here are a few different flavors affiliate deals come in. In this article we'll highlight a few of the most common ones, as well as discuss the pros and cons of each, and which deal to go for as an affiliate, given your constraints and goals.
Deal #1: Net RevShare
The most common of affiliate deals, the net revenue deal, is the simplest to understand. A net revenue deal pays the affiliate based on the amount of revenue they drive the brand, less the operators cost to service that revenue. For example, on a "30% net" deal, an affiliate that drive $1k worth of traffic, where the operator incurs $100 in processing fees, would get paid 30%*($1000-$100) = $270.
Deal #2: Gross RevShare
A gross revenue share deal, is very similar to a net deal - the affiliate is compensated based on a revenue share agreement for the revenue they drive to a brand - except there are no deductions based on the operators costs to service that traffic. That is, the affiliate payment is based on the top-line "gross" revenue they drive to the brand. In the same above example of an affiliate driving 1k in revenue, a "30% gross" RS deal would yield 30%*(1000) = $300 in affiliate payments.
For brands that have large internal processing costs, gross deals tend to be preferred, and also given their simplified nature, affiliates will never get hit with hidden fees. For this reason, when available, gross deals are generally preferred.
Converting from a net deal to a gross deal depends on the profit margin of the brand. For most brands we see net to gross ratios of about ~70%, however this can vary significantly.
Deal #3: CPA
A CPA deal, is a deal where the affiliate is paid a fixed amount based on a certain action - usually this is a player depositing and meeting minimum wagering requirements, however there do exist CPA deals where simply a sign up triggers a CPA payment.
Deal #4: Hybrid
A hybrid deal, is a combination of both a CPA and RevShare deal. A $50 + 20% hybrid deal for example would yield a $50 payment upon an acquisition, and a 20% net RevShare payment thereafter. Typically hybrid deals are used when an affiliate wants some combination of the benefits that a RevShare provides, while maintaining the stability of a CPA agreement.
It is considered standard practice for the CPA portion of a hybrid deal to be protected in that negative revenue driven is not offset against the CPA portion of the payment. For example, if there's a -$1000 payment from the prior month, and the affiliate sends 2 depositors the next month who continue to drive negative revenue, in the above hybrid example, they'd still get paid $100.
When to go for a RevShare deal
A rev-share agreement will typically end up being higher expected value for the affiliate, and thus if there is no concern for monthly volatility, a RevShare deal makes more sense. Much of the revenue from affiliate marketing within iGaming comes from just a few customers, and these tail end outcomes are difficult to price in with a CPA agreement.
Thus, it becomes a risk-reward calculation, where the affiliate needs to compute the forecasted LTV of their customers and then figure out which deal is superior.
When to go for a CPA deal
A CPA deal provides a more stable stream of cashflows - it's impossible to end the month in the red in a CPA deal. If the affiliate can predictably send customers to a brand, they can reliably predict their revenue, which is very useful for business purposes. It's hard to scale a business operationally if you don't know what your revenues will be, which you won't get from RevShare agreements, without huge scale. In fact, even the brands themselves can have 50%+ month over month fluctuations on their revenue from existing traffic.
For affiliates just starting out, or those that rely on lower margins as they have higher marketing costs, a CPA deal may make more sense.
When to go for a Hybrid deal
Although the least popular of the affiliate deals, a hybrid deal can make sense when an affiliate is not yet ready to make the extreme tradeoff between Revshare and CPA. If an affiliate wishes to maintain some stability with their cashflows, while at the same time capturing some of the upside of sending one of those few very valuable customers, a hybrid deal is a logical choice.
In summary, you can think of CPA deals a bit like buying insurance on your affiliating business. While over the longterm you will likely pay some premium for going with a CPA deal, the stable source of cashflow they provide can make them a net benefit for lower margin affiliate businesses that require meticulous planning of cashflow for their operation.
More from
Deals
category
WPT - An Early Look
