Affiliate commission – What plan to choose.

For webmasters new to affiliate marketing, some of the terms might not always be so easy to understand. While some terms are less important, you at least need to understand the different commission types available.

Affiliate commission – Choosing a revenue option

When choosing an affiliate program, the commission offered is - obviously - very important. So is the commission type. Should you choose a program that pays you for every visitor you send their way, so called PPC? Or should you go with the option of sharing the revenue for that particular visitor? Fixed commission or a percentage? The options are many, there is no general answer to what is best. It’s up to you to decide where to send your visitors, to experiment, evaluate and finally choose one or a few affiliate programs best suited for your needs.

PPC - Paid per click

Many affiliate programs offer you a - fixed or varied -commission for every visitor you send their way. Often these programs are similar to Google’s Adsense program, namely contextual advertising. The advantages of this are many, but so are the limitations. The main advantage is just the contextual bit, the task of placing relevant ads on every page is gone, and all you need to do is choose what program to join. Another great advantage is – because of the flexible nature of these programs, you will only need to join one program, making it easier to reach the payout threshold. The downside of it all is the revenue. If you can target your visitors, and subsequently what they are looking for, you can make a much larger profit with other types of affiliate programs. But, it WILL require far more work.

PPM – Paid per mille

This is roughly the same as PPC, the difference being you get paid for every visitor viewing the ad, they do not have to click it. Many companies, offering contextual advertising, have this option included in their program. The good part about it is the possibility to get paid while visitors stay on your site, instead of referring them to someone else. This option is most suitable for high traffic web sites - with small quantities of visitors, this rarely adds up to a good profit. It can, however, be a good way of targeting often viewed pages on your site.

PPS – Paid per sale

This type of commission is based on the activities of the visitors you refer to the affiliate website. If you send active visitors, who shop a lot, this can be a goldmine compared to PPC and PPM. The type of commission varies as well. It can be a percentage of the sale, a fixed amount per sale/signup or a combination of both. What to choose is very dependant on your audience, and what category of program you are looking for.

In some cases, often with a recurring commission, the option of sharing the revenue, thus getting a percentage of the total order, rake or what have you, will be far better than choosing a fixed amount per sale. The dynamics of percentage vs. revenue sharing will be looked at more deeply later on.

PPL – Paid per lead

This is roughly the same as PPS, but you get paid for leads instead of sales. This is a fairly uncommon commission method, but it often applies to specific categories of affiliate programs; Insurance companies, financial institutes and other companies with high priced products in competitive markets. If you have a site targeting visitors looking for these kinds of products, this can be a highly interesting revenue model for you.

There are other, less common, alternatives. Many of them are individual, and are mainly for very specific niches, or for experienced affiliates.

Paid per click vs. Pay per sale

When using affiliate programs, the option of getting paid per click is often tempting. This can be in form of contextual advertising, or traditional PPC programs. This option, how ever, is not the best option in all cases. How do you know when to choose to be paid per click, and when to choose a PPS model?

People familiar with adsense or other forms of contextual ads – with a fluctuant amount paid for each click – are aware of the big difference between the price for a click in a competitive niche and a less competitive one. These days, there are numerous websites dedicated to listing and reviewing various keywords and niches for contextual advertising.

If you have a website in a niche lucrative and competitive – and you are attracting visitors – you might stand a good chance of getting a fair amount of money for every visitors you send thru contextual ads, but if you are running a website in a less competitive niche, odds are you not to thrilled with the money you make with contextual ads.

This is a perfect time to switch to an affiliate program. The good thing about affiliate programs lies in the ability to target the products and ads yourself, while with contextual ads, you are stuck with a more or less accurate script deciding what will convert best and pay you the most.

There are a few differences in promoting a pay per sale affiliate program, both difficulties and possibilities.

The main difficulty is you are now hoping for your visitors to, not only click, but to buy the products or services you are advertising. With contextual ads – in its simplest form – all you need to do is place the code on a prominent placed and cross your fingers. With affiliate programs you need to be more subtle. Looking only at the commission you will receive, and not looking at the quality of website you are sending visitors to, will not be a very profitable project. Instead, you should do as much research you possibly can, and always try to improve both your click thru rate and your conversion rate. Don’t be afraid to try new affiliate programs if the first one won’t make you any money.

When using static ads – banner and/or text ads – you have a much better way to choose the ads according to your visitors. Different from the scripts doing the work with contextual ads, you have the means to look at several other factors to decide what you site is about. Looking at your visitors will give you additional information on what products or services they might be looking for, and hopefully buy.

In addition to this, you have a good chance of promoting the products you are advertising, hence pre-selling them. This is known as one of the most important factors when working with online affiliate programs, simply because your visitors often have some level of trust in you and your writing. This has little to do with you or your website, but simply because people tend to believe the person not obviously gaining from it. If a website brags about their products, people will filter it out, deeming it blatant advertising, but if another source – you – tells them the same thing, they are less reluctant to consider it the truth.

As a rule of thumb, traditional pay per sale affiliate programs will perform better than contextual ads in niches of low to medium competition. In niches of high competition – i.e. pharmacy products, gambling and travel – the price paid per click can sometimes make the use of contextual advertising it highly profitable.