Xoxo, Reznik here! Today we are going to try to go down to the very roots of CPA and affiliate marketing.
When my friends and relatives, who are not very much into traffic arbitrage ask me: “What do you do?” – I usually can’t give a straight answer. After a few so-so explanations they get a thought that I sell penis extenders on the internet. That’s why I made up my mind to scrawl an article. It can easily be referred to if you want to give a brief explanation of main notions of affiliate networks and whatever they are used with.
What is affiliate network?
Essentially, affiliate network is kind of a complex advertising commercial platform. Advertisers and merchants of various goods a services there can find each other. Main characters in this play are: merchant, advertizing specialist and, actually the affiliate network. Let’s take a closer look here.
- Merchant (supplier, company, merch) – is a person, who owns a resource to be sold. For example, a certain merchandise, interesting order, service with paid access or any other media resource. Merchant is ready to pay for a certain action, which a buyer is supposed to make on his resource. It will most probably be a purchase, service payment or registration. For each of these actions merchant is ready to pay a fixed amount or a deal’s percentage. Merchant has got some advertising materials, which are used for performing the action and most often it’s web-sites and smartphone apps.
- Affiliate (also advertizer, advertizing specialist, arbitrator, sometimes affiliate or arbitrator team, gang, reseller, advertizing agency, webmaster, aff) is a person, who can work with advertisements and produce new leads for the merchant. How it is done is a sealed mistery. So, in this or that way, the web creates traffic of merchant’s web-sites and somehow it develops into orders. Magic. For each order, the affiliate gets a payment from the merchant.
- Buyer (also mostly a fool or a yokel) is a source of money for everyone involved. Buyer, being a dumbass unable to use Google of AliExpress, gets fooled by affiliate’s notice and goes to a merch’s web-site, where he makes an order. Being even more stupid, some of them even approve the lead and pay for it. Why is it bad to be a customer? I’ll tell you in a sec.
- Affiliate network is a special service that organizes an interaction between all three previous characters and provides them with comfortable tools for fulfilling their purposes. For example, the affiliate gets comfortable tools for analyzing statistics, merchant gets the CRM for working with leads, buyer gets special web-sites with detailed info on goods and services he pays for. Lives on the commission from the rate that the merchant pays the affiliate.
What is an offer?
It is a core element of our network. This whole whirlwind is happening around it. Essentially, offer is a deal between a merchant and a web-master. Besides the description of all peculiarities, offer has got a few very important elements:
- Goals. They define what the affiliate will be paid for. Goals usually are: approved or paid order, merchant service registration, and account replenishment in merchant service. One offer can carry one or more goals. For achieving the goal, affiliate receives payment.
- Payments. The network cornerstone. It defines the amount paid to affiliate for a goal reached by the customer he had brought. Payments may vary, dependent on the goal itself, customer country, customer’s device (smartphone or a computer), origin of a customer. Amounts paid by the merchant and received by the affiliate also vary. This inequality is network’s living.
- Web-sites (landings). Offers often have got certain web-sites, on which a visitor can make his order. They a designed only to hold the visitor and convince him that this purchase is a matter of life and death. As usual, they are organized as a pair of two sites: prelanding and landing. First, the visitor comes to a prelanding, designed as a web-site with comments on the product, then he reaches the web-site devoted to the product itself.
As a rule, there are several types of offers, with fundamental differences in their function modes:
- Goods. Nope, not your school girlfriend. It’s an offer, connected to a real merchandise, that needs shipping and receiving. It’s considered classics among affiliate networks.
- Info-product. World-class air trade: info-courses, trainings, seminars and franchises. Info-business representatives are commonly referred to as info-gypsies and treated ironically among other CPA representatives.
- Finances. Here we can add not only Forex-kind, exchanges, options, but also casinos, gambling, betting and other offers with money as merchandise.
- Apps and games. One of most diverse categories in terms of payments, because within applications the merchant can offer payments for quite interesting and unusual goals. Mostly represented by white offers.
By the way, about offer colours…
Offer colours: what’s up with them?
Now is the time to tell you why the buyer is a retard in most cases. There are three major categories in affiliate networks: white, grey and black. And most offers, as a custom, are far from white.
