Is Wealthy Affiliate An MLM
In the UK Pyramid schemes are illegal. MLM or Multi-Level Marketing is legal. MLM can work with good products. Often they offer high gains in a short time. True or False? I interviewed an expert in MLM. Good and bad MLMs Is Affiliate Marketing an MLM? Are you joining an MLM? Get the reality and truth here.
Pyramid Schemes
They say a picture is worth a 1000 words.
Imagine you join a pyramid scheme. This is where recruiting a “downline” is more important than the sale of a product.
Level 1: You
Level 2: You recruit 3 people (3 people)
Level 3: They recruit 3 people each (9 people)
Level 4: They recruit 3 people each (27 people)
Level 5: They recruit 3 people each (81 people)
Level 6 They recruit 3 people each (243 people)
This is a total of 364 people at the moment. These pyramid schemes are never this regular but we must use some kind of model to demonstrate how they work.
Each person pays $100 to join. That means an income to the company of 100 x 364 =$36,400.
Some of this money is paid out in commission to each level of recruiter.
The company keeps $20 out of the $100 for each recruited person.
Here is what happens to the rest ($80): It is distributed out to the person who recruited you, the person who recruited him/her etc. down the line.
What Can I Earn in a Pyramid Scheme?
Level 2: You earn $20 for each person you recruit. (3 x $20 = $60)
Level 3: You earn $20 for each person those 3 recruit. (9 x $20 = $180.)
Etc until the $80 (left over after the company takes Its $20 from the $100,) for each person is used up.
Diagram
Here is where you will have to trust me that you end up with $4,020. Not a bad return for $100 and if you repeat this each month, i.e. recruit 3 people, you will generate an income of $4,020 per month, each month. MMM
What is Wrong With This Model of a Pyramid Scheme?
Well, first of all, extend the calculations on a little further in the recruitment.
If everybody has to recruit 3 people each month to make this money, then after 12 months, your downline will be 531,441 people.
IF YOU STOP AFTER THE FIRST MONTH.
If you continue to recruit 3 people each month, for 1 year, and they all do the same: You will have a total downline of 791,160 people in your business.
Now, how many people live in your town? How many of them might join?
One last bit of maths: Assume you continue recruiting 3 people a month and they all do the same etc.etc. then after a total of 15 months, you will have a downline of over 21 million people.
You will have earned a miserable $4000 a month (15 x 4,000 = $60,000) for doing this and the company will have made 21,000,000 x $20 = $420 million.
I hope you can see why schemes built on recruitment only work for the people who set them up and run them.
Hey! Want a real crazy bit of number crunching? Try this: If each of your downline recruits 3 new people each month, your downline after 2 years will be 94,143 million or over a quarter of the population of the USA or 1 and a half times the population of the UK, (each person will have to join one and a half times.)
The maths is simple: start with 1 and multiply by 3, multiply that by 3 etc. until you have done it 24 times. (24 months.)
What happens, in reality, is that people run out of friends and family they can recruit and then quit after a few months.
Are Pyramid Schemes Illegal
In the U.S.A. and the U.K., Yes.
How Do The Pyramid Schemes Exist
By pretending to sell goods which are radically overpriced and unsaleable and so do not attract buyers.
What is MLM
Did you note that there is not a mention of a product in Pyramid schemes?
This is because the product, if offered, is only there to avoid legal issues and attempt to hide the fact that the company is running a pyramid scheme.
With Multi-Level Marketing, there is always a product or service offered.
In most MLM companies the product is the main source of income and recruitment is secondary, in theory.
An MLM company should work as a normal retail system with people selling the products directly to the customers with no actual premises. No shop or office means costs are drastically reduced.
Many of the MLM companies rely on word of mouth, parties and exhibitions to advertise their products. This saves another chunk of money. The people recruited into the business are often self-employed so the company saves taxes, administration, insurance etc. etc,
The theory is that this reduces the cost of the product so much that there are generous commissions to be had when selling the products.
- No Advertising
- No Tax
- No Premises
- No Employees
- No Insurance
- No Health Plans
- No Transport for employees.
- No Pension contributions.
- Simple Distribution costs
This should add up to a colossal saving in product costs and therefore more commission to the people who sell the products.
MLM the Reality
But somehow it almost never does.
There are some MLM companies which have survived quite a long time.
- Amway
- Avon
- Herballife
- FM
- Forever Living
- Kleeneze
- Nu Skin
- Tupperware
These are a few of the well-known MLMs that have survived at least 5 years.
A lot of MLMs fail after a few years. I do not know why. Perhaps it is the difficulty making a reasonable level of income without working 24 hours a day.
