Why CPA Is Red-Hot (and 4 Great Ways to Make Money with It Today)

OK, roll call for online marketing types, what do we have here? Cost-per-click, margins shrinking, click fraud, check. Cost-per-sale, widely abysmal conversion rates, waaaaay too many merchants thinking 2% or 5% is a fair rip to pay the affiliate, check.

Hey pretty lady in the corner, who are you again? Cost-per-action (CPA)? Hey, aren’t you the one GOOG is moving into? I guess click fraud is forcing Google to hedge a bit. But then, maybe they also know your secret. (OK, a lot of people know this “secret”.)

And here’s the “secret”: It’s a LOT easier to get someone to give you their email address, than it is to get them to give you their credit card number.

And here’s another little secret: The average payout-per-lead (across industries) is in the same range as the average payout-per-sale. Think about it, what’s an average order amount at Amazon or Vitamins.com? $50? What do they pay out on average, 5 or 10%? Meanwhile a whole lot of CPA deals pay $8 or even $20 per lead (yes, a lot of low-end CPA stuff pays out $1 per lead, but we’re talking the range and the average here). The bottom line is, across industries and in-the-aggregate, the absolute revenue from a CPA conversion is in the same range as the absolute revenue from a CPS conversion.

So, we have: 1) higher conversion rates, and 2) similar payouts. Umm, yeeeahh…

Disclaimer: Tons of people make a lot of money on cost-per-sale affiliate programs, and certain types of sites convert very well to sales. And some people get 800% ROI on the cost-per-click spend. I am talking about macro-trends here.

OK, so the truth is out, I love CPA. So do the merchants (lead-buyers): as long as there is quality control and due diligence on the lead-buyers’ side, worries of fraud are virtually eliminated. Meanwhile it’s just as easy to track and measure as CPC. And of course, from the lead-buyers’ point of view, the risk is virtually zero, as long as you know what a lead is worth to you, and provided you track lead quality to each affiliate. So it’s no small wonder some smart merchants are beginning to shift spends from cost-per-click and other channels into CPA efforts.

And I’m not the only guy on the affiliate/webmaster side who loves CPA. In case you haven’t noticed, six-figure lead-gen sites (especially those in liquid niches) are being gobbled up by seven-figure companies (at juicy multiples). And seven-figure lead-gen sites are being gobbled up by eight- and nine-figure companies (at even juicier multiples).

So what am I telling you here? That if you are a smart affiliate, you should be looking more deeply at CPA? Yes, that is precisely what I’m telling you. There are many different strategies you can use to make mad money with CPA (and even I myself am starting to get a bit more creative and occasionally move outside my old tried-and-true model). Here are four such strategies, I am guessing one of them will appeal more than the others due to your personality type (that’s OK–play to your strengths!)

1. Build a site around an existing microniche CPA program. This is the ol’ Big-Fish-Small-Pond idea, find a smaller niche and then you’ll have an easier time ranking in it, even if you can’t get on Digg or afford to buy links. Yes, the risk is higher because if you have one lead buyer and he cancels his program or boots you you’re screwed, but on the other hand you can pump these out faster and spread your risk by building a new site in a new niche every month. Example: Make a site and rank it for “Jewish singles”, but pray to God that JDate doesn’t cancel their affiliate program. (Alright this example isn’t even that “micro”, there are a ton of niches even less competitive than this one.)
2. Build a site around an existing liquid CPA program(s). I believe I thoroughly explained this gameplan in my post earlier this week, the short version is, same thing as above, except in a very competitive and mature niche. Example: Build a site all about auto insurance, and generate auto insurance leads. The end game is when Insurance.com or InsuranceTracker or whoever decides they want your leads and then it’s time to get paaaaid.
3. Build a site around a particular demographic. Take a site like Tropical SEO, it’s not centered around a particular product, but I know my readership (online entrepreneurs / SEOs / affiliate marketers), so I could try and sell you guys on an entrepreneurship conference, or to sign up at such-and-such ad network, or to do a free test of Brand XYZ Analytics On the low end, you can pretty easily build huge amounts of traffic to celeb sites, then monetize with free iPod schemes, FriendFinder, free satellite TV dish offers, paid surveys, etc.
4. Build direct lead-selling relationships in a niche that lacks an existing CPA program. This particular option involves the most legwork (e.g. getting on the phone with people, deleting bogus leads every night before sending them on to the lead buyer, etc.) But it also has a very high upside, the idea here is that you can become the next (much smaller version of) Quin$treet or HealthInsurance.com, by sniffing out an upcoming lead economy and being the first player there. The annoying part is you have to get on the horn and call around until you can find a company (or three) to buy your leads. Example: Sell terrorism insurance leads to a struggling local insurance agent who is desperate enough to do business with a guy (or gal) like you. Re-invest all initial profits. Eventually, you can afford to buy TerrorismInsurance.com, your volume will grow to five figures a month, and then you can start buying leads from other affiliates (become the reseller). The end game is when Insurance.com or InsuranceTracker or whoever decides they want to enter your niche–and they want your leads–and that, my friends, is what we call a liquidity event.

So those are four different ways you can skin the CPA cat, to be honest they’re the only models I am qualified to speak about. If you can pick a good niche and combine one of the above models with a premium domain or some other sick asset like a big ol’ email list, you’re on track to get-relatively-rich, relatively-quick! (Maybe that’s what I should title my e-book.)

p.s. If I decide to build a terrorism insurance site at a later date, man am I going to kick myself for using that as an example

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