CPA vs RevShare: How to Choose a Commission Type in Affiliate Marketing

Veranika Minina 02 July 2024 Beginners Guide
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Table of contents:

  1. Commission Types Meaning
  2. What is CPA Commission Model
  3. What is Revenue Share Commission Structure
  4. Main Differences Between CPA and RevShare
  5. How to Choose Commission Type in Affiliate Marketing?

Commission structures are crucial for determining the success and profitability of affiliate marketing campaigns. Two prominent models, Revshare and CPA, have become popular choices. Deciding between them requires careful consideration of factors such as offers vertical, target audience, control preferences, and risk tolerance.

This article delves into the differences, benefits, and drawbacks of CPA and RevShare, aiming to help advertisers and affiliates make an informed decision. By taking into account the insights, you can change your approach to running affiliate traffic.

Commission Types Meaning

As you know, affiliate marketers promote offers provided by advertisers and earn a commission for each successful action: sale, lead, form filling, registration, click, etc. The sum of the commission is determined by merchants based on the type they set up.

So, the affiliate commission model refers to the various ways in which affiliates can earn payments for promoting and driving desired actions for an advertiser’s products or services.

Here are some common commission models in affiliate marketing:

Commission ModelDescription
CPACost Per Action or Cost Per Acquisition means affiliates earn a commission when a specific action is completed by a referred customer.
CPLCost Per Lead is a commission model where affiliates earn a commission for generating leads.
CPSAccording to Cost Per Sale type, affiliates earn commission for sales made by users.
CPCCost Per Click is used to describe the cost an advertiser pays for each click on an advertisement.
CPMCost Per Mille means that advertisers pay for every thousand impressions of their ad.
RevShareRevenue Model is a commission structure according to which affiliates earn a percentage of the revenue generated from their referred customers’ purchases.
HybridThe term typically refers to a commission structure that combines multiple models, such as CPA and RevShare.

In this article, we will focus on the top 2 commission types: CPA and Revshare. The task is to find out the difference between these models and decide which one is more useful for you. So, let’s start our research with the meaning of CPA.

What is CPA Commission Model

CPA is an affiliate marketing commission model that allows affiliates to earn commissions for specific actions taken by the target audience. In contrast to other models like CPS or CPL, this structure focuses on actions such as filling out a form, signing up for a trial, downloading an app, or making a purchase.

With this commission type, affiliates are paid based on the completion of a desired action rather than simply generating sales, leads, or clicks. Advertisers define the specific action they want to achieve in a CPA offer‘s requirements, and marketers promote the product through various channels. When a user performs the designated action, the affiliate earns a commission.

Let’s have a look at the example to understand how CPA commission type works in reality. If a merchant wants to increase email sign-ups, an affiliate gets a CPA commission for each user who enters their email address on the advertiser’s form. The commission could be a fixed amount or a percentage of the merchant’s revenue generated from the action.

The CPA model is attractive to affiliates because it allows them to earn a commission without requiring the referred customer to make a purchase. However, the conversion rate for these actions may be lower compared to sales commissions, and advertisers often have specific criteria or quality metrics that the action must meet to qualify for a commission.

Overall, the CPA commission model offers flexibility and diversity in affiliate marketing by rewarding affiliates for driving valuable actions beyond traditional sales.

We have an article which you can read to delve deeper into the world of CPA offers in affiliate marketing.

What is Revenue Share Commission Structure

RevShare, or Revenue Share, does not require a full commission but rather a percentage of the payout. The remuneration is usually between 5% and 50%, but it can be higher up to 90%.

Compared to CPA, RevShare does not involve specific payouts. That’s why affiliates and advertisers agree on the percentage amount. There is one main peculiarity: you won’t be able to earn a large amount of money in a short period of time. It is a payment model that becomes more efficient over time.

Here’s an example of how the RevShare commission model works in affiliate marketing:

Let’s say you are promoting an eCommerce offer. The merchant offers a 30% RevShare commission structure. If you refer a customer who purchases the software for $100, the revenue generated from that sale is $100. As an affiliate, you would earn 30% of that revenue, which amounts to $30.

The RevShare structure can be an attractive option for affiliates because it allows them to earn commissions over a long period of time. It’s worth noting that the RevShare model may have certain limitations. For example, there may be specific rules regarding refunds, chargebacks, or recurring subscription payments. It’s essential for affiliates to review the terms and conditions of the affiliate program or agreement to understand the details.

Main Differences Between CPA and RevShare

Let’s explore differences between two commission types taking into account such parameters as:

  • Mechanisms;
  • Duration of campaigns;
  • Efforts needed;
  • Traffic sources;
  • Payments.

Mechanisms

While CPA allows you to earn money for completing small tasks like email signups or app downloads, RevShare only pays you a percentage when a sale is made. However, achieving success with RevShare can be quite challenging, and despite your best efforts, it may not always yield the desired results.

