I have lost track of the number of times that new affiliates have asked me which form of affiliate compensation they should select. Is receiving a one-time CPA payment the way to go, or are they better off with a share of ongoing revenue?
To answer this question, I will often start with a generalization – CPA pays now, rev share pays more – but of course this not always true, and one needs to determine the affiliates’ needs to provide a proper answer. To start to understand this I like to know if the affiliate is new to the industry, or experienced; if they have a single site, or multiple sources of revenue; and what their long term plans are.
CPA compensation does provide quick cash, and it is a great choice for affiliates that are in need of cash flow because they are just starting out, experiencing greater expenses than income, and/or because they are offering incentives to players that come with a high cost to the affiliate.
On the other side of the equation, operators prefer revenue share compensation for two main reasons; there is a far less likelihood of fraud, and their cash flow is not compromised. Keep in mind that operators have settlement accounts, withdrawals, operating costs, and other expenses already eating into their revenue, and that a successful affiliate program that has a high percentage of CPA affiliates can actually be a danger to the viability of their business.
In my opinion, a hybrid between the two types of affiliate compensation is the perfect solution for affiliates that want to be able to cover at least a portion of their fixed costs quickly, and also want to maximize the potential revenue from their affiliates. For operators a hybrid program can also answer their fraud and cash flow concerns and provide them with the ability to even offer affiliates an overall better compensation package.
While I have been a big proponent of this type of affiliate compensation for several years, it is only recently that we are starting to see hybrid compensation being offered. Some examples include a casino offering 20% – 30% revenue share plus a $30 CPA, another offering 30% – 40% rev share with a $25 – $35 CPA, and a poker site offering “up to $200 CPA plus 25% revenue share”.
What is fair? Tough question in this market where many of the larger operators are willing to pay higher than player value for traffic, but common sense would dictate that if an operator is willing to offer affiliates, for example, a choice of $150 CPA or 30% rev share, then a hybrid plan would need to provide affiliates with a reasonable expectation to make at least this amount, with the possibility of increased earnings. This means, however, that operators that are interested in having their CPA affiliates consider a hybrid program will have to be willing to share the true expected player life time value of their players with the affiliates during that discussion.
Expect to see more operators offering hybrid offers in the coming months, and there will be some good opportunities for affiliates that keep their eyes open for these. I personally recommend them for affiliates that can afford the lower CPA payment, and it shows a commitment from the affiliate to the operators’ program as well.
Is a hybrid compensation program right for an affiliate? That question can only be answered by each one depending on their individual circumstances, but in my experience many of the "CPA only" affiliates are open to exploring this. Some operators that want to offer hybrid compensation currently have software restrictions that make that difficult, but if affiliates ask, you can be sure that changes will be made.
Remember that affiliate programs need to work for both parties; affiliates, as salespeople, need to be compensated fairly for their efforts, but it has to be affordable to the operators. A hybrid program provides both the affiliates and the operators with increased flexibility in their compensation, and goes a long way to keeping everyone financially happy.
Gian Perroni is the President of the Canadian Affiliate Management Company, (CanAffco.com), and has been in the online gaming industry since 1997. A frequent speaker at gaming conferences, Gian has himself been an affiliate, an affiliate program director, and an operator. He and his team work with gaming and retail merchants, helping them manage their affiliate programs. Gian can be reached by email at [email protected].