Is Affiliate Marketing a Pyramid Scheme?

The new marketplace created as a result of the constantly growing global usage of the internet has created a wide range of new opportunities for excited entrepreneurs and influencers, such as myself.

What was only a dream before is now possible for those looking to reach a larger audience. Now, rather than leaving the comfort and security of our home, we can make money online in a much more self-expressive and constructive form.

Affiliate marketing is one of the best and most well-known ways to create passive income quickly. However, the ease with which this success can be achieved and the convenient relationship built between vendors and influencers has led many to question the validity or legality of this process, with some even comparing affiliate marketing to a pyramid scheme.

However, when we sit down and look at the two tactics, you’ll be able to see that they are both so widely different that this comparison could only be based on a lack of information and confusion. Here is just some of the information we’ve been able to find about the two so that you can clearly see that affiliate marketing is anything but a pyramid scheme.

What Is a Pyramid Scheme? 

When you see the word scheme, you generally know you’re dealing with a pretty terrible situation, and a pyramid scheme is no exception. When these tactics first started coming out, many people fell into a trap, thinking that it would be a great way to make money online. However, they were often left in a worse financial situation than they were when they started. 

Here’s how pyramid schemes work. First, a company would reach out to an individual, such as myself, and offer me the opportunity to earn an income by selling their product for them. I would, essentially, earn a percentage of every product I was able to sell.

The name “pyramid” comes because all these smaller influencers are selling the product with profit running back up the line to the top, the one business owner making the vast amount of profit. Now, while this may sound great initially, things can get a little more complicated down the line. 

Once I’ve agreed to this business deal, I’ll have to purchase a set amount of products with my own money. I’ll then be given the recommendation that I should first sell the products to my friends and family to start gaining a positive reputation in my area.

Will I be given any help in terms of marketing or guidance? Absolutely not. These schemes are inherently fraudulent, using unsuspecting influencers and taking advantage of their willingness to try new opportunities for success. 

What Is Affiliate Marketing? 

Affiliate Marketing is, on the other hand, quite literally the opposite. With this tactic, businesses reach out to influencers and ask if they would be willing to promote their products on their own site in exchange for a portion of the profits made from their viewers purchasing the product. Often, businesses will actually send their products to us directly ahead of time so that we’re able to see for ourselves how it works if we weren’t already aware. 

Once the agreement is made, we’ll be sent a link which we can post on our websites, blogs, social media, email blasts, or any other way we communicate with our audience, which will also be used on the business’s end to keep track of the number of purchases made by our viewers. This means that we can be sure that the company is sending us what we deserve in exchange for our promotion. 

Additionally, because the business itself does not directly employ us in any way, there is no conflict with us promoting this or any other product as time goes on, allowing us to take advantage of a wide network of opportunities as our audience and influence grow over time. 

Legal and Illegal Tactics 

If you want to know the number one difference between affiliate marketing and pyramid schemes, you need to consider that one is very legal, while the other is very much not. At least here in the US and several other countries worldwide, pyramid schemes have been declared illegal by the government, and businesses absolutely cannot hire individuals under this form of a payment plan. However, just because it’s illegal doesn’t mean it doesn’t happen. 

Every year we hear about more and more new influencers who were tricked into one of these schemes, losing tons in the long run. These business owners generally have to keep finding new promoters to take the initial money they invest and throw it towards old promoters until they eventually disappear completely or get caught by authorities.

Either way, don’t try and hold your breath until you get your money. At the end of the day, there is a wide range of other opportunities to make money online out there, so make sure you’re working with a business that you can trust.

Signs of a Scheme 

If you’re starting as an influencer and are being approached with opportunities from businesses you’re unsure of, knowing what signs you should look out for and what to avoid can make a world of difference. 

Is the business in question telling you that you’ll need to invest a large amount of money to buy the products outright so that you can sell them to individuals closest to you? Are you noticing that their plan will require you to purchase other products, such as books and pamphlets, to stay a part of the business? These are both serious red flags that a scam company has approached you.

Whenever you have to invest any of your own money into making profits for another business, you’re getting yourself involved in something you shouldn’t be. Remember that affiliate marketing tactics work by promotion rather than sales, so make sure you avoid these kinds of companies.

Affiliate Marketing Is Legit  

When you get involved in an affiliate marketing opportunity, the situation will be completely different. You will be able to promote this product based on your own personal experience with it, standing behind the product, and what it’s able to do for you and your viewers.

Think of it this way. When you have a great night out at a local restaurant, the first thing you want to do is jump onto a dating site and leave your own testimonial so that people will see how wonderful the place is.

Affiliate marketing is just like that. Essentially, these companies will reach out to you and ask that you promote whatever they have to sell, as long as you’re comfortable doing so, and they’ll reimburse you for every customer they gain as a result of your promotion. Only you’re getting paid for it.

With online entrepreneurs and bloggers gaining more and more influence every year, it’s really no surprise that businesses are changing their marketing strategies to include this direct form of promotion. In fact, you could really say that this marketing tactic is truly the future for product promotion around the world.  

At the end of the day, technology and global internet usage have completely changed the way businesses work and how they communicate with their customers. Having a quality virtual presence is an absolute must if you’re looking to get anywhere in today’s online marketplace.

Businesses have learned that taking advantage of influencers and promoting products is a great way to reach the perfect target audience quickly and efficiently while simultaneously benefitting the influencers themselves.

However, the newness and the lack of public information have made many people question whether or not this marketing tactic is actually a pyramid scheme., remember that pyramid schemes are put in place by business owners looking to make a fast buck and are willing to leave their partners in the dust when making a profit. I hope that in this post, I’ve been able to clear a lot of that confusion up and have given you a firm grasp of the differences between the two. 

These schemers will probably seem extremely convincing and even pushy when it comes to bringing you on board, but remember that any time you have to put forward your own money to get involved, you’re setting yourself up for disaster. 

On the other hand, affiliate marketing is a completely legal and exciting way for influencers to make a passive income. This mutually beneficial relationship between companies and influencers is undoubtedly the future of marketing, and getting yourself on the boat before it sails can be a game-changer.

Keep this information in mind to go forward and find marketing opportunities that make sense for your personal brand and fit within your audience today.