Pricing and Payment Structure of Affiliate Programmes

The majority of affiliate programs today (80%) use revenue sharing or cost per sale (CPS) as a compensation method, 19% use cost per action (CPA), whilst the remaining programs use other methods such as cost per click (CPC) or cost per mille (CPM).

Cost per Mille (CPM)

Cost per mille requires only that the publisher make the advertising available on their website and display it to their visitors in order to receive a commission. The publisher is not concerned about a visitor being a member of the audience that the advertiser tries to attract and is able to convert, because at this point the publisher has already earned their commission. This leaves the full risk and loss (if the visitor can not be converted) to the advertiser.

Pay Per Click (PPC)

Pay per click requires that the publisher make the advertising available on their website and display it to their visitors, and also requires that the visitor clicks on the advertisement to visit the advertiser's website. This method has diminished in use over time due to click fraud issues.

Cost Per Action (CPA) and Cost Per Sale (CPS)

Cost per action/sale methods require that referred visitors do more than visit the advertiser's website before the affiliate receives commission; the advertiser must convert that visitor first. It is in the best interest for the affiliate to send the most closely-targeted traffic to the advertiser as possible to increase the chance of a conversion. The risk and loss is shared between the advertiser and the affiliate.

Multi-Tier Programs

Some advertisers offer multi-tier programs that distribute commission into a hierarchical referral network of sign-ups and sub-partners. So for example, if publisher "A" may sign up to a program with an advertiser and will get rewarded for the agreed activity conducted by a referred visitor. If publisher "A" then attracts publishers "B" and "C" to sign up for the same program, all future activities performed by publishers "B" and "C" will result in additional commission (at a lower rate) for publisher "A".

Two-tier programs exist in the minority of affiliate programs; most are simply one-tier. Referral programs beyond two-tier involve multi-level marketing (MLM) or network marketing.