[Disclaimer: this article belongs to Mobidea Academy. Find the original article here.]
Affiliate Marketing Network
One of the most important partners a Media Buyer has is an affiliate network.
It’s basically an intermediary between publishers (affiliates) and advertisers (offer owners).
On the one hand, it helps publishers find the best offers all over the world; on the other hand, it helps advertisers aggregate an immense amount of traffic and users from the variety of sources to their offer.
Some affiliate networks work with renewals. This means they’ll pay affiliates when a user renews the subscribed service. However, most affiliate marketing networks work based on a pure CPA basis.
This means they charge affiliates only when an acquisition is made. In case an offer fails to convert, the affiliate network won’t pay the affiliate. The amount paid is a percentage of the payout of the converted offer.
This percentage is commonly known in the business as “RevShare.”
Verticals
A vertical is a group of offers divided by category. There are two main verticals in affiliate marketing: Mainstream and Adult. Mainstream consists of a number of sub-verticals.
The biggest of these are Games (e.g. Fruit Ninja, Magic Rush), Utilities (e.g. Opera Mini Browser, Turbo Cleaner etc.) and Sweepstakes (e.g. win money, win iPhone). Adult can be divided into the VOD (Video on Demand) and the Adult Dating sub-verticals.
Affiliates
An affiliate is a person who’s registered in an affiliate network. He/she uses its tools and sends traffic to the advertiser’s offer.
When users click on the offer and make an acquisition (which may be a subscription, sale, install or even just a visit), the affiliate gets paid by the advertiser.
Simple.
There are four affiliate types: Media Buyer, Webmaster, Social marketer and Network (yes, an Affiliate Marketing Network can be an affiliate to another Affiliate Marketing Network).
A webmaster is someone who owns a website, promoting offers to his website’s visitors. A Media Buyer is someone who doesn’t have his own traffic. He buys it from ad networks, DSPs or direct publishers. A Social Marketer is basically doing the same thing a Media Buyer does. The only difference? He only buys traffic on social networks.
How can an affiliate monetize his traffic?
Since webmasters own traffic, they can choose which business model suits them best:
a) they can work with affiliate networks based on performance marketing, meaning they promote offers and earn from acquisitions made by users (mostly CPA and CPI models);
b) they may not want to depend on the offers’ performance, ultimately deciding to sell traffic to the ad networks by impressions, visits or clicks (CPM, CPV and CPC models);
c) they can buy traffic, monetizing it with CPA or CPI. What about Social marketers? They’re Media Buyers which buy/have traffic not on specific websites via ad networks but from social networks such as Facebook or Twitter.
Ad Networks
An ad network is the intermediary between an advertiser and a publisher.
It aggregates traffic from many sites, which advertisers buy to promote their offers.
On the ad network, a Media Buyer can target specific segments (such as country, operator, OS, devices, etc.) or sites and put the price he’s willing to pay for the traffic in an auction system: the one that pays more has better or more traffic.
Ad Exchange
An ad exchange is another digital marketplace where publishers and advertisers can sell/buy traffic that’s coming from multiple ad networks.
An ad exchange provides more traffic to advertisers than any single ad network can provide, giving them the option to optimize it all in one place.
In an ad exchange, unlike an adnetwork (where you buy impressions in bulk), each impression is auctioned and the highest bid wins the impression.
This system increases the transparency of the pricing process, as you always know how much you’ll pay and what’s your position.
DSP & SSP
A DSP (Demand Side Platform) is the platform that aggregates traffic from the multiple ad exchanges and SSPs (Supply Side Platform), thus helping advertisers find as much traffic as possible with the cheapest market price.
DSP bids are based on the RTB (Real-Time Bidding) system on behalf of advertisers. RTB allows advertisers to buy traffic per impression through a real-time auction.
The system gets info about the webpage and the user while the ad spot is loading and sends its bid to the ad exchange, where it’ll compete against bids being issued from other DSPs or bidding systems for that same impression.
