Recently, I received this email from a ClickZ reader:

Dear Jim,

I recently signed up as an affiliate for [Company X], and I am dying a slow death. As they recommended, I purchased all the programs they suggested and a dozen others.

Now, I'm frustrated and feel ripped-off. Instead of getting sales, other marketers (like me) respond to my posts, trying to sell me their stuff. I'm swimming in a hundred emails from different companies who are also trying to sell me their product, upgrades, credit repair, lower mortgage interest rates, etc. I spent several hundred dollars "signing up" for all the recommended "packages," but now see who's really making the money.

Where did I go wrong? Is there a "right" way to enter the business of affiliate marketing and make some money? Can you recommend affiliate programs where an Internet neophyte like me can make money, instead of paying?

I hope you can give me some guidance. It seems affiliate marketing isn't what I thought it would be. I'm about to give up.

Warmest,
Frustrated Marketer

Right off the bat, I knew what was wrong. Frustrated Marketer is a multilevel marketing (MLM) scheme victim. The most discouraging part of this story is Frustrated Marketer, as many of us did in the beginning, confused affiliate marketing with MLM.

What Is MLM?

The Federal Trade Commission's definition:

Multilevel marketing plans, also known as "network" or "matrix" marketing, are a way of selling goods or services through distributors. These plans typically promise that if you sign up as a distributor, you will receive commissions -- for both your sales of the plan's goods or services and those of other people you recruit to join the distributors. Multilevel marketing plans usually promise to pay commissions through two or more levels of recruits, known as the distributor's "downline."

You know what these are. You've seen them before. Remember the guy you met at the bowling alley who wanted you to put $1,000 in his pyramid scheme with promises you'd make it back in a week? You had to guarantee you'd get two more people to cough up the money, and so on, and so on...

Then there's your pesky neighbor, who keeps inviting you over each weekend to try to persuade you to become her sales "partner" for those expensive candles.

MLM has moved online, spreading from inbox to inbox. It grows more popular every day as enrollees seek fresh recruits with a simple click of the mouse.

Neophyte entrepreneurs such as Frustrated Marketer are sucked in by slick copy and big promises, until they learn it's not what they thought. This can leave them with a sour taste in their mouths -- and often lighter wallets.

MLM Is Not Affiliate Marketing

Affiliate marketing is a referral-based marketing strategy. Merchants pay affiliates commissions for referring business to the merchants' Web sites.

The difference? Merchants do not pay for advertising on affiliate sites until a sale is transacted. (Note: A two-tier affiliate program could be construed as an MLM tactic).

Get Smart

My point isn't to bash MLM in favor of affiliate marketing. It's to educate people such as Frustrated Marketer about the differences. I should point out there are many MLM success stories out there and legitimate businesses using the MLM business ethically and very effectively.

You can find a comprehensive list of affiliate and MLM programs on ClickZ's sister site, Refer-it.com.

Budding affiliate entrepreneurs must learn to distinguish the differences between the programs. Frustrated Marketer found out the hard way: The methods are different and aren't right for everyone.

How Do I Know If It's MLM?

To borrow from Jeff Foxworthy:

• If it claims you'll make income through the continued growth of your "downline"... it's probably MLM.
  
  
• If it requires new members to purchase inventory to remain in the program... it's probably MLM.
  
  
• If it compels each member to recruit additional members to qualify for the program's benefits... it's probably MLM.

The Biggest Similarity

No MLM or affiliate program will get you rich instantly. Both require hard work and commitment to make sales. Choose the one that's right for you and dig in -- but choose wisely.