There’s a lot of confusion about what’s available for people who want to start an at-home business. The internet is full of ideas, opportunities and job offers.
The trouble is, most of them aren’t legitimate, and good people who want to work and make a decent living from home get caught up in schemes instead.
This wastes both time and money. It can be so discouraging that many people just give up on their dreams of working from home. The truth is, running an online business from home is hard work, but it can be fun and profitable, too.
I want to encourage people to follow their dreams, so to help sort through the confusion, I’ve put together this comparison guide for online business concepts. Here are a few terms you should know before we get started:
- Online Business—this refers to any business with a strong online presence as its main source of sales; an umbrella term that covers many business models
- Internet Marketing—this is a broad concept that covers any type of marketing done online
- Multi-Level Marketing/Network Marketing—this is a tiered business model with a structure very similar to a pyramid scheme, with a few tweaks that make it legal (not necessarily ethical, though)
- Affiliate Marketing—with this business model, an affiliate marketer promotes the products created by other companies and gets paid a finder’s fee when their work generates leads or sales for other businesses.
As you can see, some of the marketing areas are very similar and, in some cases, can overlap with others a little bit.
Table of Contents
In contrast to a brick-and-mortar store, which focuses on foot traffic, an online business makes most of its sales through online purchases. It covers a wide variety of business models, including:
- Affiliate marketing, which will be discussed in detail further in this article
- Ecommerce stores selling physical products online
- Amazon affiliates, which allows online business owners to sell products on Amazon.com
- eBay and other online auction sites
- Etsy stores, in which the manufacturer also runs an online business to sell the goods or services which he or she produces
- Selling services such as content writing, image creation and editing, and videography online
As you can see, there are as many ways to sell things online as there are business models. Like brick-and-mortar companies, they depend on traffic to generate leads and sales. The traffic just comes in different ways.
Organic traffic refers to the people who visit someone’s online business web site because it showed up in a Google search. This usually happens when the business owner has posted good information about the topic the visitor was searching for. Consistently writing good content is a great way to generate traffic, which can bring leads and sales.
Paid traffic happens when the online businessperson pays for an advertising campaign, such as search ads, social ads, or banner ads. These can also generate traffic and sales, but there’s an investment involved.
There are many advantages to running an online business. You can build an online business at your own pace, so you’re not overwhelmed by costs in time and money. There’s almost no overhead, no need for employees, and you can work your own schedule.
Internet marketing is a broad concept that includes any type of marketing in the online world. Internet marketing is used for all types of businesses, including traditional brick-and-mortar businesses who want to sell goods and services online as well as in a store.
Many traditional businesses as well as internet-based businesses use internet marketing through Google AdWords, search engine marketing, and social media platforms, including YouTube. Internet marketing, particularly on social media platforms, can be part of an overall marketing strategy for any company looking to grow. Some companies even hire internet marketing specialists or teams to help them increase their online sales.
Social media shares can generate word of mouth marketing, which is one of the best ways to sell a product or service (and, at that point, it’s free). There are plenty of ways both traditional and online businesses can leverage the internet to market both physical and digital services and products. Search engine rankings are among the most powerful way to market your business online because they are free, and once ranked, will often stay in their position for years or months, generating free traffic to your business.
One thing to keep in mind is that not all internet marketing is equal. Some scam situations like to call what they do internet marketing. In some ways they are right, because they’ve figured out how to use the internet to extend the reach of their scams.
This can get confusing, especially for newbies, because many people, including myself, refer to the work we do online as internet marketing. I call myself an internet marketer because I have several web sites and I market products for several different businesses.
Unlike scam systems, the work I do is real, honest and sometimes time consuming and hard—like you would expect of any ethical job. I enjoy my job, but I work long hours and I’ve put in a lot of effort to get where I’m at today.
It pains me to think that some people may mistake what I do for scams that also call what they do internet marketing. I feel even worse when I realize that many people who are new to making money online may be tricked by false promises of riches.
Before we move on, let me say it again, as clearly as I can: Internet marketing is real work; it’s hard, it’s time consuming, and it’s well worth the efforts. Don’t be fooled by promises of easy money. Any business worth doing is going to require some work.
Multi-level marketing, also known as network marketing, is a tier-based business concept that can be misleading on several levels.
The network marketing aspect focuses on ‘networking’ with friends and family, which, for many people, means risking relationships in order to sell something that’s not meaningful. Some people can and do pull this off. Others end up alienating their friends and family, who feel used rather than appreciated when they’re asked to join a multi-level marketing scheme.
Because multi-level marketing and network marketing businesses are set up in tiered levels, they’re very similar to pyramid schemes, which are illegal in many countries.
A traditional pyramid scheme makes money by recruiting members, who have to pay for their membership. All the money floats to the people on the top tiers. People on the lower tiers scramble to sell ‘memberships’ but never really make money.
Of the fee new recruits pay, a percentage goes to the people in tiers above you, or your ‘upline.’ A small percentage goes back to you. When people in your ‘downline’ (the people you’ve recruited) sign up other people in tiers beneath them, you make a percentage of whatever fees those people pay.
The more people in your downline, the more you get paid. The more people that folks in your downline recruit, the more you get paid.
The problem is that this is just exchanging money. In a pyramid scheme, there is no product and no value. The last person in the scheme is unable to make money because there is no one to pay them, and the first people that are on top of the pyramid are millionaires.