The ad will then be displayed on the webpage of the advertiser with the highest bid. The system minimizes the number of wasted impressions, helping advertisers cut costs.
An SSP (Supply Side Platform) is the equivalent of a DSP, but on the publisher side.
An SSP is a platform that helps webmasters automate and optimize the process of selling traffic by providing valuable statistics such as the number of visitors, time spent by visitors, and % of visitors returning to a specific website.
Monetizing Traffic – Performance-based Models
CPA (cost-per-action) is the mobile pricing model where an advertiser pays for the subscription to his offer. The flow of the subscription can vary according to the country and operator policy. It can be single opt-in, double opt-in, or pin submit. It seems obvious that – the easier the flow – the higher the conversion rate.
CPI (cost-per-install) is the model used to promote mobile apps, where an advertiser pays to the publisher when users install his app or perform an action.
CPA and CPI are performance-based models.
They’re used by the affiliates of affiliate networks so as to gain from the difference of buying traffic on a CPM/CPC basis and earning based on a CPA/CPI method.
Apart from the CPA and the CPI model, there are other less popular models in the market. One of them is CPL or PPL which is the abbreviation of Cost per Lead. In this model, the advertiser pays as soon as the user provides his personal info in a form. CPL is a common model for Dating offers.
Another pricing model is called CPS (cost-per-sale) or PPS, where the advertiser pays when the user is charged by the service.
The payout is normally higher and the conversion rate is generally lower compared to other models, due to the credit card billing used in this model.
Media Buying – Bidding Models
The CPM (cost-per-mile) is the cost per 1000 impressions. You set the maximum you wanna pay per 1000 impressions of your ads.
The biggest advantage is that you can play with your banners so as to get a better Click-Through Rate (CTR). By doing so, you get to decrease the costs compared to other models. Some ad networks have the option to bid based on the Smart CPM pricing model, which is even better than the common CPM.
When using Smart CPM, you set the maximum bid you’re willing to pay, but the actual price you pay is a bit higher (the % depends on the adnetwork) than the bid of your next competitor, which makes you save money. In case there are no competitors in the segment, you’ll pay the minimum bid, regardless of your preset bid.
CPC (cost-per-click) is the model where an advertiser pays for each click on his ad (usually a banner ad).
Be careful! You’re gonna be paying for each user that’ll see your landing page.
What does that mean? Each click is important!
CPV (cost-per-visit) is the model where an advertiser pays when the user visits the landing page of his offer.
Asking yourself what is the difference between CPC and CPV? The thing is that a certain percentage of users may click on the banner, but then close it before the page is loaded. In this case, the user’s action counts as a click, but not as a visit.
Notice that the potential for sweet profit is higher with the CPM model than with CPC.
In order to create a profitable CPM campaign, you gotta find high-performing creatives which are in tune with the offer and the source of traffic.
Affiliate Marketing Summary
You already know the main actors that are part of the Media Buying play! Now let’s sum it all up for you real tight!
Imagine you’re a Media Buyer: you sign up for an affiliate network and – after talking with your account manager – you pick a very good CPA offer for Argentina.
Later, you sign up for any ad network and buy banner traffic in Argentina with a link to the offer.
What happens is that users in Argentina visit the sites (the ones which you buy traffic from) from your adnetwork and see your offer.
If you buy traffic per impression, that’s the moment when you pay for it: the users see your banner, you pay.
Your banner grasps the attention of some of them, so they click it and see the landing page of your offer (in the case of CPA).
On the landing page, the user can see the offer, terms, and conditions. If he agrees with everything, he clicks on the confirmation button and he’s subscribed (the flow may vary according to the country and operator).
At this point, an advertiser of this offer pays you a fixed amount for the subscribed user and the money later appears on your affiliate network account.
As this amount is large (when compared to the CPM, CPC or CPV) you earn money!
This is the general idea of the business. I bet now you know this is the way to go!
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