There are three main commission models used in affiliate marketing: Pay Per Sale (PPS), Pay Per Lead (PPL), and Pay Per Install (PPI).
Pay Per Sale (PPS)
With Pay Per Sale commissions, the affiliate publishers will earn a percentage of the sales price for any sales that originated from their affiliate link. This is also known as Cost Per Sale (CPC) or revenue sharing.
The most well-known example is the Amazon affiliate program, where you, the affiliate publisher, get betweeen 4-8% of the sales price. For physical products, anything between 4-15% commission on the sales price is common.
For digital products, like some on Clickbank, the PPS commission could be a lot higher, because there is almost no cost and work involved for the seller. Commisions of up to 50% are common.
For affiliate advertisers (like Amazon), Pay Per Sale is very safe affiliate marketing model, as they know they can pay the commission and still (easily) make a profit for every sale.
Pay Per Lead (PPL)
Pay Per Lead is common for services or software that the customer signs up for. As an affiliate publisher, you recieve a fixed commission for every signup.
PPL is used for paid sign-ups, and for free sign-ups.
For paid sign-ups, this could means the affiliate gets a fixed commission, for instance $50 for every new paying customer. This model is often used for webhosting. For instance, by Hostgator (which I am promoting).
PPL for free sign-ups are typically used for survey sites, auction sites, or newsletter signups. The commissions are usually pretty low; expect anything between $0,10 and $5. Most commonly, $1. Usually, conversion rate is a lot higher than for PPS, so this can really add up.
Another use is free sign-ups for a service that also offer a paid version, for instance, for software, or a membership site.
Sometimes, the PPL model for free sign-ups is combined with the PPS model, for instance, $1 for free signups, and then 10% for a sale.
The affiliate advertiser knows the average value of a customer, for instance, based on the average membership duration and how much they charge. This allows them to calculate how much they can pay the affiliate.
Pay Per Install (PPI)
Pay per install, or Cost Per Install (CPI), is used for software. As an affiliate publisher, you get paid for every installation of specific program that you promote. Installation of the PPI software is usually free, but the software often has a paid version, or another way of generating revenue, like showing ads or affiliate links themselves, or promoting their other services.
Ever noticed free software trying to install toolbars or other programs you don’t necessarily want? For instance, the Yahoo toolbar? The developers of the free software you’re trying to install are PPI affiliates, and earn $1 for every installation of the PPI-software they offer alongside their own.
PPI is also huge in the Mobile App market.
There are a lot of different commission models in affiliate marketing, and all of them could be big earners.
New to affiliate marketing? See Getting started with affiliate marketing – 5 things you need to succeed.