Forex niche has been a lucrative opportunity for many marketers, as it is competitive and advantageous. The main idea of affiliate marketing is that a marketer promotes services via their social media channels. These channels vary, as they can be YouTube channels, websites, databases of emails, and other. The moment they attract new customers, the brokerage service provides the marketer with commission.
There are various options when it comes to affiliate programs, what differentiates them among each other are different commission schemes, namely CPL (Cost Per Lead), CPA (Cost Per Action) and Revenue Sharing. These are three main categories of the commission types.
In this ultimate guide we will go through each of them to provide you with a more detailed picture. As a result, it will become easier for you to choose a Forex affiliate program that is good for you.
It is possible to receive a regular income from a brokerage company. Let us go through commission schemes in detail:
CPL (Cost Per Lead)
In this case a marketer gets a single payment for each trader successfully converted by the broker. The requirement of the marketer is quite easy to meet, as a brokerage service requires a new trader only to sign up. However, some brokers might require a new user to provide their phone number or other contact details. It makes this scheme much simpler than CPA, for example, therefore it can be more suitable for some affiliates.
It can also be an attractive choice for some brokers. It is so because they can get more people to sign up on their website for a smaller commission. Moreover, they pay only once when a user sign ups and there are no future shared revenues with the affiliate marketer.
However, on the other hand there is a substantial disadvantage, as CPL commissions are much lower than those of Cost Per Action. Therefore this option might not be ideal for those marketers who are looking to maximize their monthly income with an affiliate program.
This program may also not be that suitable for some brokers, as there is no way to know for certain if users who sign in and leave their contact information will eventually make a deposit and start trading. It means that for brokers there is a financial risk involved. Although, the risk involved is not that large as with CPA, as the payment the broker provides is much lower.
CPA (Cost Per Action)
The idea behind this scheme is that a marketer brings in new traders who should meet certain conditions and then the broker pays the affiliate marketer a fixed amount of money. This flat fee may vary from $100 to $1000 per user depending on certain factors.
The user’s first deposit must correspond to the specific amount, or even should be higher. Also, a trader should execute a certain number of trades worth a set amount of lots. It works this way as traders might decide to withdraw their initial deposit and then the broker will earn no income from their trades. From this follows that there is no point of paying the affiliate in this case.
It is obvious that this kind of cooperation is beneficial for both affiliate marketers and brokers. It provides a possibility for the affiliate to earn a large sum of money for each customer who meets the criteria established by the broker. There is a potential to earn much more in comparison to the Cost Per Lead scheme.
Most brokers also prefer CPA schemes, as they can make just one payment to the affiliate and retain all the upcoming earnings that are generated from spreads and commissions.
However, it is important to remember that there are drawbacks of this payment scheme. The first downside is that the marketer will receive only a one time fee. From that follows that this commission type is not suitable for creating a constant payment stream. Another issue is that newly recruited users of trading services will have to meet certain criteria before the marketer can receive his or her commission. From it follows that if a trader does not deposit less than expected or executes not enough trades, the marketer will not get paid.
For the brokerage service there are their own disadvantages. There is no guarantee that a trader will remain with the broker after the broker made their payment to the affiliate. As the payment with this category is usually larger than with other schemes, there is always a risk involved for the broker to end up with a loss rather than profit.
Perhaps, the most common commission scheme is revenue sharing. As it becomes obvious from the name, in this case the broker shares a part of revenue acquired from trader’s activities with the affiliate marketer. Let’s say the revenue sharing agreement between the broker and the affiliate makes up 20%. From it follows that if the trader spends $1000 on spreads, the broker retains $800 and pays out $200 to the affiliate marketer.
There are pros to this scheme for both brokers and affiliates. The advantage for the affiliate is that while the trader continues trading the marketer will receive a regular monthly commission. Therefore this scheme is perfect for creating a passive income source for the affiliate. Moreover, affiliates can engage more traders to increase their earnings.
The moment the trader opens an account and makes his initial investment, the affiliate marketer does not have to do anything to keep the growing revenue that comes in the form of commissions generated by the client’s trading activities. It provides an opportunity for marketers to invest more time in bringing in new traders to increase their income.
This commission scheme can be attractive for some brokers as well. The company does not have to pay any commissions to the affiliate if the trader has not made a deposit or has not executed any trades. It means that there is a very small financial risk involved.
However, as for every commission type there are some disadvantages. In some cases the commission gained from spreads of one trader can be quite insignificant. Therefore, it follows that to have a decent income affiliates have to bring in to the trading platform at least 10-15 traders. Another obvious problem is that not every trader who signs up and makes an initial investment will trade regularly.
The disadvantage for the broker is that they have to pay out fees to the marketer indefinitely as long as attracted traders are active. In this case, there is no possibility to make one payment to the affiliate and retain the rest of the revenue.
In addition to financial considerations there is a concern about trust between the marketer and broker. It is not always easy to find a broker with a good reputation, as the reputation of the affiliate depends on it as well.