- White offers. The best, but most rare category. Here we most often see classic goods or services, which goal is not to fool a person in order to get money. E.g. it can be hard and e-copies of books, gadgets and common electronics and real estate property. Among non-merchandise parts one can find here various mobile and desktop apps, useful web-sites and services, owners of which decided to attract new users. These offers usually have got small payments, not more than 10% out of the general amount. Easy money and pleasant work.
- Grey offers. Suppose it’s most common merchandise and service category. We know them from the disgusting “TV shop” advert. They present cheap Chinese goods, sold ten times more expensive, than their real price is. They can’t be considered as white because of multiple price and selling fake “copies” of their goods. But they can’t be called black either, as they do their job. Here we can also put bets and casino offers, as nobody will say they’re white, but all their blackishness depends on the smile of the fortune. Payments on such offers are mediocre, usually about a half of the receipt. Working with these offers leaves a slight scar on your heart.
- Black offers. Most profitable and disgusting affiliate network offer category, based on plain lie and use of vile longings and fears of humans. Penis and breast extenders, means for waist diminution and weight loss, hair and beard growth, pregnancy assistants speak for themselves. Your magic arsenal will be extended by all kinds of amulets for love and wealth, red threads, magnet gasoline, gas and water “savers”, energy loaded wristbands. All these offers can be categorised by one common property. Bullshit. They don’t have a single thing common with reality. Payments here can be up to 90% of the general amount. When you’re done with an offer like that, better cleanse your karma with a toilet brush and toothpaste.
Theoretically, there should be one more category: absolute black offers. Drugs, psychoactive substances, weapons and other law-restricted elements. But I was fortunate to never face this kind. Maybe affiliate marketing model can’t be applied to them.
What is traffic arbitrage?
When we say “arbitrage” we mostly think of judicial system. Apparently, arbitrage has also got it’s own definition in economics. It defines a chain of deals that bring profit. I’m not sure if classic option “Buy cheap and sell expensive” will do here. Deals must be independent.
Let’s take a look at our affiliate. There is a reason why we call him an arbitrator. The chain of deals he makes is very simple. First, he invests into the advertisement. You won’t see the end of all ways and peculiarities here even with your head over hills, so let’s just say he is paying for a commercial, which leads to a merchant’s web-site. The flow of visitors directed via the advert is called traffic. The second deal in this chain is made with the merchant, who is eager to pay for each order attracted by the arbitrator. And it fulfils the aff’s wallet.
The financial goal for traffic arbitrage is to make the ad budget lower, than merchant’s payment. And that’s how they live. To make their life even better, the affiliate network provides them with a powerful tool to analyze statistics. With it’s help, the web analyzes conversion of his ads and selects most successful options.
Experienced arbitrator forms and tests so-called pairs for each offer. A pair is a combination of text and an image, collaborating with correct pages of a prelanding and a landing. Stealing somebody’s well made pair is a key to success, so they are usually held secret. Never ask an arbitrator about his pairs, it’s not cool.
What’s a lead?
If we take a look at the arbitrage from merchant’s perspective, (ALL OF A SUDDEN!) we’ll see leads. And it’s nothing common with bullets. Remember: no absolute black trading, kids. Lead is a potential order for a merchant to work with. A customer has left an application on a web-site, downloaded an app, registrated in a service or made any other action, which led to a lead creation. Commonly, the lead is to be approved or denied. If accepted, an affiliate will get his payment. If denied, the lead goes to the thrash can. Leads can also be put on hold. It’s a condition, where it becomes a “Schrodinger’s lead”. It’s both either and neither approved and denied. It’s usually used in cases, if lead demands checking after approval.
Lead is a true depiction of the term, decrypted in CPA – Cost Per Action. Dependant on which action is used for lead generation, we can highlight further workflows:
- CPL: Cost per Lead. In this workflow the payment will be received for any valid lead. Validity can be defined by real data in the lead itself, not the spam message, so the lead is created by a real human. For example, registration and application downloads can be united in this category. Payment is made for both successful and failed leads.
- CPS: Cost per Sell. This workflow presumes not just valid, but the lead, approved the customer, like an online-order with shipment. In this workflow, lead payment is made only after customer’s acceptance. Here comes the buyout term. It’s the rate of customers, who paid for the order on receiving.
