Affiliate Marketing - Methods of Compensation

Affiliate marketing is an Internet-based marketing method whereby a business rewards

one of more affiliates for each visitor or customer brought about by the affiliates marketing efforts. While search engines, e-mail and website syndication are some of the methods most favored by online retailers, affiliate marketing continues to play and important role in e-retailers marketing strategies. Eighty percent of affiliate programs today use revenue sharing or Cost Per Sale (CPS) as a compensation method, nineteen percent use Cost Per Action (CPA), and the remaining programs use other methods such as Cost per Click (CPC) or Cost Per Mile (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 occurs when a person, automated script, or computer program imitates a legitimate user of a web browser clicking on an ad for the purpose of generating a charge per click without having actual interest in the target of the ads link. Unlike CPC and CPM,CAPA and CPS require that referred visitors do more that visiting the advertisers website in order for the affiliate to get paid a commission. The advertiser must convert that visitor first. 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. The risk and loss is shared between the affiliate and the 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 form of compensation is also referred to as revenue sharing. With CPA, advertisers pay publishers a commission for every visitor referred by the publisher to the advertisers web site and performs a desire action, such as filling out a form, creation an account or signing up for a newsletter. This compensation model is very popular with online services from 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. With PPI, Advertisers pay publishers a commission for every install by a user of usually free application, bundled with adware (software packages which automatically play, display or download ads to a computer after the software is installed on it or while the application is being used) applications. Users are prompted first if they really want to download and install this software.

Affiliate Marketing - Methods of Compensation

By: Lou Sorell

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