The affiliate marketing business model mainly operates on a fairly straight-forward pay per sale method. This is actually what 80% of affiliate programs use to this day. Nineteen percent of companies use a cost per action business model and the rest of them use a cost per click or cost per mille (CPM, cost per 1000 views).
CPC and CPM account for less than one percent of affiliate programs at the moment, although these payment methods are still used frequently in paid search marketing.
CPM requires that the affiliate publishes an ad on his/her website. Once the ad receives 1000 impressions the affiliate is paid a commission. PPC (Pay-Per-Click) requires an additional step in the process where a visitor is required to click on the ad before the affiliate gets compensated.
CPC was a lot more common in earlier days of affiliate marketing but is now almost non-existant due to things like fake clicks and the like. While CPC is almost non-existant in e-commerce and online advertising industries, they are still prevalent in some places. China is an example of a country where affiliate marketing works completely differently. Many affiliate over there get paid a flat rate on a daily basis with certain networks offering CPC and CPM payment models.
In the case of CPM and CPC, the affiliate doesn’t care about the relevancy of the traffic because he only need to generate impressions and clicks to get paid. In many cases the merchant ends up losing out in a big way because the traffic is worthless and doesn’t convert but they still have to pay to affiliate their commissions. This is partly the reason why these compensation methods are almost non-existant now.
Another term for affiliate marketing is “performance marketing”. This is in reference to how salesmen are usually compensated. These employees are paid a commission for each sale they make, incentivising them to work harder to generate more leads and make more sales. Affiliate marketers aren’t employed by merchants in this way but the same compensation method applies to affiliate marketing now.
People often say that “affiliates act as an extended sales force for your business”, this statements isn’t strictly accurate. The main difference between the two is that affiliate’s don’t really provide much influence to a potential customers in the conversion process once they’ve clicked onto the merchant website. It can be said though that affiliates do prequalify prospects with the content on their website. This could be in the form of a review for a product or an outstanding piece of content.