CPA Networks: Effective but Proceed with Caution

November 7, 2005

By J.T. Stephens
Director of Auctions Marketing & Business Development,
Overstock.com Auctions

A popular debate among affiliate managers centers on whether or not value is added to affiliate programs by CPA Networks, which are online marketing companies that recruit advertisers from around the Web and pay them to promote different merchant offers.

Some affiliate managers argue that CPA Networks fail to add value because they poach advertisers who are already in merchant affiliate programs. Others insist CPA Networks add tremendous value because they attract new and unique advertisers who in turn, deliver new valuable customers.

Regardless, CPA Networks are emerging as major players in the online marketing world. These marketing companies have direct access to groups of advertisers who, through a wide array of marketing techniques, have the potential to drive a high volume of clicks, sales and new customers.

However, managing a CPA Network can be difficult if you also run an affiliate program with a major Affiliate Service Provider such as LinkShare or Commission Junction. Here are some tips to help you achieve a favorable ROI while working with these networks:

1. One Offer, One CPA Network: Working with more that one CPA Network can lead to trouble. When affiliate managers come to the online marketplace with multiple offers, capitalism intervenes and fierce competition ensues. CPA Networks pay their advertisers to promote merchant offers. Advertisers will migrate towards the network that provides the best payout for a given offer. If two offers exist, CPA Networks will undercut each other to retain advertisers and hold market share. Eventually, they end up giving away all of their margin and stop pushing the offer. To avoid this problem, research the CPA Networks in the marketplace and choose one. If your offer is exclusive and yields a good earnings-per-click ratio (EPC), you will end up attracting many new advertisers.

2. Communicate Your Business Needs: When merchants clearly communicate their online marketing requirements to CPA Networks, the partnerships can thrive. Before committing to any deal, ensure that the CPA Network accepts your affiliate terms and conditions. You should also provide networks with an email suppression file, a list of marketing companies/affiliates on your blacklist and a list of your top affiliates that the network cannot contact.

3. Be Alert to Other Affiliate Activities: Unlike Affiliate Service Providers, CPA Networks seem to take a more cavalier approach towards the issues that plague the affiliate industry (such spyware, CAN-SPAM and adware). Many affiliates who violate affiliate standards agreements and are blacklisted by major Affiliate Service Providers seek refuge as advertisers in CPA Networks because their activities are not policed as heavily. As a result, merchants partnering with CPA Networks run the risk of inadvertently doing business with unscrupulous affiliates.

4. Pricing: Some CPA Networks are notorious for commanding exorbitant fees to run offers. During the negotiation process, networks will often tell affiliate managers their offer is too low and that the network is getting twice as much from another merchant. Keep in mind that for networks and advertisers, online marketing is an EPC game. Also, there are many up-and-coming CPA networks looking for new offers all the time. Competition is heating up and that’s good news for affiliates. Companies with great offers, recognizable brands and high consumer ratings can do well, even at a lower CPA. If a merchant offer converts well, advertisers will flock to any given network to get access to that offer.

Affiliate managers should also make sure that their CPA Network payout is less than or equal to what they pay their Affiliate Service Provider. This decision will prevent affiliates from abandoning their Affiliate Service Provider to join up with CPA Networks.

5. Define Your Marketing Strategy: Once you have finalized pricing, be sure to clearly outline a marketing message that is consistent with your company objectives. Do not let the networks determine how to market your offer. Many network advertisers are huge proponents of the “Click Here and Get a Free iPod” tactic. Affiliate managers should avoid participating in these types of promotions. While the “free item” strategy works from an EPC standpoint (these types of ads seem to be everywhere on the Web), consumers need to jump through several hoops to get the free prize. These consumers are likely more interested in the prize than the merchant offer. As a result, this form of advertising may yield ineffective results.

There are many CPA networks committed to delivering both merchant and advertiser satisfaction. Some of these networks include Endai Worldwide, Adteractive, Metarewards, and The Vendare Group. Affiliate managers who spend the time to find a network that suits their marketing objectives and follow the correct steps to set up a compelling offer have a wonderful opportunity to develop a new powerful online channel.

Source: revenuetoday.com