Affiliate
Marketing
Methods of Compensation
In
today’s affiliate programmes, it has been found that
around eighty percent use revenue sharing or cost per sale (CPS) as the
preferred compensation method, whereas nineteen percent use cost per
action
(CPA), and the remaining one percent of programs use other methods,
such as
cost per click (CPC) or cost per mille (CPM).
Cost-per-sale(CPS).
This involves the advertiser paying the
publisher an agreed percentage of the order (sale) value as a result of
a
customer being referred by the publisher by means of different
advertising
methods. This form of compensation has the alternative name of revenue
sharing.
Cost-per-action(CPA).
In this model, the advertiser pays the
publisher a commission for every visitor, referred by the publisher to
the
advertiser’s website, who subsequently performs a specified task. This
can be
represented in many ways, such as filling out a form, or creating an
account,
or signing up for a newsletter. This particular form of compensation is
very
popular with online services.
Cost-per-click(CPC).
This method involves the advertiser
paying the publisher a pre-determined commission for each time a
visitor clicks
on the advertiser's ad. In terms of the compensation, it is unimportant
how
often the ad is displayed. In the end, commission is only paid when the
ad is
actually clicked.
Cost
per mille (CPM). This method is commonly used in online
advertising and refers to the cost incurred in order to show an
advertisement
to one thousand viewers (CPM). It is used to evaluate the comparative
cost of
an advertising campaign or an ad message. Instead of being an actual cost, CPM
determines the approximate cost per
1000 views of the ad.
Consider the following
example.
Total cost for running
the ad is $20,000.
The total audience is 3,000,000 people.
CPM is calculated as CPM = $20,000/(3,000,000/1000) = $6.67
Such
methods may also be considered to be performance based
compensation models since payment is only made if a visitor clicks on
the
appropriate part of the site or, alternatively, completes a purchase.
In this
way, both advertisers and publishers share the risk of a visitor who
does not
convert into a sale.
Consider other methods
of compensation:
Although less than one
percent of affiliate marketing
programs currently use cost per click and cost per mille, these forms
of
compensation are used extensively in display advertising and paid
search.
In respect of
cost per mille, it is only necessary for the publisher to make the
advertising
available on his website and display it to his visitors in order to
receive a
commission.
On the other
hand, pay per click requires an additional step in order to generate
the payment
for the publisher. The visitor must not only have seen the
advertisement, but
also to have clicked on the advertisement in order to be able to visit
the
advertiser's website.
Cost
per click was the more common method when affiliate
marketing was in its infancy, but is now little used due to click fraud
issues
(when a person imitates a legitimate user of a web browser by clicking
on an ad
so as to generate a charge per click without having actual interest in
the
target of the ad's link).
Affiliate
– How To Succeed
Peter Radford writes
Articles
with Websites on a wide range of subjects. Affiliate
Articles cover Background, History, Methods of Compensation, Websites,
Various
Issues.
His Websitecontains over 140 Affiliate
Articles.
View hisWebsite
at: affiliate-how-to-succeed.com
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