The hidden shortcomings of affiliate programs

    The CPA model (cost-per-action) provides for the sale of ads with "pay-per-action" committed by users as a result of viewing this advertisement. The CPA model is the basis of a variety of affiliate programs and is considered very fashionable. But she also has her flaws. One of these shortcomings - double payment for one user - is considered in the Atlas Institute analytical report entitled “The Hidden Cost of Pay-for-Performance Media” (PDF file).

    The fact that the CPA advertising model is becoming increasingly popular, says statistics. According to the Direct Marketing Association, last year about 14.8% of all advertising budgets were spent on affiliate programs and CPA schemes. This is really a lot of money.

    Affiliate programs are considered to be a very effective form of advertising, because there is supposedly no risk: the advertiser pays “in fact” for really attracted customers who either made a purchase or performed another action determined by the terms of the contract.

    In fact, there is a risk. The hidden risk is associated with the fact that the advertiser can overpay very substantial amounts of money due to the peculiarities of accounting for attracted customers. In many cases, you have to pay twice or thrice for one client.

    The problem of double payment is caused by the fact that the user gets the same advertisement from different sources, for example, he is shown banners at the same time on several sites. Even if the user ignores the advertisement, but then visits the advertiser's website, it is possible that a record of customer acquisition will appear in several affiliate programs at the same time, since they recorded an advertisement showing to the customer.

    At first glance, the problem seems insignificant. However, studies show that double counting losses exceed even the wildest assumptions. In October-November 2005, experts from the Atlas Institute analyzed ten affiliate programs from four advertisers and found a discouraging fact. For each client attracted through these programs, the advertiser paid an average of 170%. That is, for one person they paid almost three times (2.7).

    With an average level of “duplication” of 170%, in the ten partner programs studied, the minimum level was 26%, and the maximum - 379%. The logical result was millions of dollars in losses, that is, extra costs.

    In affiliate programs, taking into account transitions (clicks), the level of “duplication” was much lower than in campaigns taking into account banner displays. But in some cases, even there, a level of 200% or higher is fixed, that is, taking into account clicks on links does not save from double counting.

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