In this article, you\u2019ll learn how to tell the difference between legitimate affiliate marketing programs and illegal pyramid schemes. I\u2019ll also share how to identify and avoid pyramid schemes so you don\u2019t accidentally get caught up in one. <\/p>\n\n\n\n
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Affiliate Marketing: What Is It and How Does It Work?<\/h2>\n\n\n\n
Affiliate marketing is a performance-based marketing arrangement. The affiliate marketer promotes a product or service and earns commissions on any resulting sales.<\/p>\n\n\n\n
Here\u2019s a brief walkthrough of the process:<\/p>\n\n\n\n
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- Sign up<\/strong> for an affiliate program<\/a>.<\/li>\n\n\n\n
- Get an affiliate link<\/a><\/strong> for the different products or services in the program. <\/li>\n\n\n\n
- Create content<\/strong> to promote the affiliate link to your audience.<\/li>\n\n\n\n
- Interested users visit the product page<\/strong> using your link.<\/li>\n\n\n\n
- If they buy the product<\/strong>, the system recognizes that the sale came from your link, and you earn a commission<\/strong>.<\/li>\n<\/ol>\n\n\n\n
![\"affiliate](\"https:\/\/www.authorityhacker.com\/wp-content\/uploads\/2022\/02\/what-is-affiliate-marketing.png\")
<\/figure>\n\n\n\nBenefits of Affiliate Marketing<\/h3>\n\n\n\n
Affiliate marketing mutually benefits both businesses and affiliate marketers. <\/p>\n\n\n\n
Here\u2019s how businesses benefit from having an affiliate marketing program:<\/p>\n\n\n\n
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- Profit-guaranteed marketing<\/strong>: Businesses only pay commission when a product is sold.<\/li>\n\n\n\n
- Extended reach<\/strong>: Every affiliate is a potential source of new business.<\/li>\n<\/ul>\n\n\n\n
And how do affiliates benefit? <\/p>\n\n\n\n
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- Low barrier to entry<\/strong>: It costs virtually nothing to start an online business in affiliate marketing. All you really need is a computer to build an affiliate marketing website<\/a>. <\/li>\n\n\n\n
- Extremely scalable<\/strong>: Join multiple affiliate programs and build a diverse revenue stream.<\/li>\n\n\n\n
- Build a passive income<\/strong>: With time and the right strategies, affiliate marketing can replace your income. In fact, our affiliate marketing statistics<\/a> page shows that the average affiliate marketer makes over $8,000 per month<\/li>\n<\/ul>\n\n\n\n
Pyramid Schemes: What Are They and How Do They Work?<\/h2>\n\n\n\n
A pyramid scheme is a type of fraudulent investment strategy where the profits are based primarily on recruiting new members, rather than legitimate business activities or product sales.<\/p>\n\n\n\n
Here\u2019s how it works:<\/p>\n\n\n\n
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- Initial recruitment: <\/strong>The person at the top recruits others to join the scheme and invest money.<\/li>\n\n\n\n
- New members pay to join: <\/strong>These new members then recruit others to join, and their recruits pay fees or “investments” to the higher-ups in the pyramid.<\/li>\n\n\n\n
- Redistribution of funds:<\/strong> The money paid by the new members funnels up the pyramid to the higher-ranking members.<\/li>\n\n\n\n
- Continued expansion required: <\/strong>For everyone to make money, there must always be new recruits. Once recruitment slows down, the pyramid collapses, and nearly everyone loses their investment. Only those at the top may turn a profit.
<\/li>\n<\/ol>\n\n\n\n![\"pyramid](\"https:\/\/www.authorityhacker.com\/wp-content\/uploads\/2023\/09\/pyramid-scheme-visualization.png\")
<\/figure>\n\n\n\nHere are some notorious pyramid schemes:<\/p>\n\n\n\n
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- United Sciences of America (USA) pyramid scheme<\/a> had $8.6 million in debt before shutting down in 1987. <\/li>\n\n\n\n
- WakeUpNow pyramid scheme<\/a> failed to provide profit to 95% of its distributors and ceased operations in 2015.<\/li>\n\n\n\n
- Vemma pyramid scheme<\/a> faced $238 million fines before shutting down in 2015. <\/li>\n<\/ul>\n\n\n\n
And here are some defining characteristics of a pyramid scheme:<\/p>\n\n\n\n
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- Promises you\u2019ll earn easy money<\/strong>.<\/li>\n\n\n\n
- Demands a hefty signup fee<\/strong>.<\/li>\n\n\n\n
- Lacks a genuine product or service<\/strong> that provides value.<\/li>\n\n\n\n
- You\u2019ll primarily earn money by recruiting<\/strong> other members.<\/li>\n<\/ul>\n\n\n\n
Apart from the obvious risk of losing your investments, joining a pyramid scheme can also damage relationships as you coax people to join with you. Worst-case scenarios even include potential legal actions from angry recruits. <\/p>\n\n\n\n
Is Affiliate Marketing a Pyramid Scheme?<\/h2>\n\n\n\n
Affiliate marketing is not a pyramid scheme.<\/strong> It’s a legitimate business model where you join a free program and earn commissions by promoting products or services with actual value. <\/p>\n\n\n\n
In contrast, pyramid schemes charge a signup fee, and earning money requires recruiting more members. <\/p>\n\n\n\n
Affiliate marketers provide a valuable service in creating useful resources and identifying high-quality products to buy. Without this industry, many of your favorite websites, social media accounts, and YouTube channels likely wouldn\u2019t exist. <\/p>\n\n\n\n
In fact, its status as a legitimate business model is what makes affiliate marketing a great way to make money online. The affiliate marketing earnings potential<\/a> exists because you\u2019re building an honest and useful business \u2013 it\u2019s not based on a rickety pyramid structure that could come crashing down at any moment. <\/p>\n\n\n\n
However, the affiliate marketing world isn\u2019t free of malicious actors. There are affiliate marketing scams<\/a> to watch out for, and you\u2019ll need to discern the good programs from the bad to stay safe. That\u2019s what we\u2019ll be looking at in the next section. <\/p>\n\n\n\n
How to Tell the Differences Between Affiliate Marketing and Pyramid Schemes? <\/h2>\n\n\n\n
Here\u2019s a simple table to capture how affiliate marketing differs from pyramid schemes.<\/p>\n\n\n\n
- Demands a hefty signup fee<\/strong>.<\/li>\n\n\n\n
- WakeUpNow pyramid scheme<\/a> failed to provide profit to 95% of its distributors and ceased operations in 2015.<\/li>\n\n\n\n
- New members pay to join: <\/strong>These new members then recruit others to join, and their recruits pay fees or “investments” to the higher-ups in the pyramid.<\/li>\n\n\n\n
- Extremely scalable<\/strong>: Join multiple affiliate programs and build a diverse revenue stream.<\/li>\n\n\n\n
- Extended reach<\/strong>: Every affiliate is a potential source of new business.<\/li>\n<\/ul>\n\n\n\n
- Get an affiliate link<\/a><\/strong> for the different products or services in the program. <\/li>\n\n\n\n