MLMs look good on paper and some of them have superb products, so the model has a flaw and it is maybe that, at the beginning, a new recruit sells to their family and friends and then runs out of steam finding new customers.
Tupperware used to sell through parties and it worked really well.
Kleeneze sells from catalogues distributed locally then a return trip to collect the catalogues and orders. The cost of keeping up with the new catalogues, which you have to buy, and returns of unwanted orders, soon eats into already thin profits.
How to Make Money with MLMs
The only way is to recruit other people and receive an over-riding commission on their sales.
Recruitment is time-consuming and expensive. It is also hard work and quite specialises as a skill. You are then dependant on your colleague’s motivation and hard work as well.
You have to have your own direct sales as well.
Definitely not a “passive” income here.
How to Make Money from Wealthy Affiliate
First of all, Wealthy Affiliate is neither a pyramid nor an MLM company.
Wealthy Affiliate is a training company that runs a series of courses to teach you how to build an internet based business, from the bottom up.
You can start with
- very little knowledge,
- an internet connection and
- a computer.
The skills you will acquire are useful in any business, especially an internet-based one.
It is run on a membership basis and people who follow all the training and put the skills into practice will be successful.
With a community of thousands to help and support you, as well as from regular updates, you can solve almost any problem you come up with.
It really is a “one-stop shop,” dealing with websites, hosting, marketing and all the things you need to build an online business.
Unlike MLMs and Pyramid schemes, there is a genuine free membership for you to “try before you buy.” The advantages are:
- The cost is a fraction of most joining fees for MLMs and
- You can leave at any time.
- There are no products you must stock or buy.
- No Scams
- No Adverts
- No expensive surprise upsells
- No recruitment
- Some software you can buy when you are earning money to increase your profits.
- A genuine free trial where you can test out the courses and build a website of your own.
What is Affiliate Marketing
If you would like to sell things from a store which carries over 40 million products and services, without stocking one of them, you can sell them on commission.
This is called Affiliate Marketing. You become an affiliate to the company and market their products for them. They stock, deliver and collect the money from the customer and send you the commission.
You have to do the marketing. (All in the courses.)
So there is no profit from recruiting in Wealthy Affiliate, no downline or upline. There are real products and they are chosen by you, the business owner. The products or services can be anything you chose and Wealthy Affiliate makes no profit in what you sell.
Wealthy Affiliate is not a Pyramid scheme, not an MLM, it is a real business.
Who Offers Affiliate Relationships
Let us start with Amazon. They are just one. Click Banks and many, many more.
Wealthy Affiliate shows you how to do this, step by step.
You can study, learn and become your own boss.
This can be a sustainable business that will develop and grow as fast as you want it to.
A simple comparison shows the advantages of a genuine business over Schemes that involve recruitment.
As an Affiliate marketer, the sky really is the limit for what you can earn.
Warning. It is hard work and takes time. The earnings depend on how much work you can put in and how much you already know.
Assuming you are starting with very little, wealthy affiliate is one way to break into the online business. It is the future as more and more people buy online.
Thank you very much for your time and for reading my article. Whatever you decide, I wish you good luck and hope you do well.
You are welcome to leave a comment on your own experiences. Your honest opinion can help other people make the right decision.
I have been a part of these programs before and to my knowledge these programs are not worth it. There is so much work that is involved when it comes to MLM and the sad part is that your success is not even sure. I got tired also of attending meetings when it comes to programs like MLM. But with wealthy affiliate sky is the limit.Wealthy Affiliate is an online business that will help anyone to achieve their goals. I would encourage anyone to become a part of this community. Wealthy Affiliate makes such a big difference in the lives of so many people. Wealthy Affiliate is the way to go.
Thanks Norman.
I agree that if you follow the training and do the work, you will eventually succeed with Wealthy Affiliate.
At least it depends on you and not other people you have recruited. You are your own boss and do not have to attend meetings.
Thanks and good luck.
Thanks for explaining the difference between an MLM and a Pyramid scheme and why Wealthy Affiliate is different.
I belong to an MLM and you’re right. It can be tricky to recruit people! Although, I’ve seen very, very successful people in the business I’m in. I think it’s like with anything. You have to work it and treat it like a business. Do you or have you ever worked with an MLM company?
Also, what’s the best thing about Wealthy Affiliate? What is the #1 reason why it’s worth the cost of a membership?
Thanks for your comment Christina.
First of all; MLMs, yes I have been involved with several MLMs and all except one were more hard work than they were worth. the people at the top of the company were often the only ones getting rich.
