The rise of blogging, interactive online communities and other new technologies, web sites and services
based on the concepts that are now called Web 2.0 have impacted the affiliate marketing world as well.
The new media allowed merchants to get closer to their affiliates and improved communication between
each other. New developments have made it harder for unscrupulous affiliates to make money.
Emerging black sheep are detected and made known to the affiliate marketing community with much greater
speed and efficiency.
Main article: Compensation methods
Predominant compensation methods
80% of affiliate programs today use revenue sharing or cost per sale (CPS) as compensation method, 19%
use cost per action (CPA) and the remaining 1% are other methods, such as cost per click (CPC) or cost
per mille (CPM).
Diminished compensation methods
The use of pay per click (PPC/CPC) and pay per impression (CPM/CPT) in traditional affiliate marketing
is far less than 1% today and negligible.
Cost per mille (thousand) (CPM/CPT) requires the publisher only to load the advertising on his website
and show it to his visitors in order to get paid a commission, while PPC requires one additional step in
the conversion process to generate revenue for the publisher. Visitors must not only made aware of the
ad, but also pursue them to click on it and visit the advertiser's website.
Cost per click (CPC/PPC) used to be more common in the early days of affiliate marketing, but diminished
over time due to click fraud issues that are very similar to the click fraud issues modern search
engines are facing today. Contextual advertising, such as Google AdSense are not considered in this
statistic. It is not specified yet, if contextual advertising can be considered affiliate marketing or
Compensation methods for other online marketing channels
Pay per click is the predominant compensation model for pay per click search engines and their
contextual advertising platforms, while pay per impression is the predominant compensation model for
display advertising. CPM is used as a compensation method by Google for their AdSense/AdWords feature
"Advertise on this website", but this is an exception in search engine marketing.
While search engines only recently started experimenting with the compensation structures of traditional
affiliate marketing, such as pay per action/CPA, they have used similar models in display
advertising, offering CPA as early as 1998. By the end of 2006, the market share of the
CPA/performance pricing model (47%) caught up with the CPM pricing model (48%) and will become the
dominant pricing model for display advertising, if the trend of the last 9 years continues in 2007.
CPM/CPC versus CPA/CPS (performance marketing)
In the case of CPM or CPC, the publisher does not care if the visitor is the type of audience that the
advertiser tries to attract and is able to convert, because the publisher already earned his commission
at this point. This leaves the greater, and, in case of CPM, the full risk and loss (if the visitor can
not be converted) to the advertiser.
CPA and CPS require that referred visitors do more than visiting the advertiser's website in order for
the affiliate to get paid commission. The advertiser must convert that visitor first. It is in the best
interest for the affiliate to send the best targeted traffic to the advertiser as possible to increase
the chance of a conversion. The risk and loss is shared between the affiliate and the advertiser.
For this reason affiliate marketing is also called "performance marketing", in reference to how
employees that work in sales are typically being compensated. Employees in sales are usually getting
paid sales commission for every sale they close and sometimes a performance incentives for exceeding
targeted baselines. Affiliates are not employed by the advertiser whose products or services they
promote, but the compensation models applied to affiliate marketing are very similar to the ones used
for people in the advertisers' internal sales department.
The phrase, "Affiliates are an extended sales force for your business", which is often used to explain
affiliate marketing, is not 100% accurate. The main difference between the two is that affiliate
marketers cannot, or not much influence a possible prospect in the conversion process, once the prospect
was sent away to the advertiser's website. The sales team of the advertiser on the other hand does have
the control and influence, up to the point where the prospect signs the contract or completes the