CPA over Revenue Share: Why CPA makes sense
Most affiliates/webmasters are probably comfortable on revenue share but as the years go on, that comfort is starting to fade and CPA is slowly starting to look like the new standard revenue model. CPA (cost per acquisition) is a flat fee you are paid for referring a depositing player whereas revenue share gives a cut of the recurring commissions to the referring website. Of course revenue share is attractive on a product like gambling where you continue to earn as players can continue to deposit. It seems that as online gambling sites were setting up their affiliate programs, revenue share became the default. Rev share was ideal back in the day when the industry had less regulations to deal with.
Recently casino affiliates have been shafted by a few affiliate programs that probably makes all of them wish they were on a CPA deal than a lifetime revenue share that doesn’t really seem to be for life:
- Refilliates sold to BestPay Partners and both affiliate programs appear to be shut down
- Betfair Affiliates closing accounts and reducing revenue share
- Smarkets Affiliates closing accounts
As you can imagine, there are many pissed off affiliates that have experienced problems with these 3 affiliate programs that have lost earnings overnight. If all of them were on a CPA deal, there would be a lot less pain.
There are other factors that make CPA more attractive over revenue share and it might be worth considering CPA on some brands whether you question their reputation, their ability to retain players and whether you think they’ll be around for a long time. Let’s look at some of the negative situations that make CPA a wiser choice.
- Regulated markets introduces more taxes or in some cases losing a market
- M&A - Mergers and Acquisitions
- Programs that close
- Programs have poor retention
- Program gains a poor reputation
- Programs introducing MAQ or predatory terms and conditions
- Forced terms & conditions
- Cross Promoting
- Flat Rate Fees
Regulated Markets with taxes & fees going to the affiliate
When programs setup their lifetime revenue share agreement, it was done at a time when things were the way they were without much thought of what would happen in the future. Given that none of us can accurately predict what will happen, it’s not easy to carry an agreement in place knowing that things will change. You don’t know what fees and taxes will be passed onto the affiliate. Also when a program pulls out of a regulated market, well you have just lost all the players you have referred to date and you would be hoping you earned enough commissions at that point that would be greater than what you would have got at a set CPA deal.
Mergers and Acquisitions
Just like in the case of Refilliates being sold, M&A is becoming normal in the industry and when this happens, you don’t know if a rogue company is going to acquire one you have had a good relationship with.
Programs that close
Of course when a brand closes that you have dumped a lot of effort into, you are saddened that your efforts didn’t pay off. On a CPA model this wouldn’t be as painful but of course keeping in mind that this would be implied future income the program has paid you for but if they can’t stay in business, this shouldn’t be your problem.
Programs with poor retention
Once you refer a player to a gambling site, your job is done which is the acquisition part. Now the retention is where you would benefit on revenue share. We know not all programs are very good at acquisition and/or retention so when a program is below average in this area, CPA becomes advantageous.
Programs that gain a poor reputation
A program can go rogue overnight so when this happens, you are naturally going to promote them less unless you don’t care about that and you earn commissions one way or another. Often for some programs that introduce performance quotas or minimum activity quotas, having your revenue share deal cut shouldn’t be coming fully at your expense. When these situations happen, you’ll want to have had more CPA deals than revenue share.
Programs introducing MAQ or predatory terms and conditions
MAQ (minimum activity quotas) are just not fun to deal with and is something you’ll see more with sportsbooks. Basically a program will reduce your revenue share commission if you don’t send traffic or refer a certain number of players in a specified period of time. MAQ hold affiliates captive and forces them to promote a brand when they might not want to in order to avoid having your commissions reduced. This is equally painful when a program has tarnished their own reputation, it makes you want to send your players elsewhere. An argument many affiliate programs have for needing to enforce these terms and conditions is that they shouldn’t be paying out an affiliate more money if they are not promoting them, or maybe are not updating their marketing materials. Another argument for MAQ is to ensure that these affiliates are not referring their own players. I personally think these MAQ can be avoided with other terms to satisfy the complaints some programs have but these MAQ give too much power to a program to just reduce commissions on an affiliate. For big portals that have lots of traffic, this might not ever be an issue, but it certainly harms the affiliates that are trying to get bigger and grow. If you don’t like the terms and conditions you are offered by a program, then CPA avoids these problems completely as there is no running contract in place. If a program wants to cut off your contract when you are on a CPA deal, you haven’t risked your future income as it was indirectly paid for by having the CPA in the first place.