Multi-level marketing level marketing gets around the illegal status by selling a product as well as a membership. For this reason, some businesses call themselves ‘direct sales’ because they sell these products directly to consumers rather than using a storefront.
This attempt at rebranding aims to refute some of the negative connotations associated with multilevel marketing. It’s misleading, though, because product sales are not how most network marketing companies make money. For many of them, it’s still about the membership and recruiting new people. The products are a loophole, so MLM companies are not illegal.
There’s a problem with the products, as well. While they might be good quality (many times they are not), they’re really expensive. This is not because they’re better products than what you could find at a local retail store. The products cost more because, to be legal, the multi-level marketing company has to support the payment plan and still have money to continue producing the product. This results in serious price hikes, even if the product is decent.
You may pay $10 for a bar of soap or bag of instant coffee that would normally cost $3 in the store, but because of the way the business is structured, higher price doesn't always mean higher quality.
While there are some legitimate multi-level businesses out there, telling them apart from the unethical ones can be tricky. Do your homework before signing up. The most obvious way to tell an illegitimate MLM from a legitimate one is whether the most profit is found by recruiting new members instead of making sales. If they people making the most money are recruiting new members instead of selling products, that company may be one of the unethical MLM companies.
I'm not a fan of this business model, partly because it isn’t sustainable, but it can be a part of a larger internet based business concept if the products are good. I personally dislike needing to leverage family relationships and friendships to sell products, though some people don't mind, and if you really do like the products, I don't see anything wrong with promoting them on a website.
Affiliate marketing programs are free to join, and there are some real perks for people who are willing to put in time and effort.
One of the best things about affiliate marketing is that marketers have the freedom to promote any product they’d like to. They’re not limited by what one company produces. This means they can integrate their hobbies and passions into their work, promoting products and services they already buy, use, and love.
You can also promote multiple products from competing companies, really exploring the depths of the things you already like. It makes work fun.
Also, because an affiliate marketer's job is only to bring customers to the merchant companies, they don’t have to worry about monitoring or restocking or storing inventory. There’s no shipping hassle or shipping costs. As an affiliate marketer, you don’t have to worry at all about customer service or product development.
Affiliate marketers are paid on a cost-per-action basis. Usually, this means they get a commission for every sale the company makes because of their work promoting the products. Sometimes, you get paid (usually a smaller amount) for a very small action like signing up to an email list, or submitting a telephone number. For example, a home loan company may be collecting phone numbers to call clients, and you can get paid $1 per phone number you send them.
There’s a variety of ways that affiliate marketers can promote a company’s products. Niche blogs are a great way to build up an expert-status, which brings organic traffic that can convert to leads and sales. Paid traffic and social media promotions are also good options and a good affiliate marketer can use e-mail lists to promote products, as well.
While it does require hard work and dedication, the freedom to promote what you already love combined with the variety of ways you can run promotions makes affiliate marketing one of the most solid internet business choices available.
Affiliate Marketing VS MLM Comparison
In this section, I’ll be comparing affiliate marketing with multi-level marketing. Both methods are popular ways to make money online.
Here are some things to consider if you’re trying to decide between an affiliate marketing business and a multi-level marketing business:
- Recruiting—Multi-level marketing relies heavily on recruiting new members to its programs, but there is no recruiting at all in affiliate marketing programs.
- Choices—Affiliate marketers can choose to promote whatever products and services they want to sell. These are often items that are associated with the marketer’s hobbies and passions, and they can be diverse. There’s no limitation to the companies a marketer can promote, even if they’re direct competitors. Meanwhile, multi-level marketing companies require brand loyalty. There’s no freedom to make money on competing products.
- Dependence vs. Self-reliance—an affiliate marketer is only dependent on him or herself and the amount of work he or she is willing to put in. The more work that affiliate marketers do, the better their promotions are and the more money they can make. In contrast, people in multi-level marketing companies are dependent on their downlines for money both from direct sales and from memberships purchased by new recruits.
- Complication levels—compensation packages for multi-level marketing companies are confusing. There are always rules about when you do/don't get paid, who gets paid how much based on what “level” they are, and awkward bonus incentives that encourage people to artificially boost sales numbers by buying their own products. It’s straightforward with affiliate marketing, though. The marketer gets paid by producing results (in most cases, sales) through their promotions.
- Goals and expectations—affiliate marketing programs are realistic in their goals. Marketers know they get out of their business what they put into it, so they’re able to track metrics and project the outcomes of their efforts. In multi-level marketing, sample budgets are often based on best-case scenarios, which are more daydreams than actual plans. You are often incentivised to “get rich” by living a new lifestyle.
- Initial investment—Multi-level marketing programs usually require new recruits to pay a high investment by purchasing memberships and product kits. In some cases, costs can run into the thousands of dollars. Contrast that with a solid affiliate marketing business. It costs absolutely nothing to join an affiliate network program, and even with domain/hosting for your website, your first year operation will be under $500.
As you can see, there are several ways people can go about running a business online. The important thing to remember is to do your research before you open a business. Obviously, I'm biased toward affiliate marketing. It's how I make money, and I love my job. Which business model do you prefer? Leave a comment below!
Make sure you know what you’re getting into and that you’ll enjoy the work you’ll be doing. The more you love your work, the higher your chances are of sticking with it until you’re actually making the money you want to make.