I have found that internet sub-industries often have skewed perceptions of each other. For the longest time domainers were viewed as squatters, now publishers are viewed as made-for-adsenser’s (made up that word), and so on. These myths actually benefit the “victims” by decreasing competition until everyone else starts figuring how rich the players are getting.

Had read a single article about domaining that didn’t portray the industry in a negative way as “squatting” I’d probably have a very valuable portfolio today.

Here is another myth — affiliate marketing is actually multi level marketing. Its not. Multi level marketing certainly can involve the use of affiliate marketing. So what is the difference?

Multi level marketing is a business model that relies heavily on bringing in new “partners.” Often the “partner” has to pay money to start selling the MLM’s products. The partners who actually get rich do so not by selling the MLM’s product but by bringing in lots of new partners.

Here is an example: My name is Bob and my friend Jack started a MLM company “Dutch Tulips.” To join I have to pay $500 on inventory. For every package of Tulips I sell I make $5, for every new member I bring in I make $250. Do the math, what am I going to spend more time doing?

Now lets take a look at internet affiliate marketing. In online affiliate marketing you don’t have to pay a joining fee to participate (if you do, run the other way and don’t look back.) You are paid a flat fee or percentage for a sale or lead.

Like MLM you can make money off of referring new members. There is a difference, lets take a look at the math. A typical referal percentage is 2% of the new member’s commissions. That means the new member has to make over $12500 just for you to make $250. Or, lets put it another way. In order for you to make a six-figure income solely off of referrals, the total commissions of those referrals will have to exceed $5 million. In MLM you could make 6 figures without any of your new referrals earning a penny.

Affiliate marketing serves a very legitimate purpose in the world of online advertising: saturation. As a lone company it is very difficult to cover all of the internet content channels. Since affiliate publishers are incentivised by performance they can take extra efforts to ensure an offer is seen, visited, and completed — something a traditional ad buy can not do.

The main business models of MLM and affiliate marketing can be merged, warped, and changed. Your ability to identify one from the other does not come through recognizing words but rather recognizing patterns. Before you participate in any new business opportunity first think about how the business model really works despite what others may tell you.