Affiliate Network – Four Main Structures
I am sitting here thinking back to the early days of the internet, and in particular, online marketing. Do you remember when you first learned of what an affiliate network was, and what it was for? Me neither. However, what I now know, is that an affiliate network is a website which acts as a facilitator for advertisers who have products or services which need to be marketed, and internet marketers known as “affiliates”, who are eager to market the products and services of others in exchange for a commission. The set up is what is referred to as affiliate marketing.
The great think about affiliate marketing is that it sets expectations very clearly for all parties involved. Essentially, it really sets the stage for the performance under what is in all honesty a contractual agreement. The affiliate is aware that the advertiser is willing to offer (X) is they perform (Y). Hence, an affiliate who owns no product or service can generate a substantial revenue for promoting offers which belong to others. Moreover, advertisers who need exposure to their offers, but do not have the budget to spend on an advertising campaign which proves to be fruitless can pay affiliates only when they perform. However, how affiliates are paid will be determined by the structure which is utilized.
Below, we will briefly review the four most frequently utilized methods of compensation by affiliate programs:
1. Cost Per Sale or CPS: Cost per sale is a very straight forward method of affiliate marketing. There are rarely any misunderstanding which are not self-inflicted with this means of compensation. Essentially, affiliates are provided with a tracking link which is unique to them. If the product or service is being promoted via an affiliate network, this link will be provided by the network. Otherwise, it will be provided by the advertiser themselves. Each time a sales is made through the affiliate’s link, the affiliate receives credit for a conversion, and a predetermined commission is allocated to that affiliate’s account. The term “Cost Per Sale” refers to the expense which is incurred by the advertiser for the sale. Thus, if a product is $30 total, and the affiliate is compensated $18 for each sale, the CPS would equal $18. However, one thing that you should notice is that the advertiser only pays an affiliate for sales which are made, meaning that the advertiser too is making money. This is a great structure for advertisers who do not have the bandwidth sink money into advertising which might not produce results.
2. Cost Per Action or CPA: Cost Per Action is a little bit more flexible in that the actual “action” which is compensated is determined by the advertiser. Essentially, all three of the other forms of affiliate compensation can fit within this definition. For example, if the “action” to be completed is a sale, then this would fit the definition of “Cost Per Sale”. Thus, CPA gives the advertiser and affiliate the flexibility to determine and agree upon what constitutes an action.
3. Cost Per Mille or CPM: This is actually used quite frequently by affiliate networks. Basically, for every 1000 visitors sent to an advertiser’s website by an affiliate, the affiliate is compensated in a predetermined amount. Many larger advertisers utilize this method.
4. Pay Per Click or PPC: Usually when you hear of PPC, someone is referring to the programs offered by the search engines. However, did you know that there are also PPC programs offered by an affiliate network? How it works is that an affiliate network will host websites and blogs which belong to a myriad of niche markets. The advertiser then posts their ads on websites and blogs which fit their niche market, and pay a fee each time a visitor clicks on their link.
One thing that I must tell you about becoming a member of an affiliate network, and engaging in affiliate marketing is that you need to treat this as a business, not a hobby. Your business is that of a marketing firm, and advertisers are willing to pay you as much as you are willing to earn. Focus on building a customer base by using opt-in email methods. This will present you with the capacity to market to the same customers again and again.
Prior to committing to anAffiliate Network, you should determine the compensation structure. The truth is that some Affiliate Programs are better equipped to operate under one structure as opposed to the other. This article covered the main four. Drop in and check out our network at SOSComplete.com
