Affiliate marketing involves receiving compensation for directing an internet user to a partner site where he will take an action: purchasing from an e-commerce site, signing up for a newsletter, subscribing to a service, etc.
The principle is simple: an affiliate site displays advertisements or links to an advertiser's site, and when a user clicks on one of these elements and takes an action on the site in question, the advertiser pays a commission to the affiliate. It's a win-win deal for everyone.
Different revenue models in affiliate marketing: overview
There are different revenue models in affiliate marketing: cost per action (CPA), cost per lead (CPL), cost per click (CPC), op-tin (SOI or DOI), or cost per installation (CPI). Each of these models entitles the affiliate to different types of compensation, with their own validation terms.
Cost per action (CPA): The affiliate receives a commission when the user takes the desired action, usually a sale on an e-commerce site. The remuneration often consists of a variable commission, i.e. a percentage of the sale made.. In some cases, for subscription products, the advertiser may decide to offer a commission for each month of the subscription.
In the case of high-tech products, commission percentages are generally low, ranging from 1% to 5%.
For pet products, the percentages can be higher, ranging from 8% to 12%.
In the case of digital products, some advertisers offer commissions of up to 75%
The cost per lead (CPL) is a model where the affiliate receives a fixed commission when the user provides their information, such as by filling ina form. For example, commissions for opening a bank account can range from a few tens of euros to over 50$ for investor leads, or even exceed 100$ for B2B leads.
Cost per click (CPC) is a model where the affiliate receives a fixed commission, usually a few cents, every time an internet user clicks on a link that directs to the advertiser's site. This model is very common among price comparison sites, but less frequent in affiliate marketing due to the risk for the advertiser of paying before being able to evaluate the quality of the traffic. It is more suited to pay-per-click (PPC) campaigns and requires intense monitoring by the advertiser who, after buying click samples, must analyze them to determine whether to reinvest. Depending on the product categories, the cost per click can be very variable, ranging from 0.05$ to 0.30$ for the most profitable categories.
Discover AffilizzThe opt-ins (SOI or single opt-in and DOI or double opt-in) and cost per installation (CPI) are two models where the commission is fixed:
In the case of SOI, the user signs up by leaving their email address or by filling in a form.
For DOI, the advertiser wants to verify that the subscriber is who they claim to be: after signing up, the person must validate the process, usually by clicking on a link received by email. This model is widespread in subscriptions to newsletters or for online games (browser games).
Cost per installation (CPI) is a model derived from the opt-in. To validate the commissions, the user must not only install a software or app, but also launch it (double opt-in mechanism).
On average, for subscriptions, the models can earn you between 0.10$ and 5$ for double opt-in.
💡 It is important to take into account geographical areas for opt-in and CPI, as remunerations vary depending on the countries, but the known borders are not applied as they are on the internet. For example, for France, overseas registrations are often less well paid, and some countries are simply not remunerated.
There are also hybrid models that advertisers offer to motivate affiliates. For example, for an online role-playing game, an advertiser can offer both opt-in and cost per action (CPA). So you will receive a fixed amount when a player registers, as well as when the player buys paid game content.
Finally, keep in mind that the remuneration models are chosen by advertisers and typically correspond to a business sector:
cost per action (CPA) and cost per click (CPC) in e-commerce
cost per lead (CPL) in banks, insurance, and B2B
opt-in for newsletters and online games
cost per installation (CPI) for installing software and applications
In most cases, the models are not negotiable with advertisers, unless you are an important affiliate (see our article on the commercial strategy to implement when starting in affiliate marketing).
Why are there different compensation models?
The compensation models are designed based on the progression of the prospect in the advertiser's conversion funnel:
When the advertiser compensates on a cost per click (CPC) basis, the visitor is at the beginning of his conversion funnel, you are paid to open a page on the advertiser's site.
At cost per lead (CPL), the user takes an action on the advertiser's site. However, nothing has been done yet, as the advertiser must follow up with the prospect to make the sale.
With opt-in, there is also a visitor action to sign up (whether it be a simple opt-in or double opt-in), but the visitor is already partially acquired by the advertiser.
With cost per action (CPA), finally, the visitor has bought, the advertiser has nothing more to do, he has made a sale thanks to you and potentially acquired a new customer. All that remains is to retain the customer.
💡 Most advertisers who work with cost per click (CPC), cost per lead (CPL), cost per installation (CPI), and opt-in exercise increased traffic surveillance. Unlike cost per action (CPA), they have already paid even though they have not yet received money from the visitor. They are paying you against a promise of customers and if the quality of the traffic is not there, the advertisers will not hesitate to stop the partnership.
Advantages & disadvantages of each revenue model
The different revenue models of affiliate marketing each have their advantages and disadvantages.
Pros | Cons | |
|---|---|---|
At CPA
| - You don't have to generate a lot of traffic to earn commissions - With volume, cookie placement generates additional sales | - You need to generate quality traffic to convert - You are dependent on the advertiser's conversion tunnel |
At CPL
| - Higher fixed commission than CPA - You don't need to generate much traffic to earn commissions | - You need to generate quality traffic to convert - If the person converts, you have already earned a commission |
At CPC
| - You don't need to convert to earn commissions
| - You need to generate a lot of traffic - The quality of the traffic is important to maintain the relationship with the advertiser - You will only get a few cents no matter how much you buy |
At Opt-in & at CPI
| - The actions requested are often not engaging for the user | - You need to generate quality traffic to convert - It is necessary to do volume to generate more revenue |
Key points to remember
Each compensation model has its own advantages and disadvantages.
Different compensation models are often tied to a particular industry.
Advertisers compensate you based on the risk they are taking.
Summary
The compensation model depends on the theme of your content. In the case of volume-based models, it may be necessary to make larger human investments, unless you find a thriving theme. Depending on the size of your team, it may therefore be advantageous to focus on less demanding themes.
