For many advertisers, especially those new to affiliate marketing, choosing the right payout model is a little confusing. Obviously there are pros and cons to each model, but there are also very specific characteristics of each model that make them more or less appropriate for different offers. Because HasOffers tracks and manages all of these payout models, my goal for this post is to quickly run through each model, characteristics associated with each, and the most typical networks using these models.
CPA – Cost per action
CPA offers are the truest form of performance marketing. Rather than basing payouts on bulk traffic which may or may not convert, cost per action refers to compensating affiliates/publishers for real sales, leads, and other conversion metrics. This is often the most empowering method for advertisers, as they are able to gain direct results from their advertising budget. The CPA model is a risk-free approach to advertising that usually targets niche specific publishers or clever affiliates. The key is obviously relevance. In order for a CPA offer to be worth while for an affiliate, the affiliate must be able to consistently get conversions. Perhaps the most popular model for CPA offers is pay per lead. This often gives advertisers the numbers they need to create effective campaigns, while empowering affiliates to get more conversions. Performance based payouts vary greatly in presentation. Email, banner, and contextual advertising are all very effective methods of promotion. Companies like Azoogle, Affiliate.com, Commission Junction, and Tatto Media typically use CPA models.
CPC – Cost per click
This describes when an advertiser pays for users who actually click on an advertisement (or offer). The advantage for advertisers is that they are only paying for real visitors to their site/offer. Though there are ways to detect it, CPC offers are subject to “click fraud,” where affiliates cause illegitimate clicks to get higher payouts. Typically CPC campaigns are targeted towards affiliates/publishers with lower levels of traffic so that it can be carefully managed. CPC campaigns are often displayed as text because users are likely to click on relevant text to the page they are viewing. For this reason, contextual links are commonly used to receive targeted traffic. Google Adwords, Microsoft AdCenter, and Yahoo Search Marketing are among the most popular CPC based advertising programs.
CPM – Cost per thousand unique visitors
In CPM, the advertiser pays a fixed fee for 1,000 unique consumer views. This means the user does not have to actually click on the ad, but must only land on a page that displays that advertisement. Because the only measured user action is on the impression, banner advertisements are most effective. CPM is valuable for brand building purposes and is most commonly suited for publishers or affiliates who have extremely high volumes of traffic. Large budget advertisers looking to increase consumer recognition in specific markets can benefit greatly from CPM advertising on the right niche websites. One major draw back to this model is a concept known as “banner blindness.” It is commonly believed consumers may see the ads but completely disregard their message. Value Click, Tribal Fusion, and Platform A (now AOL Advertising) are some of the primary companies in “display advertising” that use CPM pricing models.
Determining which payout models are best for the offers in your network is the most important step in creating successful offers. Unfortunately, many advertisers tend to make this decision independent of the type of offers, the type of traffic they are connected to, and which display methods are most appropriate. Take the time to think this step through, and don’t be afraid to do some real world split testing. User behavior can help you make up your mind.