The concept of affiliate marketing is an online-based marketing arrangement where a online business compensates affiliate marketers for each time a visitor or customer purchases a product due to the marketing efforts of the affiliate.
While search engines, e-mail, and website syndication are some of the methods most favored by online retailers, affiliate marketing continues to play an important role in e-retailers’ marketing strategies.
Revenue Sharing
From our own research we have been able to establish that approximately eighty percent of affiliate programs that are available to you today use what is called revenue sharing or Cost Per Sale (CPS) as a remuneration method, around nineteen percent use Cost Per Action (CPA), and the remaining affiliate programs use other methods such as Cost Per Click (CPC) or Cost Per Mille (CPM).
The use of CPC and CPM in traditional affiliate marketing today comprises less than 1% of the compensation methods used. CPM requires that publisher only load the advertising on his website and show it to his visitors in order to get paid commission, while CPC compensation requires not only that web site visitors be made aware of the ad, but they also click on it and visit the advertisers website.
CPC used to be more common in the early days of affiliate marketing, but diminished over time due to click fraud issues, similar to those which still plague search engines today.
Click Fraud
Click fraud can only happen when a person or such things as automated scripts, or computer program pretends to be a legitimate user of a web internet browser then clicking on a paid advertisement for the purpose of generating a commission per click without having any real interest in the target market of the ad’s link.
Unlike CPC and CPM, CPA and CPS require that referred visitors do more than visiting the advertisers website in order for the affiliate to get paid a commission. The visitor must be converted into a sale first by the online business. It is in the best interest for the affiliate to send the best targeted traffic to the advertiser as possible to increase the chance of a conversion or sale. In this scenario the risk or loss is shared equally between the affiliate and advertiser.
Under the CPS model, the advertiser pays the publisher a percentage of the order amount (sale) that was created by a customer who was referred by the publisher. This type of payment structure is known as revenue sharing. With CPA, advertisers pay publishers a commission for every visitor referred by the publisher to the advertiser’s web site and performs a desired action, such as filling out a form, creating an account or signing up for a newsletter.
This type of affiliate marketing payment model is very fashionable with online services such as internet service providers, cell phone providers, banks, credit cards, and various subscription services.
Within the CPA model there are also subcategories. Among these are Pay Per Call and Pay Per Install (PPI). Pay Per Call involves the use of ad listings in search engines and directories that allows publishers to charge local advertisers on a per-call basis for each lead (call) they generate. Advertisers pay publishers a commission for phone calls received from potential prospects that respond to specific publisher ads.
If you want to use what is called PPI, advertisers pay publishers a commission for every install by a user of usually free applications bundled with adware (software packages which automatically play, display, or download advertisements to a computer after the software is installed on it or while the application is being used) applications. In most cases the end user is prompted first (meaning asked permission) if they really want to download and install the software program.
As an affiliate you also need to be aware that if you are going to be using PPI in your affiliate marketing campaigns you could run the risk of being branded a scammer as in the the past what are called “botnets” have used this form of marketing to generate money for their unscrupulous operators.
You can also find a complete range of additional information on compensation methods here.
Thanks, great post.
One of the best ways for me personally, is not to worry about any affiliate networks. Just have your own products, and promote them, as well as have affiliates to promote. Works many times better than other because you can keep a relatively low price (which is still higher than the affiliate commission of other people`s products), and sell more.
One of the best ways for people to understand marketing without having to outlay to much money is through affiliate marketing. And yes I do agree once they have got an understanding of marketing they should actually consider launching their own products as well.
So you make a very good point…