The Global Business of Affiliate Marketing


iGaming Business' forthcoming Global Business of Affiliate Marketing Report


In an excerpt from iGaming Business' forthcoming Global Business of Affiliate Marketing Report, the first dedicated affiliate report in the market, Renйe Mate, Affiliate Co-ordinator at RewardsAffiliates.com provides and in-depth analysis of the commission structures at work in the modern iGaming affiliate sector.

Commission models explained: CPA, RevShare, Hybrids and the Wager model

One of the first questions to spring to the minds of affiliates, when he or she starts in the business, is "How do I get paid?" It's natural to ask, because you're in the business to make money, but shouldn't you be clued up not only on how you are getting paid, but what you can expect from each commission model, which can then help you understand how to get the most from your traffic?

CPA model

The first commission model most people will know about is the CPA model (Cost-Per-Action or Cost-Per-Acquisition). The basis of the CPA model is a one off payment for an 'action', which is generally a minimum requirement of some sort. Some programs, depending on their core business, will introduce requirements such as real money player registration, player wagering amounts (e.g. 30 x deposit), number of raked hands if they are a poker player (e.g. 500 or more), or the most popular, a minimum deposit amount (e.g. $100).
Some groups opt for a tiered CPA commission model, which pays the affiliate a higher CPA depending on how many players are sent. An example may be something like this:

0-5 players: $50
6-15 players: $100
16-25 players: $150
26-35 Payers: $200
36-45 players: $250
46-55 players: $300
56-65 players: $350
66+ players: $400+


This model can have major pitfalls for either party, especially if one side is not performing. It is generally good for poker affiliates or affiliates whose main traffic are players looking for games of skill (since these games have a high win rate for the player). Searching around the Internet, you will find that the majority of affiliates do not recommend this method.

The upside to this model is that most CPA amounts are usually negotiable based on player value and a working history with the group you are approaching.

RevShare model

The second widely-used commission model is the RevShare or Revenue Share model. There are many variations on this model including tiered or flat commission percentages, as well as inclusions and exclusions on what is and is not commissionable. The basic idea of RevShare is that commission is paid on gross player losses. Some groups may also choose to deduct certain items from the amount commissionable, like progressive jackpot fees, bonuses, cash-ins, chargebacks, payment fees and other admin costs.

Varying or tiered RevShare is where you are paid a varied percentage of player loss depending on the amount of players you bring in, or the amount of revenue the players you bring in generate. An example of this could be:

0-5 players: 20%
6-10 players: 250%
11-15 players: 30%
16-20 players: 35%
21+ players: 40%


OR

$0-1000: 20%
$1001-5000: 25%
$5001-$10000: 30%
$10001-15000: 35%
$15001+: 40%


These are the most common commission models. Percentages of player loss and figures for amount of players brought in, and the amount of revenue brought in vary depending on the group. The great thing about this model is that the more traffic you bring to the group, the bigger and better your commission is. Most affiliates opt for this model if it is available.

Also available as a RevShare option is a flat commission model where the program pays out all numbers and players at one percentage. This means that whether you bring one player or 100 players, you are paid the same percentage commission of player loss on either of the two scenarios.

This is the most popular commission model; however, not all groups offer it.

The upside to the RevShare model is that almost all groups assign the player to the affiliate for life, which means the affiliate is paid a percentage of player losses for the lifetime of that player.

Another variation of the RevShare model is the 'Purchase model', where affiliates are paid a percentage of player deposits. This model is very rare. However, the upside is that your commission will always be a fixed amount of the deposits and cannot go up or down if a player wins or loses. With this model, you can almost guarantee the commission you make at the start of the month will be the same at the end of the month if the circumstances are regular, i.e. no chargebacks, bonus abuse or fraud.

Hybrid model

The Hybrid model is on-the-up amongst affiliates because it is a mix between the RevShare and CPA models. The Hybrid model will usually consist of a smaller RevShare percentage than the regular one offered, plus a basic CPA amount. A couple of examples are:

25% + $150 CPA
30% + $50 CPA

This model consists of all properties of the CPA and RevShare models mentioned above, including a minimum requirement for the CPA part of the model. In most cases, a minimum deposit amount or minimum wagered amount is required in order for the CPA part of the model to be activated.

An example may be that the hybrid consists of 25% RevShare plus $150 CPA. While the affiliate may be earning 25% on any losses, the CPA will not be paid out until the minimum deposit amount or minimum wagered amount has been met. The minimum requirements for the CPA part of the model should be discussed with your affiliate manager.

The upside to this model is that you have a one-off bulk payment for the player, as well as the ongoing percentage commission. The downside to this model is that since the percentage commission is lower than the regular one offered, in the majority of cases over the long-term, you will not be earning as much commission on this player as you would have done going with the RevShare-only option. Another downside is that if the player never makes the minimum requirements in order to activate the CPA part of the model, you will earn less on this player than you could have done on the RevShare model alone.

Wager model

Last but not least is the Wager model, also known as 'WagerShare', the 'Vegas model' or the 'Theoretical model'. This model is used in land-based casinos by casino hosts and is one of the oldest commission-based models.

The model is based on margins on each game type and player wagering amounts, paying a percentage of the margin on each game type. It takes into account that certain games pay out more than others and accommodates for this, allowing the affiliate to earn a commission regardless of whether or not the player wins or loses. The reason it can also be known as the 'Theoretical model', is because it calculates the amount you would earn on the player losses 'in theory' over a period of time, and pays it out in even portions. This means that over time, the amount you would have earned on, for example, the RevShare model, is spread out evenly so that rather than having one big month, then the next month being negative, affiliates receive a steady commission each month.

With the Wager model, commission can never fall from a player winning and will only ever get higher as long as the player is playing. If the player decides to spend their winnings back at the casino, the affiliate will also earn on the wagering of the player win.

Although this model is new to the online gaming world, it has been used by a few groups to date. Some have incorporated the tiered commission structure into the model, and others pay at a flat percentage rate. The payout percentages for each game type rely absolutely on the margin on each group's properties. A great example of this is video poker. Since it is the highest paying game, the commission percentage on it would be lower. This is because over a period of time, the affiliate would have earned less, if anything at all from a video poker player, since there is approximately a 98% chance he/she will win. Since the affiliate earns regardless of win or loss on the wager model, the affiliate will earn a commission in this case, rather than be in the negative as they would have been, had they have been on the RevShare model.

The upside to this model is that, like the RevShare model, this commission model is mostly paid on the lifetime of the player, so over the long-term, this model stands to earn you the most commission per player. Since this model is also based on player wagering, the amount of potential earnings per player is not restricted to a percentage of their losses, and in the case of a high turnover player, it can even be much higher than the amount the player has deposited.
 
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