What is Affiliate Marketing and CPA

CPO, CPC, CPL and other billing models in affiliate marketing

We online marketers have already developed a number of abbreviations over the years, which our economic environment often had question marks in our eyes. One of the most extensive collections of abbreviations has developed around commissions and remuneration models. CPO, CPL, CPC - and what is the difference between ordinary CPM and CPM? This article aims to clarify these and other fundamental questions. This part one is more suitable for beginners, while the second part explains basic strategic considerations in affiliate marketing that result from the billing models for advanced users.

Another note: In addition to the terms CPO, CPL, CPC etc. used here, their counterparts PPO, PPL, PPC etc. are also common synonyms. The C stands for "Cost", the P for "Pay". So z. B. CPO Cost per Order and PPO Pay per Order. This article uses the "C" version that is more common for us.

CPO - cost per order

With a cost-per-order billing (also PPO - Pay per Order or PPS - Pay per Sale), the advertising partner receives a commission, which is calculated from the amount of the shopping cart of the individual order. However, if he only sends users to the website of the online retailer who then do not buy, he does not receive any commission.

A CPO remuneration is usually set on a percentage basis. For example, if the CPO is 8% and the customer comes from an affiliate website and places an order for € 100 in the shop, the affiliate is paid € 8. But it is also possible to define an absolute CPO, e.g. B. 5 € commission per order, regardless of the shopping cart. Technically, the second is then mapped more as a CPL by the networks, but is also a CPO from a logical point of view. This is particularly common in the financial sector.

CPL - cost per lead

The CPL remuneration (also PPL - Pay per Lead) is used if the publisher is not to be rewarded for the sales generated, but for certain actions carried out by potential customers. The lead is paid at a fixed fixed amount. For the type of remuneration, it is essential to define what exactly the lead is. This could e.g. B. be a completely submitted form or the registration for a newsletter. Since the value of the lead is often fixed for the online retailer, the remuneration is also a fixed amount, e.g. B. "10 € per newsletter subscription".

CPC - cost per click

With cost-per-click remuneration, the partner receives a fixed (absolute) remuneration for each click with which a user visits the website of the online retailer. This remuneration should be relatively well known in performance marketing, because the basic business model of Google's search engine ads is based on it. Many large partner sites in affiliate marketing now require a CPC fee for a collaboration. This enables them to better calculate and estimate what the cooperation will bring them.

CPM - cost per mille

This form of billing is also known as the thousand-contact price (CPM). This makes it clear: There is no difference between CPM and TKP. A cost-per-mille payment pays out a commission for 1,000 advertising contacts with users. So could z. B. a display partner set a CPM of 3 €. If he now displays his ads and thus generates 120,000 views, he receives a remuneration of (120,000 / 1,000) * € 3 = € 360. The type of remuneration still plays a role, especially in media buying / display advertising and email marketing.

CPA, CPI and other models

From the previous remuneration models, others have been developed that are mostly based on the existing billing types and have only been adapted to a specific application. So was z. B. with CPA - cost per action (also known as Cost per Acquisition or Cost per Transaction) found a very general term for a billing model. What exactly the "action" is here is completely open. It could e.g. B. Downloading a white paper, registering for the newsletter, creating an account, sharing a post or the like. It is also open whether it is billed in absolute or percentage terms.

With the rapidly growing number of apps, their promotion is also becoming more interesting. For this purpose z. B. the billing model CPI - Cost per Install Are defined. The download and installation of an app are paid for here. In almost all cases, there is a fixed remuneration, i.e. no percentage billing. If additional technical requirements (mobile tracking) are necessary here, the model is only a modification of CPO, CPL or CPA.

Lifetime compensation

A lifetime remuneration offers the affiliate a special incentive: multiple commissions are paid out. When the first hurdle has been overcome and the customer has been referred, the advertising partner “automatically” receives a commission for further orders.

This enables them to build up a “passive” income from which they can benefit even without advertising activities. Important: Lifetime does not necessarily mean "for life". The model can also be restricted in such a way that e.g. B. only follow-up transactions in the first year are remunerated or a monthly commission payment is made as long as the user is still a customer.

Hybrid billing models

Of course, the billing models listed can also be cleverly combined. The combination allows z. B. split the risk between partner and online retailer. Furthermore, you can offer your advertising partners additional incentives that make the cooperation even more fruitful.

For example, CPC and CPO can be combined by offering a partner a click fee (CPC) to provide them with basic security for cooperation. If transactions then result from the clicks, these can also be remunerated on a percentage basis - depending on the size of the shopping cart (CPO). The advertising partner then has a well-founded incentive to qualify or select the generated traffic as high as possible, as this enables them to increase their own income. The following combinations work similarly:

  • CPC-CPL, CPC-CPI
  • TKP-CPO, TKP-CPL

A combination of CPL and CPO is also conceivable. In this case, the affiliate receives a (smaller) commission if he can get a user to fill out a form. If the user then makes a purchase later, an additional CPO (either percentage or absolute - depending on the product) would be paid out.

The imagination knows no limits. Insofar as the desired model can be represented technically and appears attractive, it is certainly worth a try.

Conclusion

Even if every billing model has its own peculiarities, it became clear that they overlap a lot: If the lead of a CPL is defined as an order, it could be called a CPO. Many abbreviations are used synonymously: cost per acquisition, cost per action, cost per order or pay per order can all mean the same thing in the end.
Regardless of this, all remuneration models should be precisely calculated so that both partners (online retailer and e.g. affiliate) benefit from the cooperation to the same extent and thus long-term cooperation is possible.

The second part carries out strategic considerations that are linked to these commission models. There we then specifically refer to our favorite area: Affiliate Marketing. There you can read more about the calculation of the models, the advantages and disadvantages, the distribution of risk between merchant and affiliate and the influence of Post View and Post Click.