A newbie to the whole affiliate programs and marketing thing would be confused by jargon like
CPC , PPC , CPA and what not. Let me define in very simpler words what these terms mean.
Affiliate Marketing - When one website uses its traffic to sell a product which belongs to a second website or sends its traffic to the second website so that the owner of the second website uses the traffic as he wishes, this process is called Affiliate Marketing.
Now that the second website has profited by selling or gathering any data, he needs to pay the first website which was helping it out. There are Four ways of paying the first site.
By the way the first website and its owner of course will be called a Affiliate and the second website will be called the Affiliate Network/Program
Affiliate Advertising - Same as Affiliate Marketing ( above )
So the four ways of paying for Affiliate Marketing are:
CPC - Cost per Click. The Affiliate gets paid by the network for the clicks made on the networks' site ( by the affiliates' traffic) . Here even if there was no sale made or no other action followed , payment is made on the basis of number of clicks. CPC is used sparingly in Affiliate marketing.
CPS - Cost per Sale. The Affiliate gets paid a share of the revenue generated on the network's site. Nothing more. Almost 80% of all the Affiliate marketing gets done in the CPS way. Its a win win for Affiliate as the revenue share is often higher than what he gets in CPC model. For the Network it gets to pay when a sale is made and money is in the bank.
CPM - Cost per Mile. The Affiliate gets paid for every 1000 visitors ( just an example) who visit the Network's site. No other action like clicks or sale is required for payment. This model is not widely followed in affiliate marketing
CPA - Cost per Action. The Affiliate gets paid for every action performed on the network's site. The action could be a click made or a sale made or a form filled etc. Both parties, the Affiliate and the Network agree before hand what that action would be. This model is considered to be the future of Affiliate marketing.
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Some other jargons are
PPC marketing or PPC Advertising - PPC stands for Pay Per Click. Its model used in Internet Advertising where a publisher pays a search engine or any traffic source for every click made on the latter's website. There is usually a bidding for the search results site where the publisher can bid for keywords being searched by people. On the content network ( non search sites) there is fixed amount that is paid as PPC.
SEO Affiliate - SEO is Search Engine Optimization. Basically it consists of many tips and tweaks you can do to make your site more search engine friendly. A Website which has gone through SEO can expect higher position in rankings given by search engines which means more visitors. There are many firms which sell this SEO technique to people who want to implement it on their site. These firms uses Affiliate marketing as one of the ways to sell thier product. Those publishers who sign up with them are known as SEO Affiliates.
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Below data source : Affstat 2010 Report.
Affiliate Agreement : terms between a merchant and an affiliate that govern the relationship.
Affiliate Information Page : a page or pages on your Web site that explains clearly and concisely what your affiliate program is all about.
Affiliate Link : a piece of code residing in a graphic image or piece of text placed on an affiliate's Web page that notifies the merchant that an affiliate should be credited for the customer or visitor sent to their Web site.
Affiliate Manager: the manager of an Affiliate Program who is responsible for creating a newsletter, establishing incentive programs, forecasting and budgeting, overseeing front-end marketing of the program, and monitoring the industry for news and trends.
Affiliate Program (also an Associate, Partner, Referral, or Revenue Sharing Program): a merchant pays a commission to an affiliate for generating clicks, leads, or sales from a graphic or text link located on the affiliate's site.
Affiliate Program Directory: directory of affiliate programs, featuring information such as the commission rate, number of affiliates, and affiliate solution provider. Associate-It, AssociatePrograms.com and Refer-it are among the largest Affiliate Program Directories.
Affiliate Solution Provider: company that provides the network, software, and services needed to create and track an affiliate program.
Auto-Approve: affiliate application approval process where all applicants are automatically approved for an affiliate program.
Commission: income an affiliate receives for generating a sale, lead or click-through to a merchant's Web site. Sometimes called a referral fee, a finder's fee or a bounty.
Cookies: small files stored on the visitor's computer, which record information that is of interest to the merchant site. With affiliate programs, cookies have two primary functions: to keep track of what a customer purchases, and to track which affiliate was responsible for generating the sale (and is due a commission).
Contextual Link: integration of affiliate links with related text.
Conversion Rate: percentage of clicks that result in a commissionable activity (sale or lead).
eCPC: stands for 'effective Cost Per Click’. Affiliates that earn on a CPA or CPO will back their numbers into an eCPC. It is calculated by dividing total earnings by their number of clicks. For example, if an affiliate earned $1500 from 3000 clicks, the CPC would equal $1500/3000, or $0.50.
eCPM: stands for 'effective Cost Per Thousand impressions'. Affiliates that earn on a CPA or CPO will back their numbers into an eCPM. It is calculated by dividing total earnings by their number of impressions in thousands. For example, if an affiliate earned $1500 from 75,000 impressions, the CPM would equal $1500/75, or $20.00.
Hybrid Model: affiliate commission model that combines payment options (i.e. CPC & CPA).
In-house: alternative to using an affiliate solution provider; building affiliate program architecture within a company.
Lifetime Value of a Customer (LVC): the amount of sales in dollars that a customer in his lifetime will spend with a particular company.
Manual Approval: affiliate application approval process where all applicants are manually approved for an affiliate program.
Merchant: an online business that markets and sells goods or services. Merchants establish affiliate programs as a cost effective method to get consumers to purchase a product, register for a service, fill out a form, or visit a Web site.
Pay-Per-Sale: program where an affiliate receives a commission for each sale of a product or service that they refer to a merchant's Web site. Pay-per-sale programs usually offer the highest commissions and the lowest conversion ratio.
Pay-Per-Lead: program where an affiliate receives a commission for each sales lead that they generate for a merchant Web site. Examples would include completed surveys, contest or sweepstakes entries, downloaded software demos, or free trials. Pay-per-lead generally offers midrange commissions and midrange to high conversion ratios.
Pay-Per-Click: program where an affiliate receives receive a commission for each click (visitor) they refer to a merchant's Web site. Pay-per-click programs generally offer some of the lowest commissions (from $0.01 to $0.25 per click), and a very high conversion ratio since visitors need only click on a link to earn the affiliate a commission.
Predatory Advertising: method that creates or overlays links or banners on Web sites, spawns browser windows, or any method invented to overwrite or redirect affiliate links.
Residual Earnings: programs that pay affiliates not just for the first sale a shopper from their sites makes, but all additional sales made at the merchant's site over the life of the customer.
ROAS: stands for 'Return on Advertising Spending'. This is the amount of revenue generated for every dollar spent on advertising. For instance, a ROAS of $1 means you're generating $1 in sales for every $1 in advertising spend, and a ROAS of $5 means you generate $5 in sales for every $1 in spending.
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