The members make their earnings based on the sales they have reached in that particular product or service. It also includes the sales of the person that they have recruited to join the business. Most of the time the individual who has recruited more members and provided a good sales output on the product compensate higher because of the effort to transact in two different fields.

There are “pyramid schemes” or Ponzi schemes, which are considered illegal. Most people associate multi level marketing to these kind of schemes because they also recognize themselves to be a legitimate networking business. Because of the bad image brought up by these schemes, many prefer to use their names for their businesses as “home based business franchising” or “affiliate marketing”.

Commissions are earned in the process of selling a particular product or service in a legitimate network marketing. There can be no earnings in what they call as a “sign up fee” or for just recruiting yourself alone. This kind of marketing is always criticized because of the questionable recruitment process where they get their revenue and profit. They get their sales from members and new members, which are considered the end users of the product and as the distributors.

These criticisms led to the major changes in the multi level marketing in the early 1980s when many companies have started to allow their members to concentrate only on marketing and not on distributing or stocking the product. Most multi level marketing firms nowadays perform as fulfillment firms by taking the tasks of shipping the product, paying the commissions and taking orders from their clients.

Many people who are victims of the illegal schemes in multi level marketing are required to buy expensive products, but most of these schemes do not last long because most of the sales are not easily resold.

From the merchant’s point of view, it is still worth paying a commission in the form of a refund to the buyer, if it results in a new sale. At first glance, this appears to be a system which benefits everybody. Merchants get extra sales, affiliate networks get extra commissions, and consumers get a better deal. The person who loses out is the affiliate who might have already referred the customer.

If a review site funded by affiliate revenue advertises by PPC to get traffic, then they would not be out of line to expect that if any of their visitors went on to make a purchase based on the reviews, they should receive a commission. However, if at the point the visitor was about to make a purchase, they went through a cashback site; this would overwrite the most recent cookie set. This means that the affiliate has gone to all of the work of getting the customer to the point of sale, for the cashback site to take the credit. There is evidence to suggest that people just use cashback sites at the point of purchase. The EPC for some merchants is up to 5 times higher for incentivized traffic, suggesting that they only go through the cashback site when they are intending to make a purchase. Is it right that affiliates are being denied commissions because of cashback being a more attractive incentive to purchase?