Confusing Internet Marketing Terms Demystified (Part 5) – Everyone Gets a Cut
Internet is awesome. Yes?
Fast, convenient, and you have access to any information at the power of your tips.
And if you’re a marketer or an advertiser, you have the power to reach anyone, anywhere, at any time.
If you were doing any kind of offline marketing in the old days, you had to be careful because getting the word out about your company meant the bad guys wanted THEIR cut of the deal in return for “protection”.
And if you didn’t pay up?
They’ll send this nasty dog after you:
Ok, maybe not a fictional baby from a cartoon show, but you get my drift.
Thank goodness for justice.. these no-value adding middleman are gone.
Now we have a different KIND of middleman.. the one that makes you RICH (and as an added bonus, won’t break your legs either).
Let me explain with a hypothetical story.
Bob is a management consultant that “re-organizes” companies for “maximum efficiency” and “increased bottom line”.
Bob basically fires people for living because companies’ managers are too chicken sh*t to do the morally challenging job of giving people the pink slips.
Bob needs companies that needs his service.
Bob heard about this lead generation thing-a-magic where a lead generation company sends him leads to people who’s interested in his service.
Peter is an upcoming online lead generation specialist. He’s good.
Bob needs leads, so Bob asks Peter to send him leads for, say, $200 per lead.
Peter, being that he’s a cool guy, agrees.
After 2-4 weeks of getting setup, Peter sends him a steady flow of leads.
Bob is making sales and a good ROI from the leads and making on his advertising spend with Peter.
Peter is getting paid per lead, and Bob keeps buying… so Peter is happy.
Hearing about this deal, Bill, a long time friend of Peter and also an online lead generator, wants in on the action.
But unfortunately lead generation is a very trust based partnership.
It’s not that Bob doesn’t trust Bill… it’s just that Bob doesn’t want to have to manage multiple lead generation companies because he’s too busy making money with Peter’s leads as is.
So Bob says no.
But, Peter knows Bill is a good, trustworthy, hard working guy.
So Peter makes a deal with Bill.
Bill brings in leads and Peter brokers the deal at $180/lead.
So Bill gets $180 for every lead… and Peter will net $20 per lead.
Bob doesn’t have to deal with BOTH guys.. just Peter, so Bob has less management headache as well.
Win win situation for everyone.
This is called AFFILIATE MARKETING.
Of course, a CPA affiliate network is essentially a network people that gets paid on CPS (cost per sale), CPL (cost per lead), or CPI (cost per install).
(If you don’t remember the terms, read Part 4).
The network gets $X… and the affiliates get a smaller portion of $X.
So why wouldn’t every affiliate try to be the network him/herself?
Simply because they don’t want the headache of dealing with the advertiser, technological tools, sales team, operations, etc.
They get less, but they also do less in terms of management.
On top of that, the affiliates usually get paid FASTER than the network, which means the financial risk is more so on the network.
Now, meet Samir
Samir also runs a lead generation company.
But Peter is not fond of Samir because Samir dated Peter’s only sister … and left her with a broken heart.
There’s NO way Peter is going let Samir in on the action.
So Samir goes to Bill and they strike a deal.
For every lead Samir brings in, Samir gets $160.
So let’s look at the math..
When a lead comes in that Samir generates, $200 comes into the “network” owned by Peter.
Peter gets $20. Bill gets $20. Samir gets $160.
What Bill did is called “CPA offer syndication“.
Basically, Bill is now a middleman who is brokering offers and getting a cut in between.
Does Bill do any work? He can, but he doesn’t have to as long as Samir is doing the work.
Yes, Bill is slimey.
Ok, to be fair, this goes on quite a lot in real life.
When you click on an ad, sometimes the visitor’s click is redirected, sometimes, up to hundreds of times.
In another words, there are literally dozens of companies brokering a CPA offer (or tracking the visitor).
Yeap, everyone gets a cut.
Does it matter to the advertiser? Not really since the advertiser doesn’t really care how the lead or the sale is generated.
The middlemen usually have a system of figuring that out among themselves.