January 2008 - Channel Crossing: Online

Affiliate Networks: CPA vs. Traditional

By Kristopher B. Jones

Affiliate marketing issues are of utmost interest to the direct response industry, and it’s easy to see why. The affiliate marketing space has been growing by leaps and bounds over the past several years. At the same time, leading direct response companies such as Guthy-Renker Corporation and others have demonstrated that affiliate marketing is an effective marketing channel for direct marketers, worthy of considerable resource allocation, including dedicated personnel and significant media dollars.

While there appears to be a general consensus that affiliate marketing works well within the direct response industry, two of the most commonly asked questions are: 1) “what affiliate marketing network should I use?” and 2) “which payout structure is best?” These questions become especially important when you take into consideration the emergence of new affiliate marketing opportunities in the form of cost-per-action (CPA) networks, which may be especially well suited for direct response companies. Unlike traditional affiliate marketing networks that tend to pay affiliates on a percentage-of-sale basis, CPA networks pay affiliates on a flat cost-per-action or lead basis.

The “Big Three” of traditional affiliate networks are Commission Junction, Linkshare and DoubleClick Performics. Traditional affiliate networks predominantly pay affiliates on a percentage-of-sale basis. This type of network payout structure works best for businesses that have considerable variability in average order size or who prefer to incentivize affiliates for generating larger-than-average order sizes. Keep in mind that traditional affiliate networks also offer cost-per-action and flat lead-based affiliate payout structures-however, the majority of merchants and affiliates on traditional networks opt for a percentage-of-sale payout. Leading merchants with affiliate programs on traditional affiliate networks include Target, Overstock.com and Apple.

In contrast to traditional affiliate networks, CPA affiliate networks focus exclusively on a cost-per-action or pay-per-lead affiliate payout structure. The leading CPA affiliate networks are AzoogleAds, Hydra Network and CPA Empire. CPA affiliate networks perform especially well for subscription-based products, as well as businesses with few products or minimal variation in order size. Leading merchants such as Blockbuster, Orange Glo and Match.com have successful affiliate programs on CPA affiliate networks.

While it may seem that your product is a good fit for a particular network type, you may want to consider launching your program on multiple networks. For instance, Match.com, Blockbuster, VistaPrint and others successfully manage affiliate programs on both traditional and CPA networks. Why? Doing so gives you the ability to test different payout structures and experiment with different offers-one of the keys to success for direct marketers.

Kristopher B. Jones is president and CEO of Pepperjam, one of the fastest-growing Internet marketing agencies. He can be reached at [email protected].


No Comments

No comments yet.

RSS feed for comments on this post. TrackBack URI

Leave a comment