Revshare vs. Flat-rate CPA
Technically a flat-rate CPA is still a revshare. However, in affiliate marketing, revshare is often referred to when discussing a percentage-based payout. Before getting into the nuances, differences, and pros and cons of revshare vs. flat rate, let’s define both.
Revshare, by definition, is the sharing of the revenue made from a sale with the affiliate that was responsible for driving the sale. For the purpose of this blog, we’ll refer to revshare as a pay out in the form of a percentage of the sale driven. For example, an affiliate program with a 10% revshare model will payout 10% of each sale to the affiliate who sent the traffic to that advertiser.
A flat-rate CPA could technically be a flat percentage for all sales driven, but in most cases, it refers to a flat dollar amount. For the purpose of this discussion, we’ll refer to a flat-rate CPA as a payout in a flat dollar amount for each sale driven. For example, an affiliate program with a flat-rate CPA will pay affiliates $10 for every sign up the affiliate brings, regardless of whether the user signs up for a $5 service of a $500 service.
Both models have their rightful place in affiliate marketing. Ask any advertisers or affiliates, and they’ll have a preferred payout type. In this blog, we’ll run down why an advertiser might choose to offer a revshare vs. flat-rate CPA and what kinds of affiliates perform better with each model.
The revshare model is great for advertisers with varying product prices. E-commerce affiliate programs tend to use revshare, unless they have high-ticket items or little-to-no variation in product pricing. Revshare is predictable, and advertisers can build their payouts into the cost of goods sold to determine their net profits, much like material costs. More aggressive advertisers may take a loss on the initial sale in hopes of creating a long-time customer. Understanding the LTV of customers will impact how much an advertiser should offer their affiliates. More on that in a later blog.
The flat-rate model is seen more often in CPL, CPI, CPM, and specific CPA campaigns. Flat-rate models might also be requested/needed by affiliates, like cashback/loyalty sites for CPA campaigns. Let’s look at why flat-rate campaigns are necessary for the affiliate space.
CPL (Cost Per Lead) – Some advertisers need leads and are willing to pay for potential customers. This model is common in the insurance vertical. Flat-rate payouts make sense if an affiliate can send high volumes of qualified leads. At the end of the day, it’s the advertiser’s responsibility to monitor the quality of the leads/traffic and to convert those leads to sales.
CPI (Cost Per Install) – Apps, software, and browser extensions have to be installed, and those advertisers are willing to pay for new users. Since some installs are not commerce-based, such as games, there’s no opportunity for revshare. So, the advertiser pays out on an install and monitors for their specific KPI’s.
CPM (Cost Per Mille) – Mille means a thousand, so a CPM is the cost per thousand and refers to views. This payout is based upon impressions, and impressions are views. Impressions may come from display ads, newsletters, and/or traditional mail. In this case, advertisers are paying for touches – exposure to potential customers. This method is as much about brand awareness as it is sales. CPM is often used in conjunction with other promotional methods or because of limitations with other methods.
CPA (Cost Per Acquisition) – This model works well with set prices with little to no variation in pricing options. For example, subscription boxes that have a minimum spend or very few choices and thus very little difference in pricing. A flat-rate CPA is popular with cashback/loyalty platforms.
Cashback/Loyalty – This is not a payout model, but an affiliate type that uses a flat-rate as part of their business model. These sites offer their users cashback for making a purchase. With e-commerce, it’s hard to predict how much a user will spend with an advertiser, so to define what reward(cashback) a user will receive Loyalty sites request a flat-rate CPA and reward their users between 40-60% of that bounty. That’s not to say that some Cashback sites don’t pay users with a % of cashback, but in our experience, flat-rate CPA’s that cover the shoppers CTU result in much more volume for advertisers.
As you can see, revshare and flat-rate payouts have their place in any affiliate program. Knowing which model works for you as an advertiser will go a long way to ensuring the success of your program. At Magnattract, we work with revhare and flat-rate payouts all the time. Contact us to find out how our promotional methods can bring value, organic traffic, and sales to your program.