Why it is not healthy to push Network/Brand towards giving away an insanely high CPA
How often do we, in pursuit of high ROI, try to twist the hands of a network manager or a broker representative just to get a higher payout? Happens sometimes, huh?
So today I would like to talk about why this is not a healthy practice and what it ultimately leads to in our relationship with the network/advertiser and the market as a whole.
First, let’s see what is of major importance to us: 1) ROI and 2) how much we earn per click/lead.
Let’s imagine a situation and do some math:
We requested payouts to, let’s say, Australia from three partners we work with — Network A, Network B, and Broker B (since we are serious guys, we work not only with networks but also with direct, right?):
- Network A — gave a payout of $800 (despite the fact that the network payment is $1,050)
- Network B — in order to attract an affiliate, they give a payment of $1,200 (despite the fact that the broker only gave them $1,100)
- Broker A — paid out $1,250.
You set everything up, directed 50 test leads to each partner (150 in total), and here are the results:
CPL is $100 on average
the cost of accounts is approximately $450 for the entire test ($150 per broker)
1) Network A – demonstrates an honest conversion of 26%.
Let’s do the math:
Cost. 55 leads x $110 = $5,500 traffic cost + 150$ on accounts
Revenue. 50 leads with a 26% conversion rate give us 13 FTD, which is $10,400. Which in general gives us about 86% ROI or $98 EPL.
2) Network B. Shows an honest conversion of 26%, but since the network needs to earn to cover the difference between pay-ins and pay-outs, they do shave some of the conversions and show a conversion rate of 14%
Let’s do the math here:
Costs. Remain essentially the same: 55 leads x $110 = $5500 traffic cost plus 150$ on accounts
Revenue. 50 leads with a 14% conversion rate give us 7 FTD, which is $8,400. Which in general gives us about 52% ROI or EPL 58$ earned on each lead.
3) Broker A
This is where things get interesting.
We usually think that everything should be super-duper smooth if we’re working directly with adverts.
But strange enough, this is exactly where the biggest incidents, losses, and mistakes can happen.
Since you didn’t work with a specific broker and requested a rather large pay-out, not knowing how your traffic would show itself over time, the broker decided to insure himself as much as possible and showed you a conversion of 11%.
Cost. 55 leads x $110 = $5500 traffic cost plus $150 on accounts
Revenue. 50 leads with a 12% conversion give us 6 FTD, which is $7,500. In general, it gives us ~36% ROI or $40 EPL
I agree, examples and situations may be different: you could work with a broker already and get a guarantee from a network, but you must agree that in order to get a guarantee of 25%+ from a network, you need to spend more than 10K with it.
The point is, by twisting the hands of networks and brokers, and asking for too high a payout, we put ourselves into a corner and put partners in a position where it will be impossible not to shave.
Dumping is an unhealthy practice that eventually affects the entire market, driving all participants into conditions of a toxic competition. Networks and brokers are forced to apply it when an affiliate refuses to direct traffic with a payout that, as it seems to them, is below the market.
Our recommendation: pay attention to EPL and ROI instead of simply estimating the partner’s payout, as often low payout networks work best in terms of CR/ROI/EPL.
At the same time, a network that does not require too high a payout from a broker minimizes the chance of a shave on the part of the advertiser, because the latter does not need to introduce the so-called “additional optimization for risks” in case the supplied traffic will not pay off.
This happens not only with crypto but absolutely with all verticals. But since crypto is relatively the youngest, right now it is going through those transformation processes that many other verticals have long put behind them.