Affiliate Marketing – How It Pays (Part 2)

We introduced what Affiliate Marketing means in Part One of this blog series and as promised, here we are with the second part of the Affiliate Marketing blog series!

Read on to know more about the Types of Models the Affiliate Programs consist of.

Types of Models

1. CPA – Cost per Action

Here, the merchant site pays an affiliate only when a customer referred by an affiliate makes a purchase. The affiliate sends them a customer who purchases something. Some merchant Web sites, like Amazon.com, pay the affiliate a percentage of the sale and others pay a fixed amount per sale. BigRock follows the CPA model for all of its affiliates. – mention here that this is the most practiced model

2. CPL – Cost per Lead 

Companies with these programs that adopt this model pay their affiliates based on the number of visitors they refer who sign up as leads. This simply means the visitor fills out some requested information at the merchant site, which the merchant site may use as a sales lead or sell to another company as a sales lead.

Note – +95% of the affiliate program follow either the CPA or CPL models. The ones below are not standard affiliate models.

3. CPC – Cost per Click

In this model, the merchant site pays the affiliate based on the number of visitors who click on the link to come to the merchant’s site. They don’t have to buy anything, and it doesn’t matter to the affiliate what a visitor does once he gets to the merchant’s site.

4. CPM – Cost per 1000 Impressions

This refers to the cost of internet marketing campaigns where advertisers pay for every 1000 times their ad is displayed, usually in the form of a banner ad on a website, but can also refer to advertisements in Email advertising.

An impression is the display of an ad to a user while viewing a web page. A single web page may contain multiple ads. In such cases, a single page view would result in one impression for each ad displayed. In order to count the impressions served as accurately as possible and prevent fraud, an ad server may exclude certain non-qualifying activities such as page-refreshes or other user actions from counting as impressions. When advertising rates are described as CPM or CPI, this is the amount paid for every thousand qualifying impressions served.

Pros & Cons of the Affiliate Models

Merchants favor affiliate marketing because in most cases it uses a “pay for performance” model, meaning that the merchant does not incur a marketing expense unless results are accrued.

Companies which do not have reliable tracking systems to monitor actions have difficulties managing cost per acquisition affiliate programs. Several affiliate networks specialized in cost per action advertising can help overcome these challenges.

The Advertiser only pays the Affiliate for the leads generated by the ads. CPL (Cost-per-lead)  is based on the consumer completing a form (such as subscribing to an email newsletter). CPL has a lower financial risk for the Advertiser, compared with CPM (Cost per Thousand impressions) and CPC (Cost Per Click) where the Advertiser still pays even though there may be no tangible results from their advertising dollars.

CPC (Cost-per-Click) pricing models, commonly found on search engines, compel advertisers to pay for clicks from people that might never sign up on the advertiser landing page.

In a CPM (Cost-per-Thousand) pricing model, advertisers are forced to pay for wasted impressions.

Stay tuned for the third and final part of this series 🙂

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6 Responses to Affiliate Marketing – How It Pays (Part 2)

  1. Bhushan August 12, 2012 at 8:53 PM #

    Thanks for the post,explained in detail.

  2. pradeep kumar July 31, 2014 at 10:57 AM #

    Now I am clear with the terminology that involved in online ads. Thanks for the information.

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