With the rising popularity of affiliate marketing, people are afraid it’s a pyramid scheme.
And you can’t blame them. Pyramid schemes are illegal, and people lose a lot of money they never get back.
By money, we are talking billions. In just one year, Americans lost over $11 billion to pyramid schemes, hacks, and exploits (in 2022).
If you wonder whether affiliate marketing take email marketing service is legit or if it’s a scam, this article is for you. We will answer the anticipated question, “Is affiliate marketing a pyramid scheme?”
We will also break down the most popular myths about affiliate business so you know what’s true and false in this growing industry.
Is affiliate marketing a pyramid scheme?
In order to prove it, we analyzed the key differences between how affiliate marketing works and how the pyramid scheme functions.
Here are the most important differences between the two:
1. Product-based revenue
In affiliate marketing, the primary focus is on selling actual products or services. Affiliates earn commissions based on the sales they generate or specific actions like leads or sign-ups. For example, in Amazon Associates, affiliates earn a percentage of sales from products they promote on their blogs or social media.
In a pyramid scheme, revenue is primarily earned through recruiting new members rather than selling products or services. Members pay a fee to join and make money by recruiting others who also pay the joining fee.
2. Commission structure
In affiliate marketing, commissions are based on genuine transactions (eg, a customer purchasing a product). The financial reward depends on the affiliate’s ability to drive sales or leads.
Think of a beauty blogger who earns commissions from Sephora’s affiliate program by promoting beauty products and earning a keeping your contact form short percentage from each sale.
On the other hand, in a pyramid scheme, earnings depend on the recruitment of new participants. The system collapses when recruiting stops because there’s minimal focus on selling real products.
3. Transparency
Legitimate affiliate programs are transparent about their terms of service, commission structures, and payout schedules. They also comply with laws and regulations, including those related to advertising and consumer protection.
As an example, affiliate networks like ShareASale provide clear guidelines on how affiliates can earn and get paid, with explicit rules for disclosures and marketing practices.
Pyramid schemes often operate under a facade, with unclear terms, hidden fees, and deceptive practices. They may promise high returns with little effort, and operate illegally.
4. Different goals & gains
Affiliate Marketing is sustainable over time as it relies on real sales of products or services. As long as consumers continue to purchase, the affiliates and merchants benefit mutually.
For example, tech reviewers promoting the buying house b latest gadgets on YouTube continue to earn from affiliate links as long as people buy those gadgets.
Pyramid scheme is essentially unsustainable because it relies heavily on constant recruitment. When recruiting new members slows down or stops, the entire scheme collapses as there is no real product revenue to support it.