CPL vs CPA vs Rev Share in affiliate marketing
One of the questions I used to always ponder was what was the best payment plan for affiliates. My experience is mainly in igaming but the same pros and cons apply to all industries.
CPL – Cost Per Lead – you get paid for every lead you send. Quite rare in the casino affiliate industry but I do some affiliates who buy traffic on a CPL basis and sell on a CPA.
CPA – Costs per Acquisition. You get paid for everyone that signs up and does a minimum action, for example, deposits and bets £10.
Rev Share – Revenue Share, is self-explanatory. You get a share of the revenue generated. Calculations vary but you get paid in proportion to the amount of revenue you generate.
Hybrid models – This usually involves a CPA and a revenue share portion. So for a casino, you might get £50 CPA and 20% net revenue. Just depends on the operator, your traffic and how well you can negotiate.
The different models reflect the different risks and values during the conversion process. A lead is cheap but the risk is all on the merchant. I could send someone 1000 leads and if none converted then the merchant out of pocket.
A CPA puts the risk on to the affiliate. If I was on a CPA deal, I could send 1000 leads and if none converted, I wouldn’t get paid. It can be a disincentive for the merchant to try as hard to covert the lead as they don’t have to pay if there is no conversion.
With revenue share, the leads will only make money if they convert and spend money. This puts all the risk on the affiliate. If the traffic or leads don’t convert and perform, then the affiliate gets nothing but if they do, they can get rewarded handsomely. This is my preferred model. Its riskier for me as some merchants will not convert or have a good retention rate but overall it worked for me for over a decade.
There are some downsides to a rev share deal though. You might get offered 35%, but 35% of what? Some people, take an instant 50% off for game fees, then there’s tax, for the gaming industry, that’s 15% POC, bonuses, and customer service fees get taken off too.
For people who buy traffic, CPA can be better for cashflow. It’s certain how much you will get and Google ads can be expensive. I was talking to someone who worked at a big PPC affiliate and he said they only worked on CPA and it was like £500 minimum for a sign up and there was a listing fee. Sounded very lucrative. They did track everything and kept an eye on the revenue per keyword, per position, per operator. If someone wasn’t performing, then they’d get canned.
Hybrid deals try to help with cashflow and balance the risk a bit in favour of the affiliate. You get an amount upfront and then long term revenue share. This works well for a lot of people too.
The major danger of revenue share is that lifetime does not really mean lifetime. If you stop sending traffic, the lifetime revenue share stops. In the good times when everything was growing, operators weren’t bothered but now the industry is maturing, it makes sense to cull affiliates who no longer generate fresh sign ups.
Sky Bet affiliate scheme was the first major one to do this by just closing their affiliate scheme down and since then, lots of others have used terms in the contract to close affiliate accounts. Bet365 are the only ones you can 100% trust. They culled a lot of affiliates but kept them on their revenue share. Their retention is the best in the industry too. Everyone else falls in between the two companies.
For a lot of other industries revenue share is pretty straightforward and the only real option. For example, Curries, might offer 8% revenue share. It’s simple, you take the price, excluding VAT and you get 8% of that sale. For Emirates Airlines, you might get 1% of the basket value.
In summary, you chose your model on how good your traffic is and how much risk you want to take. The better your traffic and the more risk you want to take, the more you will make with a revenue share or CPA. If you just want to buy Facebook or Google traffic, collect emails, and send them on to the merchant to convert, then CPL better.