CPA, Revshare, hybrid…? What does it all mean?
If you’ve recently made the leap into the world of affiliate marketing you’ve probably started to come across these terms.
And even if you understand them, do you know how to choose the best one for you?
Commissions from online marketing can be very lucrative, but they're dependent upon getting it right at the start and choosing the best payment structure for your own situation. It all starts with knowledge and that’s what we’re providing here today.
If you're curious, see our list of forex broker affiliate programs to get started.
What is CPA?
CPA stands for Cost Per Acquisition and simply put, it’s a one-off fee you receive from your affiliate partner whenever one of your leads signs up.
Often there are strict criteria that must be met in order for your lead to become a ‘qualifying client’ (or whatever phrase your specific program uses to distinguish a conversion that generates the commission for you.) These could be a specific minimum deposit requirement (online trading financial markets, online casinos, poker rooms), a timeframe which that deposit must be made (within 90 days, 180 days, etc) and be considered an active client (made x number of trades, or played 5 games of poker, etc.)
Every type of affiliate market, and every partner within those markets, will have slightly different commission structures, rates, and ‘qualifying’ requirements.
If you’re considering a CPA plan then you need to make sure you fully understand all of the requirements in order to actually receive your commission. There’s nothing worse than referring 10 leads to a partner and receiving nothing back because they all opened accounts 3 days later than the qualifying requirement!
Example:
You sign up as an affiliate for IG Markets and choose their CPA commission structure.
Under this structure, you receive a $500 payment every time your lead becomes an FTD (first time depositor.) There is a hierarchy of payments scaling up to $600 per FTD depending on the number of qualified leads you send them each month.
In order to become a qualified lead, and trigger your commission payment, the lead must be a new user to IG (so they are an FTD) and they must make at least the minimum deposit when opening their account.
It’s month seven and you send them 10 leads.
Seven of those sign up, with one already being a past member and two depositing less than the minimum required deposit, leaving you with four qualified referrals for the month. You fall into the $500 per lead bracket and would receive a payment of $2,000 for your leads that month.
What is Revenue Share?
Also commonly known as ‘Revshare,’ is a commission structure whereby you receive a percentage of the sales, profits, or losses of your qualified referral (depending on what market you’re in) for the lifetime of that client.
This obviously has large potential but is ultimately down to how active your leads are - whether they make a lot of forex trades, gamble a lot, or buy a lot of products.
Most of the Revshare plans have a ‘lifetime’ aspect to them but some do only last for a set period of time like 6 or 12 months. So make sure you get the full details when making a decision as a limited life Revshare structure is nowhere near as appealing as a lifetime option - especially if you expect your leads to remain active for a long period of time.
One last thing to consider, especially in financial markets, is what the percentage under the Revshare is actually calculated on. Some programs will base it on the broker's revenue generated from your trader (and it could be the gross or net amounts) and sometimes it can be a percentage of the spread value. Make sure to read the terms of service as it’s a case-by-case basis.
If you see a broker offering a certain dollar value per lot traded, this is another type of Revshare. Under this structure you receive a set dollar amount ($10-$15) per lot traded by your qualified referral, rather than a percentage of revenues.
Example:
Alvexo offer a Revshare option to it’s affiliates and if you choose this structure you stand to receive 20% of that referrals lifelong revenue (scaled up to 30% depending on the number of FTD’s you refer each month.)
Let’s say that by the end of month seven you’ve referred them 10 qualified leads and during that month they generate $900 revenue for Alvexo.
You’re in the 20% bracket based on the number of leads referred each month so your commission for month seven is $180.
If they continue to trade like this for the next 10 years then you will make $180 every month as it’s a lifelong plan.
What does Hybrid mean?
This one should be obvious now as it’s just a combination of the two plans above - part CPA and part Revshare.
Typically you will find that each component pays at a lower rate that the sole CPA or Revshare but that’s because you get both.
Example:
Instead of a CPA or 20% Revshare, Alvexo offer their hybrid plan with $200 CPA + 10% Revshare.
If we go back to month seven under our examples above, we’ve said there were four qualified referrals, and $900 in revenue generated for Alvexo from your referrals trading activity.
Under the hybrid payment plan, you would receive $800 CPA + $90 Revshare for this month's payout.
How to choose the right commission structure
Knowing each type of commission offered is only the first step. The more difficult question comes after and is in choosing the correct structure for your business/website.
The easiest way to decide on this when starting out is to determine your own endgame:
- What is your goal?
- What are you trying to achieve?
- Are you in it for the short term or the long term?
- Who is your audience and how active are they going to be?
Generally speaking, if you’re in it for the short term, want profits upfront, and expect your referrals to not stick around and become long term users of the service/product you are referring, then you will be better off taking a CPA structure. This will allow you to get larger, one-off payments, the moment one of your leads becomes ‘qualified,’ with no worry about what happens afterwards. You’re always running promotions or targeting new audiences to drive the most amounts of leads through your affiliate links and it becomes more of a ‘funnel’ shaped business.
If you’re strategy is to build a site or service which supports the people you are sending through your affiliate links to increase their engagement, and you’re planning on sticking with this long term, then you should be choosing the revenue share structure.
Profits will be slow in coming, and could take a long time to build up to something significant, but every qualified client you get will be connected to your account for life, so long term, you’re earning potential is a lot higher.
Under this model you’re going to be more focused on helping your leads with questions they have and providing quality content and information. You’re not just sending through as many leads as you can because if they don’t continue using your partners service/product then there is no value for you.
The last option, the hybrid plan, is perfect for those who either don’t know what they want or are unsure how their audience is going to react to the service/product - how long they’ll remain active and how active they’ll be.
Talk to your affiliate partner, or read the terms of service, and find out if you can switch structures later on. You can then go on a hybrid structure for the first 6-12 months, see how your audience is engaging with the service/product and then switch to either CPA or Revshare to maximise your return.
Another reason for choosing the hybrid structure is to even your cashflows out. Perhaps you’re trying to grow a long term business but also need cash early on to invest back into marketing and development. You can then use the CPA component as cash injections whilst trying to grow your client base and build up your monthly revshare amount.
Some partners only offer one option or don’t offer hybrid at all, so if you’re set on offering a specific partners service/product, you might not actually have any choice in what you accept which makes this decision obsolete. Of course, if you’re choosing your partner based on the structure you want then at the end of the day it comes down to what you want to achieve with each referral program and what audience you have access to.
Hopefully we’ve provided you with some clarity on what the payment structures are, and some ideas on how to choose between them.
We’d love to hear your thoughts as well, so comment below with your preferred structures.