Duration

RevShare is often lauded for its potential to generate income for several years after launching a campaign. Nevertheless, this is not always the case. Most affiliate offers end earlier due to the dynamic nature of the market, and consequently, your RevShare profits may also dwindle. Thus, you might find yourself back at square one sooner than anticipated.

Efforts

RevShare is a more complex concept that beginners may struggle to fully utilize. It requires additional efforts and research to make it work and generate revenue. Prior to accepting any offers, it is important to conduct market research and analyze current trends to assess the likelihood of success. The percentage of sales you can expect from RevShare can range from 5% to as much as 25%, with some offers providing extra incentives for achieving specific goals.

Traffic Sources

CPA models assume that advertisers choose the traffic methods, which somewhat restricts affiliates. On the other hand, RevShare does not limit your traffic sources or methods, granting you more freedom and autonomy, which can be advantageous or disadvantageous depending on the situation.

Payments

Most CPA networks offer weekly, bi-weekly, or even daily payments without any refunds, ensuring the security of your earnings. RevShare payments, on the other hand, occur throughout the duration of the contract and can be adjusted based on monthly performance. The payment period varies depending on the agreement, but typically falls within a range of 30-45 days. In some cases, payments may occur quarterly, requiring a longer wait for your funds.

Pros & cons

There are advantages and disadvantages of CPA commission type:

Pros:

  • Predictable earnings structure: CPA provides you with a clear understanding of the amount you will earn for every user action. This predictability makes it easier to forecast your overall earnings;

 

  • Reduced risk: With CPA, the risk factor is minimized due to the fixed payment per action. Unlike RevShare, where earnings are contingent upon user-generated revenue, CPA provides a more stable income stream;

 

  • Simple determining ROI: You can immediately calculate your ad spending limits without waiting for the return cycle, and there’s no need to worry about returns impacting your overall profits.

Cons:

  • Reduced conversion rates: Many users exhibit actions when there is an upfront payment or a requirement to provide personal information, resulting in decreased conversion rates for CPA offers;

 

  • Transient revenue: As CPA only rewards actions taken, the revenue generated from CPA offers tends to be short-term in nature.

Pros & cons

Now move on to RevShare pros and cons:

Pros:

  • Unlimited earning potential: RevShare suggests the opportunity to earn based on the revenue generated by each user, allowing for unlimited earning potential from individual users;

 

  • Incentive for conversion optimization: Both a merchant and an affiliate share a mutual motivation to optimize conversions and enhance the user experience to drive increased revenue, as the merchant shares a portion of the revenue with the affiliate;

 

  • Sustained revenue: RevShare offers the advantage of providing long-term revenue streams if users continue to generate revenue for the merchant over time;

Cons:

  • Variable earnings: Your commission in RevShare is contingent upon the user’s behavior and the effectiveness of the merchant’s marketing endeavors, leading to potential fluctuations in your earnings;

 

  • Extended payout time frame: RevShare payouts typically take longer to process compared to CPA payouts. This is because the merchant requires additional time to calculate the revenue generated by the user before distributing the payouts.

How to Choose Commission Type in Affiliate Marketing?

Understanding the different types of commissions offered is not enough. The more difficult question arises when choosing the right structure.

If you’re just starting out, you need to determine your ultimate goal by answering a few questions:

  • What is your goal?
  • What do you want to accomplish?
  • Are you focused on short-term gain or long-term stability?
  • Who is your target audience and how engaged are they?

If you are focused on short-term profits and you anticipate that your referrals will not become long-term users of the product or service you are recommending, then a CPA structure is more suitable for you. This model allows you to receive large lump sum payments without worrying about long-term user engagement.

On the other hand, if you’re aiming for long-term success, RevShare is a better choice. While the profits may accumulate slowly and it will take time for them to become significant, you will get higher earnings in the long run. 

You should also keep in mind the hybrid structure. With a hybrid structure, you’ll determine your audience’s engagement with the service or product within the first 6-12 months, and if things aren’t satisfactory, you can switch to CPA or RevShare. Another benefit of a hybrid plan is the ability to balance cash flow.

Conclusion

Summarizing all the characteristics, there is no definitive answer as to which is better. The choice ultimately depends on the specific circumstances and objectives of each affiliate marketing approach.

A successful affiliate marketing strategy may involve a combination of RevShare and CPA, leveraging the strengths of each model to maximize profitability and sustainability. Advertisers and affiliates should continually analyze and optimize their commission structures to adapt to changing market dynamics and meet their evolving needs.

Veranika Minina
Veranika Minina is a fan of affiliate marketing. Veranika's articles are carefully crafted to simplify complex concepts, making them accessible to beginners while also offering fresh perspectives about CPA-networks for experienced marketers. Whether you're a beginner or a seasoned marketer, Veranika's writings are sure to inspire, educate, and motivate, guiding you towards a profitable affiliate marketing journey.
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