Each has its benefits, its drawbacks, and its applications. Generally speaking, certain types of compensation pay more than others, but it should be noted that these rates can vary greatly, especially when it comes to highly competitive industries.
Most companies place a high value on leads and offer pay-per-lead (PPL) – often considered a type of pay-per-action (PPA) – compensation methods. As with most affiliate networks and compensation methods, the rate can vary greatly from advertiser to advertiser and from industry to industry. Lead-generation programs offered through affiliate networks can pay anywhere from $2 to $20 or more.
Subscription-based services, such as internet service providers and cell phone networks, as well as other service-based vendors, tend to use this model.
Pay-per-sale (PPS) requires payment in the form of a commission each time a product is sold. This commission is almost always a percentage of the total cost of the product. As with the other compensation models, the exact rate can vary greatly. But, in general, this rate has the potential to be as high, if not higher, than the others.
Some sales, such as a $2.99 ebook with a 6% commission, doesn’t have a lot of monetization potential, given the low commission rate as well as the low conversion rate for purchases. A camera, however, that generates the same commission on a $1,500 sale would have the potential to be much more lucrative.
This compensation model is very common in affiliate marketing and can earn marketers a great deal of income, but it is also highly competitive and quite time-consuming.
Pay-per-click (PPC) advertising is one of the most ubiquitous, common terms in the online advertising world. With this compensation method, marketers earn money each time a person clicks on an advertisement. Anyone who wishes to monetize an app or a website, for instance, can insert PPC ads as a way to generate an online income stream.
In general, PPC ads don’t earn very much revenue – often less than a few cents. Highly competitive niche markets, however, can pay much more. Logically speaking, then, the more traffic you have and the more you engage them, the more money you will earn.
Pay-per-impression (PPI) ads are another common compensation model for display ads and text ads. They generate revenue based on the number of times people view the ads. From the advertiser’s perspective, this compensation method is typically called cost-per-mille (CPM), which means cost-per-thousand impressions.
As with PPC, the pay tends to be low relative for this compensation model, and often requires large amounts of traffic in order to gain a significant income.
Which Compensation Model is Best for Marketers?
After reading the above descriptions, it may seem that PPL and PPS are the better way to go. After all, they earn you much more money, so why wouldn’t you?
It’s true, but there are other factors that you should take into consideration.
PPL and PPS take more time to implement. Adding ads to your website, software program, or browser extension is usually a matter of inserting the proper code. And if you have enough traffic to your site or users engaged with your app, you’ll be able to generate decent revenue.
On the other hand, it can be harder to convince someone to spend money on a product or service. You have to put time and effort into contextualizing the offer, creating good content to pitch the sale, and earning people’s trust. This type of marketing can often be a part-time or even full-time job.
Affiliate marketing is highly competitive. Generally, when people use the term “affiliate marketing,” they are referring to PPL, PPA, and PPS compensation methods. Because this type of marketing can be so lucrative, it is also highly competitive. The niches have all become saturated with talented, tech-savvy marketers who make it very difficult to squeeze in. And, as time goes on, these fields will only become more competitive.
Certain types of content are more suited to certain types of marketing. PPC and PPI ads are ideal for certain types of content, but not as ideal for others. They can be excellent for monetizing software, apps, or browser extensions, for instance. Since PPS and PPL marketing often relies heavily on context and content, it can be more of a creative and logistical challenge to use these types of marketing to monetize anything code-based.
While there is no one right way to monetize anything, there are two general things to consider: what type of content you’re trying to monetize and how much time you have to put into your online marketing efforts. For those who want to put less time into marketing and more time into content creation, PPC and PPI ads are probably the way to go. But for those who want to focus on the marketing side of things, context-driven sales, and so forth, PPL and PPS compensation methods will probably work well.