Forced Terms & Conditions
Ever login to a program only be fed a giant page of terms and conditions that you must accept in order to continue? You might see this sort of thing at NetRefer programs and it’s another unfortunate feature we see from affiliate programs. In order to get the latest marketing materials, update your payment methods or do anything functional with the affiliate program, you are forced to accept the terms and conditions without an option to reject them.
If you have an affiliate program with more than one brand under their umbrella, you would want to know if you are paid for when players are cross promoted to other brands. If this happens and you are not paid for this activity, then on revenue share it is bothersome that a program would take the extra effort to virtually detag your player from your account. In a CPA model, they have already paid for that single player so at that point they have no incentive to cross promote the player. You can argue the same for companies that have multiple gaming verticals that don’t pay for players that play other gaming products. Of course the idea is that no matter how you refer that player, you are wanting a specified CPA amount that takes into consideration what your players are worth.
One program that was once well known for cross promoting and not paying commissions when players are cross promoted is Rewards Affiliates. The discovery of the cross promotional activities was well documented at gpwa (you can read that here), a representative has informed us that they fixed the issue, we couldn't find much information that the program has changed their ways and there is no mention of this in their terms and conditions despite a warning of the program at AffiliateGuardDog.com. The problem with this type of situation, the affiliate program has a big incentive to encourage players to switch casinos which cuts off revenue share on the spot when players do switch. On a CPA model, the casino has paid for that single player so since the money has already been paid out, it doesn't make sense to go through the effort to refer that player to another casino within their large network.
Shaving is something nobody likes to talk about on the record but off the record people acknowledge this happens. On a revenue share deal, you are trusting the affiliate program will not do anything to influence the results of your commissions. In the past we have heard of things like players being de-tagged, phantom cashouts being added to reports or added bonus money to reduce the commission payment due. When you are relying on the affiliate program to provide you with accurate data, the rest comes down to both trust as well as how much you are earning. You can almost pen this down to retention, if a program is not earning you much in commissions or can’t retain your players, why bother sending them more players if the commissions are never there. On CPA, it makes it difficult for a program to shave because you can probably test when you are sending depositing players to a program but you probably will never know if those players are still playing and tagged to you. In the case of CPA, this removes another uncertainty for you.
Flat Rate Fees
Of course if you don’t like revenue share or CPA, flat rate fees as a possibility but I think they are complicated models unless they include either CPA or revenue share.
Balancing Revenue Share with CPA
I think given all the scenarios that have happened over the past few years, just relying on just revenue share is a bit risky. If there are some programs you are unsure about their future then CPA might be an ideal way to go where you can balance your risk. Of course CPA implies a short term gain of money earned now at the expense of a higher amount for continuous players. When you look at all the programs that have been axing affiliate commissions, it’s hard to know how long you will work for a program as revenue share implies a contract is in place and lifetime revenue share is lifetime trust. Some of the best affiliate programs 5 years ago are not necessarily the best today. Even with new ones like Smarkets Affiliates launching, they went from having a lot of promise to closing affiliate accounts without any explanation other than they are exercising the right to terminate the contract.
Affiliates can have some influence over affiliate programs but it is up to affiliates to use their choice of which programs to promote and to be more aware of what the terms and conditions are for a program. Trust amongst webmasters and affiliate programs is deteriorating ever since Grand Prive axed their affiliate program. Many programs do want to enforce the final say on any partnership and that is becoming tougher to avoid. In online marketing, things change all the time so the idea of having an ongoing contract for 5 or more years is starting to appear unrealistic. There are some programs that you will trust and prefer a revenue share deal but for all the rest, sometimes CPA starts to make more sense. There are many brands that treat players decently but don't have the same respect from affiliates, programs like this it becomes an easier decision to work on a CPA basis. If you treat your affiliate programs like investments, you'll want to diversify your risk. The big advantage of CPA is you eliminate the complications of an ongoing contract where the playing conditions can change month by month. You eliminate the fear of losing any lifetime revenue problems if the program does cut your commission, you eliminate the fear of wondering if your stats are accurate and the short term gain of CPA gives you income that you can use to reinvest and not have to wait for that future return. Even when a program has to pull out of a market, you both lose on a revenue share deal but the affiliate has come out on top on the CPA deal. When you add up all the problems of gambling affiliates getting shafted over the years it makes you wonder if some of those affiliates would have come out on top with a CPA deal. From PokerStars Partners closing accounts, Betfair reducing commissions and not paying affiliates for Romanian players to Refilliates and BestPay Partners closing their affiliate programs while they run Driven Affiliates. You can also read an article from ThePOGG.com about why minimum activity quotas are bad for affiliates and players.