
In a short space of time, the affiliate marketing model has also evolved to a 2
level (or in some cases, up to 5 levels) compensation plan. In the popular
2-tier version, for instance, you (as an affiliate of a particular e-book
merchant) will earn commission when you sell a book to person A and if person A
signs up to be an affiliate and manages to sell to person A1, you get
compensated too, in addition to person A.
Let’s now go on to talk about what network marketing is. In the network
marketing model, the compensation plan works in a similar fashion, except that
compensation by the sponsoring company can be paid up to several, several or
unlimited levels. The number of levels and restrictions in terms of payout is
very much dependent on the arrangement offered. As arrangements can vary from
one company to the next, this makes comparisons of the various compensation
plans available out there difficult. So be sure to read all the fine print!
At any level, a network marketer has the potential to earn a direct referral fee
for directly recommending someone and a leverage fee when one of his/her
“downlines” is successful for referring friends to the same network. In the
popular binary plan adopted by many network marketing companies, each person in
the network has two “legs” or “downlines”. If more people get referred to the
network, they automatically go below the “legs”.
Ongoing customer use is what creates the real residual income in network
marketing. The MLM business can generate earnings for a very long time even
after the initial years of hard work and investment. With a solid network,
residual income is assured at each renewal period of a “downline”. If the
product or service involved in is one that has to be reordered at each renewal
period, income should just keep coming in like clock work.
How does the difference in affiliate marketing and network marketing translate
into in terms of building your customer relationships and your earnings power?
In the network marketing model, to ensure that your “downlines” renew at each
period, you must ensure that you build up a good relationship with them. It is
essentially a people-build-people and a leader-build-leader business. The
ability to generate huge sums of money is increased exponentially when the
network grows. The potential to make huge sums of money is thus greater here if
you can employ the efforts of others to help grow the business vis-à-vis the
affiliate marketing model. In affiliate marketing, your earnings ability is
limited by your own direct sales plus an additional of 1, 2 or up to 5 levels of
Having described the above, it would seem that to maximise your income, it is
best to join online network marketing programs as opposed to affiliate programs.
Nope...I don't think that's really the case either.
Affiliate marketing is best described as an entry to online network marketing.
Affiliate products are easier to sell, likely to involve one rather than an
array of products and therefore, less expensive. For instance, an e-book is
likely to have an associated affiliate program while access to a membership site
of digital products is more likely to pay for recurrent renewals of membership.
In conclusion, there is always no harm in joining different programs whether
affiliate or network marketing ones. Just be sure that you understand how you
are paid and channel your efforts accordingly. Afterall, your goal is to build
multiple sources of income. You have a choice to represent what or which
combination of products/programs work best for yourself.
About the Author: Evelyn Lim is an online business entrepreneur. She publishes a
free weekly newsletter "Mapping You to Success" for aspiring e-biz owners. The
aim of her publication is to equip readers with the skills to acquire multiple
sources of online income. To subscribe, please visit