There was one company with a unique product and I got in quite early. I ordered 5 of the product and had sold them all from brochures. I never received the product because the factory burnt down. It was a basic product with renewables reordered every few months so could have developed into a good income without recruiting.
That was some years ago and I have just noticed a similar product being promoted by a large mainstream company.
To express Wealthy Affiliate with one positive sentence is close to impossible.
I do have one thing to say though:
Join / do the training / it works. That means that you can start a brand new business with almost no capital or overheads and make an unlimited income.
I really like the way you explained it here. I know some people that also think it’s MLM and as they’re too lazy to listen to my explanation.
I also like the way you explained the difference between MLM and pyramide schemes.
Next time somebody asks me about it I’ll just send them to your website haha
great post!
Thanks Roger, I appreciate that.
Yes, many people are confused about what Wealthy Affiliate is really about.
I was impressed by one bit of Kyle’s Training that talked about how to decide what to write about.
He said find a problem people want solved and then help them by writing an article or revue which helped people resolve their problem.
MLMs and Pyramid schemes are only based on recruiting more people even when the products are worthless.
Wealthy Affiliate works best when we help each other and help our readers.
That is what I was trying to do; clear up the understanding of Wealthy Affiliate and show how it is very far removed from an MLM or a pyramid scheme.
Thanks again for your comment and support.
.
Of course wealthy affiliate is not MLM or Pyramid Scheme. It is purely educational service which will tell how to earn money online in a legit way. It has its own affiliate scheme under which one can earn commission by referring others. But it depends on that person.
I’m a premium member of WA but I am not focusing on their affiliate program. Instead, I’m focusing myself on learning things from them and earning through Amazon affiliate marketing.
After all, one great article on WA.
Thanks a lot.
Thanks Himbru.
You are right, Wealthy Affiliate has its own affiliate program, but you can promote anything you like. Amazon has over 4 million products so there is enough to choose from there.
The skills you learn in Wealthy Affiliate are applicable everywhere on the internet and in ordinary business. For example, the ability to use a website to promote a company and get that website on page 1 of Google is really worth its weight in gold.
I am so glad I found your article! I am a member of Wealthy Affiliate for over 2 year now, and I mutual friend of me and my husband always gives me a hard time by saying that WA is a pyramid scheme, and I shouldn’t be touching it. I have never thought this about WA as it has been nothing but helpful to me for my online career, and I cannot wait to share this article with him to show him in a visual way how WA is NOT A PYRAMID SCHEME!
So thank you!
Thanks Darcy.
Wealthy Affiliate members can choose to promote Wealthy Affiliate.
They can also choose to promote any of millions of Amazon products, ClickBank or eBay products or run a website that does not sell anything at all.
You cannot buy in to the program to increase your commission.
There is no hierarchy of membership. Everybody is equal. I cannot see how this can be conceived as Multi Level Marketing.
A Pyramid Scheme generally has no real product and relies on recruiting new members. This is absolutely not true of Wealthy Affiliate.
I hope you are enjoying your membership and learning lots of useful business skills.
Very informative post! I wasn’t very aware of MLMs or how they operate! I have however been asked about Wealthy Affiliate and whether it’s a pyramid. The obvious answer by definition is no!
I used and still use Wealthy Affiliate and love the format and community ! I have learned a lot and now have 2 websites that are generating revenue and growing !
Mike
Thanks Mike.
there are some models of business which are of their time and become less useful as the world changes.
The concept of MLMs is now less important because of the internet.
People can build a business, like you have done, through the medium of the internet, from almost nothing.
It is an important part of our economy, the ability to foster and sustain start-up businesses.
MLMs appeared to be an easy way to make money, but needed a lot of effort.
Affiliate Marketing is a way people can make money, but they require a lot of effort.
I admire people who make the attempt to start their own business and would encourage anyone who seriously wants to become independent to have a go.
Wealthy Affiliate has all the basic requirements.
1. The courses to train in all aspects of the business.
2. The support
3. The encouragement from the owners and other community members.
4. A total solution, everything you need is there in the Premium Membership.
5. A very fair price for all the necessary parts.
Hi Viyee,
Thanks for that so elaborate post on MLMs and pyramid schemes.
.
When I first heard of MLMs, I was excited that I could be able to get so much so soon- but I was a student and could not raise the qualifying amount to be counted as an earning downline. I ended up losing out. When I finally got to understand how these schemes can make one lose money and time, and relationships, I made a promise to myself never to join them again. They always will cause pain to someone or a family in the end, and I wouldn’t want that. Wealthy Affiliate, however, is all so different. And that’s why I support you when you recommend it.
