Commission Structures in affiliate advertising

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Commission Structures

As a search marketer, your main goal is to get paid for placing ads. The advertisers who agree to let you place ads don’t have a problem with paying you. They do, however, have different payment systems.

Pay Per Click.

A pay-per-click commission structure pays you a fixed amount generally between 3 and 25 cents per click for each click (or visitor) you send to the client’s web site. Most payper- click commission programs specifically prohibit search marketing, however, so you would take advantage of these types of programs only if you had a content site of your own on which to advertise.

Pay Per Sale.

Pay-per-sale programs fall into two categories:

1. Percentage of sale or revenue. You receive a percentage of the purchase price or a percentage of revenue (net profit).

2. Fixed commission per sale. Instead of a percentage of the sale price, you receive a fixed commission (e.g., $5 or $10 per sale).

You might hear one of these options called revenue sharing. Some affiliate programs give you the option of choosing a percentage or fixed commission. A commission can range between 5 and 60 percent of the purchase price, so examine the eventual purchase prices of the items you are going to promote: You might actually do better with a flat commission.

Pay Per Lead/Action.

Information is the coin of the realm for many web sites. These sites place as much value in receiving someone’s contact information and having them fill out a form or download a piece of software as they do in purchasing a tangible good or service. They pay affiliates when someone clicks on their ad and performs a particular action. Some examples include:

• Completes forms. Such sites pay a fee when someone you refer fills out a form. Typically, a form requires the person to submit a name, address, and e-mail address, all of which can be used for subsequent marketing contacts.

• Opts for free registrations. Sites like the auction giant eBay (www.ebay.com) will pay affiliates if a click on one of their ads causes the clicker to sign up with eBay, although they do require that the newly registered user become an active user by placing at least one bid or purchasing or listing at least one item.

• Takes advantage of free downloads. Some sites will pay you a referral fee if a click on one of your ads leads to a download of software they provide. Downloads can lead to eventual purchases of the software.

Sites that don’t sell tangible goods and services but that develop computer software or provide information that you have to register to use are good candidates for affiliate programs. Look for sites that are especially popular and that are relatively new in other words, those that don’t already have millions of registered users that are still growing steadily.

In my opinion, pay-per-lead/action programs tend to be the most profitable ones for search marketers. In general, the less a program wants you to get the customer to do or to spend, the easier it will be for you to find customers who will perform the actions you need to receive a fee.

NOTE: You might see pay-per-lead/action programs referred to as cost per action (CPA) by some affiliate programs.

Mixed Payment Systems.

Some sites, like eBay, have welldeveloped affiliate systems that pay differently for different actions. First, if you place an ad that causes someone to register with eBay for the first time and then use his or her new registration to place a bid, you earn a fee of between $12 and $22.

At the same time, eBay operates a revenue-sharing program in which affiliates earn a percentage of the revenue eBay generates from each sale not of the final sale price when they refer someone who places a winning bid or makes an instant “Buy It Now” purchase.

Each aspect of eBay’s commission structure requires that, in order to be paid, the shoppers have to actually be willing to spend money they have to place a bid if they are new registrants or place a winning bid or make a purchase if they are currently an eBay member.

Because of the need to attract shoppers who must actually follow through in some way, eBay can be a difficult market to crack: It’s difficult to write ads that prompt the correct actions, and it’s also difficult to fine-tune and manage advertising programs.

Not only that, but eBay’s popularity makes the competition particularly fierce. Nevertheless, because eBay is such a vast marketplace, the advertising opportunities are virtually endless. To find out more about eBay’s options for affiliates, visit http://affiliates.ebay.com.

HOW DO I GET STARTED?

Naturally, by now you are anxious to get started, and you are probably wondering when we can begin joining affiliate programs and start earning money. Don’t worry, we’ll get there soon, but first we need to introduce you to one more concept. Remember when we discussed the different models that affiliates use to promote the affiliate programs they join? I identified search marketing as my preferred method of advertising these programs.

Search marketing is the tool you will use to make your affiliate advertising business a real success, so you need to understand this concept as well before you can really get started.