Monetization Models for Affiliates (Intermediate)
WM recently posted an article entitled How to Make Money on Your Website, which was intended to give those new to affiliate marketing a useful overview of the different payout structures available to them through merchants and networks. These monetization models include cost per acquisition (CPA), cost per lead (CPL), cost per click (CPC) and cost per impression (commonly known as CPM).
Novices just starting out in the world of Internet marketing must know the basic differences between each option, but more savvy affiliates will tell you that one size does not fit all. The reason for now exploring these payment structures in more depth is to illustrate the fact that the most successful Web marketers are the ones who – rather than pick and choose – can find the optimal balance between them all.
CPA – Cost Per Acquisition
As the name suggests, the affiliate earns revenue only from actual sales – or acquisitions – made through their website. In most cases, this can require a significant amount of time and effort on the part of affiliates, whether through building a following, persistent communications, creative promotional offers or all of the above. This is the most common payment structure, and also the one that involves the most work and produces the greatest rewards. Choose these campaigns wisely, and then devote the proper amount of available resources to make your investments worthwhile.
CPL – Cost Per Lead
If the CPA model requires a hard sell from affiliates (and it does), the CPL model can be considered a considerably softer sell. The affiliate earns revenue simply by providing leads to the merchant, which can include any number of interactions but does not have to involve an actual sale. Under this structure, the affiliate’s main goal is to get visitors to fill out a registration form, download a whitepaper or join an email list, which is a significantly smaller undertaking than trying to get them to purchase actual product. Again, the most successful affiliates are vigilant in their choices, allotting the most time and energy to the highest-hanging fruit.
CPC – Cost Per Click
Cost-per-click revenues may be the lowest-hanging fruit on the Web marketing tree, but they also demand the least amount of effort on the part of affiliates and generally produce the lowest returns. Whereas CPA models require acquisitions, CPL models require moderate engagement, CPC campaigns require only that visitors click on an ad or a text link for the affiliate partner to receive a percentage of the merchant’s bid price. The downside, of course, is that the commissions on each click can be quite low, and marketers have to be somewhat discretionary about the CPC agreement into which they enter. These campaigns can provide a nice supplement in combination with the other models – and with much less effort – but, again, choose them judiciously based on your overall affiliate strategy.
CPM – Cost Per Thousand Impressions
This payment structure is far better suited for highly trafficked websites and makes little sense for (nor is it available to) those not pulling in a large volume of visitors. But once a site starts to generate a high number of pageviews, CPM campaigns can be an outstanding method for increasing that site’s affiliate revenues without the heavy lifting involved in CPA or even CPL models. This model is also commonly and effectively used for testing new formats that can be implemented in the targeting and segmenting of these larger audiences, once a site reaches that coveted level.
Once marketers have grasped the general concepts behind each payment structure, they can begin to tailor their affiliate campaigns accordingly. A CPA campaign, for instance, may be built around creating a community of followers -- or vice versa. CPL campaigns, on the other hand, may be more aggressive in their immediate calls to action, but less so in terms of building relationships with visitors. The ultimate goal, of course, is to find the right balance and to know which models call for which strategies.