.
Boniface from SmileAfresh
Thanks Boniface.
When people are desperate they will grasp opportunities that they would not do if they were not desperate.
I am sorry you lost so much and I hope that you have found a way here in Wealthy affiliate to make some money as well as enjoy life.
A few MLMs do work in certain situations. People who work in large organisations where they are well known, can set themselves up selling Amways products or jewellery and perfumes at Christmas. People they work with will come to them, at Christmas, and buy off them. This happens less now since the internet is just as convenient.
I think the days of MLMs is really numbered.
Pyramid schemes are simply scams. They rely totally on recruitment and so are unsustainable in the long run.
Good luck with your WA project.
In one of the popular blogs out there for MLM, I noticed Wealthy Affiliate is included in their Top 25 MLMs in the world today. Curious, I checked by reading the blog post. The author then emphasized that even if members of WA don’t consider WA as a MLM, the manner we’re doing business here is like those of MLM. Do you agree with him? Please check multipstreams dot org to see what I am saying.
Thanks Gomer.
In my opinion, Multi-Level Marketing operates in the same way as traditional retail.
Manufacturer / Wholesaler / Retailer / Customer. This is a simple four-level marketing structure.
In MLM you can Save money by leaving out some of the levels. These are replaced by individual members of the MLM.
I cannot see how Wealthy Affiliate fits into this model.
There is no manufacturer, wholesaler and in fact no product.
All members of Wealthy Affiliate can choose their own product to sell.
Wealthy Affiliate gets no commission on any sales.
Ergo, no MLM.
My husband had involved a few MLM, starting from Amway a long time ago, then ANC, to Zurvita recently. Throughout his journey, I learn about MLM quite extensively and met many successful people. But the recruiting is pretty intense. Some people “buy” the position in order to get bonus (to make up for) or promotion.
This style of recruiting (or getting the downline repots) really turns me off as they focus more on “build your legs” instead of “providing a great product”.
I am still unclear the difference between pyramid scheme and MLM. What does your government differenciate?
Thanks Kyoko.
The difference between a pyramid scheme and an MLM is that a pyramid scheme has no product. An MLM is based on product sales.
The difficulty comes once a member has sold products to their friends and family, recruiting becomes easier than finding new customers.
In some countries, MLMs work better than others.
Generally, only the people at the top of MLMs make money.
In the UK MLMs are legal. Pyramid schemes are illegal.
Hello there! I came from another country before I transferred to United States. I want to earn money but I don’t know which one should I do. I tried pyramid scheme before in my old country but it didn’t get me into good. I read your article about mlm, pyramid schemes and wealthy affiliate. I think I found the perfect article that compare the ways I could earn money. I will surely try to do wealthy affiliate instead of other ways. Thank you for sharing this information.
Thanks John.
I have not found a quick way to make money, legally, on the net.
I do know that by following the Wealthy Affiliate courses and doing what they teach you, you will be able to earn money from your own business.
I am glad you found it useful and wish you good luck in your future business.
Have you joined Wealthy Affiliate yet?
I would love to hear your feedback and how you are finding it?
Thanks for your article. I am an Affiliate Marketer and have come across quite a few MLM products.
I have looked at some of them in depth and some of them seem to be akin to a Pyramid scheme.
I often wondered if it was possible to join these schemes at the top without signing up under a recruiter.
Do you know if people can join these schemes directly?
Thanks
Hi Jaqueline.
That is a really good question.
What happens is that often the top MLM or networking people take their “downline” to a new MLM in exchange for a place at the top.
This way they boost the membership very rapidly and it gets the new MLM turning over money quickly.
I do not recommend it unless you have your own downline of thousands of people.
Pyramid schemes are illegal and are based on having no genuine product.
MLMs are based on product sales. If you have a product you want to market through MLM, then you could start one yourself. It would not be cheap though.
In my experience, building an online business the Wealthy Affiliate way, gets better results and is sustainable.
Good Luck, whatever you do.
Hi,
Thanks for your reply.
That’s interesting how they work this.
Yes. I’ve been on the receiving end of these Pyramid schemes and MLM’s.
As an Affiliate Marketer and a member of Wealthy Affiliate, I agree with you.
This method is much more sustainable.
Jacqueline
Thanks Jacqueline. sorry for the delay in replying.
Maybe one of the problems these days is that too many people want quick solutions and in business, there are none.
Sustainability is not high on people’s agenda.
It is certainly high on mine and in a world of increasing uncertainty, I do believe more people will see the benefits of creating and building their own business for the long term,.