- COD: Cash on Delivery. It’s an evolution of the previous workflow, which can be applied only to merchandise offers. In this case, payment is made not for the approved lead, but for paid order that has reached the customer. This workflow is commonly used for white offers. In case of grey and black offers, much bigger payment is given.
- CPC: Cost per Click. The workflow is rarely used in affiliate networks in particular, but often used in advertiser network. Payment is made for any web-site transfer, made on the merchant’s side. In the wisest version of this workflow, the lead cost is simply divided by the amount of clicks and the workflow itself transforms into one of the options above.
- CPA: Cost per Action. This workflow, basically, unites all the rest, but still is somehow unique. For example, here we can unite payment for an action inside a mobile app, ingame achievement, top up the deposit in the casino personal cabinet.
What is the purpose of lead for the merchant?
Really, why do they need it? I’ve been asking this question myself for years, but still there is no answer. I managed to conclude some results by watching merchants from aside. Imagine Bear Grylls speaking now.
When a merchant of an arbitrary offer receives a lead, a pack of vultures rushes onto him, presented by the merchant’s call-center specialist. The lead is always taken by the most honorable of the unoccupied specialists. Can you see his pale white chalk-like face and the size of the cactus on his table? These are the most accurate differences between an experienced operate and a rookie. Take that away and they are all the same. Operators are herded in strict conditions by their superiors, who train to sell absolutely useless merchandise and services, lie about it and not to get shy. Their work is supervised, by local top dogs, who are called team-leaders. They control average receipt and abet employers for upsales and cross-sales.
Have you noticed the two words unseen before? Upsell (up, upsale) is an additional sale of the merchandise, identical to the order. For instance, the buyer is fooled for more than can of that marvelous lotion, like, three as a series. Cross-sale (cross) is also an additional sale, but this time it’s not the main one. Something aside. Like, a special spoon for the right use of that three cans of lotion. As a rule, ups and crosses remain in the merchant’s cabinet and have no influence over affiliate’s payment.
An approved lead, for which an affiliate received his payment, becomes an order after approval. It goes through packing, shipping and receiving. Merchant can always track all packages while shipping packages, to call the customer and remind him that he had ordered it in sane mind and free will, hence is obliged to pay for it. Depending on the amount of orders paid by the customer, the buyout is calculated – the most important KPI for a merchant. Because the buyout is what defines whether a merchant will benefit on the sell or not.
What is the role of affiliate networks?
Neither an affiliate, a merchant or especially a customer is a director of this charade. The most valuable part of the chain here is the affiliate network. It’s role is to provide the technical aspect of the whole process:
- The affiliate network is an assurer between affiliates and merchants in their deals. It is the network itself, through what all financial operations are handled and leads are recorded. The network gathers all deposits from merchants and payments to affiliates depending on the leads attracted.
- The network provides the affiliate with tools to analyze traffic, which help to attract visitors comfortably and generate leads for the merchant. These tools allow to analyze the success of advertisements, pass split-testing (A/B-tests) and define most profitable pairs.
- The network provides the merchant with CRM to work with incoming leads. Well, in case if the network is based on AlterCPA, it does. With this CRM the merchant can organize the work of his call-center and a warehouse.
- The merchant’s advertisements are based on the power of this network. In most cases, all merchant’s web-sites are copied of the affiliate network’s servers and integrated with it. As a rule, one offer is provided by different merchants in different countries, so the network also differentiates traffic between them.
- Network’s administrators steal pairs of arbitrators and send them to their own arbitrary team to gain more profit. Did I just write it? Come on, it’s obvious! If you have pre-made pairs and increased payments, the one who wouldn’t use it is a fool.
So, where is AlterCPA team here?
After reading all this, you must be thinking about my role in this process. I don’t advertise Johnson-extenders, neither do I not sell them.
I am the Extender! Me and my AlterCPA team are responsible for the technical aspect of affiliate network’s work along with those tools affiliates and merchants long for. We solder interconnections between networks, set up advertisement materials and web-sites, do everything for your affiliate business not to fall in one moment over a technical mistake. We are guardians of requiescence and protectors of prosperity. Love us, value us and scratch our backs!
Reznik here. Out!