The internet has come a long way since its early days. This has lead to more individuals turning to the internet to generate additional revenue streams. Many of these new internet marketers have discovered that an affiliate network is the place for an individual with no products or services of their own to sell. Basically, an affiliate network is an online venue who brings advertisers into contact with internet marketers, also known as affiliates, to market their products in exchange for a commission. Such an exchange is common 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.
The following cover the four most common compensation methods which are utilized by affiliate marketing:
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 form of compensation is actually quite popular. However, I do not like it, at least from the standpoint of the affiliate network, because there is no really good way to measure the quality of the traffic. Essentially, how it works, is that for every thousand visitors which are sent to the advertiser by an affiliate, the affiliate is compensated in a predetermined amount.
4. Pay Per Click or PPC: This is probably something which you are familiar with due to the popularity of Google Adwords and Adsense. It pretty much falls under the same set of rules. You place an advertiser’s link on your blog or website, and each time a visitor clicks the link, you are a predetermined amount of money.
There you have it. The four most common affiliate network structures. Nonetheless, I must inform you that while affiliate programs can be very lucrative, you have to approach them in the right manner. Do not simply throw traffic at your unique link and hope for sales. The truth is that very few buyers make a sale on their first contact with your website. Thus, it is important to provide your visitors with an incentive to provide you with their email address, and build your customer list. Thereafter, you can market to your growing customer list for years to come.
Before joining an Affiliate Network, make sure that you are well aware of how you will be paid. The reality is that a number of Affiliate Programs better lend themselves to a particular structure. Four main methods were covered by this article. Make sure that come and see us at SOSComplete.com