Forex Affiliate Program Payout Schemes
One of the main advantages of joining the affiliate program is that the marketer can receive a regular income from the brokerage company. However, the structure and method of this type of compensation usually fall into the following categories:
- Revenue Sharing
- Cost per Action (CPA)
- Cost per Lead (CPL)
- Hybrid
Let us now go through each of these in greater detail.
Revenue Sharing
One very common commission scheme is the revenue sharing agreement. As the name suggests, in this case the brokerage company shares a certain percentage of revenue, earned from the trader’s activities with the affiliate marketer.
So for example, an individual trader, after choosing affiliate marketing products, decided to sign up for the trading account and start trading with it. Let us suppose that the revenue sharing agreement between the marketer and the brokerage firm called for 20% going to the affiliate. So if the trader spends $500 on
spreads during the first month of trading, then the broker will pay the marketer $100 and retain the remaining $400.
This type of arrangement has certain advantages for both affiliates and brokerage firms. The benefit for the marketers is that if the trader keeps trading, they get to receive a regular monthly income. Consequently, these types of agreements are crucial for building the passive income stream in affiliate marketing. In addition to that, marketers can increase their revenues by attracting additional clients to the broker.
Once traders sign up for the trading account, deposit money, and start making trades, the marketer does not have to do anything to retain the income coming in from commissions earned from this individual’s trading activities. So instead, affiliates can now focus on attracting other clients and consequently growing their income in the process.
These types of agreements can also be quite attractive for some brokerage companies. The fact of the matter is that the broker does not have to pay anything to the affiliate if the trader only signs up and does not execute any trades. Instead, the brokerage company only pays a portion of the income received from commissions and spreads, earned from the client to the affiliate marketer. Consequently, there is very little financial risk involved in the process.
Just like with any other type of compensation scheme, it does have its own disadvantages. The reality of the matter is that in many cases, the income earned from spreads from one individual trader might be quite small. Consequently, in order to receive a sizable monthly income, the affiliate marketer might have to attract at least 10-20 traders to the brokerage company.
Another clear problem here is the fact that not every trader who will sign up for the trading account will deposit funds and make regular trades. This means that for example, the marketer might recruit 10 traders, but only receive income from the trading activities of 7 individuals, since the remaining three of them simply changed their mind and did not take the ultimate step of depositing funds and making trades.
The downside of this arrangement for the brokerage company is the fact that they have to share revenues received from some traders to the affiliate marketers indefinitely. Here, typically, there is no option for making a single payment to settle the accounts with the affiliates and retain all future revenues for themselves.
Cost per Action (CPA)
Another widely-used commission scheme is called the cost per action (CPA). The basic idea behind this is as follows: if the marketer manages to recruit the trader and this market participant meets certain conditions, then the brokerage company pays to the affiliate the flat fee for each such client. The exact sum can typically range from $100 to $1,000, depending on the place of residency of this new customer, as well as on some other factors.
As for the conditions, the trader’s initial deposit has to be equal to or higher than the specific amount, whether this will be $500 or any other number. The second condition usually is for traders to make trades worth a specific amount of lots. This is because if the market participant makes the deposit and then for whatever reason decides to pull it back from the account, then the broker will earn no income from his or her activities. Consequently, there is no point in paying money to the affiliate in such cases.
Now, it goes without saying that these types of agreements can be beneficial for both parties. This gives the affiliate marketers an opportunity to earn some decent lump sums for each client which meets the criteria set out by the broker. This gives them the potential to earn a higher amount of monthly income, compared to the revenue sharing agreements.
Some brokers also like cost per action type commission schemes. The fact of the matter is that with those agreements, the brokerage firms can simply pay a single payment to the affiliate and retain all of the future earnings coming from spreads and commissions they received from that individual.
When considering which Forex affiliate program to choose, it is worth remembering that the CPA commission scheme does have its downsides. The first drawback of this arrangement is the fact that the marketer will only receive a single commission payment. Therefore, this scheme might not be ideal for building a reliable income stream.
The second issue here is that recruited traders have to meet all of the requirements in order for the marketer to receive a payment. This means that if a trader opens an account, but deposits less money than required, or does not execute the agreed number of trades, then the affiliate will not get any commission.
The downside for the brokerage companies with this type of agreement is that there is no guarantee that the trader will keep trading with them after the broker makes the CPA payment to the affiliate. Since the size of those payments is usually larger than with other categories, there is always some risk that the brokerage firm might end up with some loss. This is unlikely to happen with the majority of traders, but this risk is something which the brokers need to keep in mind.
Cost per Lead (CPL)
Another possible commission scheme is called cost per lead (CPL). In general, they are similar to the cost per action (CPL), in a sense that here the marketer gets a single payment for each trader, rather than sharing it with the revenues.
However, it is worth noting that there are two distinct differences between these two categories. Firstly, the requirements for the marketer to receive payment is much easier to meet. Here the brokerage company might only require a trader to sign up. Some brokers might also require for the market participant to verify his or her email and mobile phone number.
It goes without saying that these requirements are much easier to fulfill then ones of the cost per action (CPA) scheme. Consequently, for some affiliates, this might be the best option.
For brokerage companies, it can also be an attractive choice. The reason for this is that the brokers can get people signed up in exchange for a small fee. In addition to that, the single payment is all they have to make since they do not have to share any future revenues with the affiliate marketer.
On the flip side of the coin, the brokerage companies make it clear that if the affiliate marketing programs you choose fall into this category, then the actual size of the payment will be considerably lower than with the cost per action scheme. Consequently, this might not be the ideal choice for those marketers who want to maximize their monthly earnings through the affiliate program.
This scheme also has some disadvantages for brokers as well, since there is no guarantee that the individual who signed up and verified his or her email and mobile phone number, will be willing to deposit money and make trades on a regular basis. So in those cases, there is still some
financial risk involved in the process. However, it is worth noting that here the risk exposure can be smaller than with the cost per action scheme since the size of payments is not as large as with the previous category.
Hybrid
Finally, we have the hybrid commission schemes. As the name suggests it is a mix of two schemes we have discussed above. In most cases, here we are dealing with the combination of the cost per lead (CPL) and the revenue sharing. This means that the brokerage company will pay for the promoter a flat fee when the trader opens the account and verifies his or her email and mobile number. However, after that, the broker will share some of the revenues received from this client with the affiliate.
It goes without saying that this sort of arrangement can be very attractive for some affiliate marketers. The fact of the matter is that in this case, they have two distinct sources of income. Even in the cases when traders just sign up for the account and do not take any additional steps, the marketers will still receive payment from the broker. At the same time, if the trader deposits money and starts trading on a regular basis, then the affiliate will get some portion of the revenues received from this client.
These types of agreements can also be reasonable for some brokers. This is because except for the small fee for cost per lead, the brokerage company does not have to pay anything to the affiliate if the trader does not deposit money on the account and start trading.
This commission scheme is indeed very popular with some marketers. However, just like in all other previous cases, it does have its downsides. The reality of the matter is that in the case of the hybrid type of agreement, the size of the commissions in dollar or percentage terms can be smaller than with the revenue share or CPL only arrangements. So for example, the broker might suggest the marketer pay 20% of the income received from the client to the promoter with revenue sharing agreement. However, with the hybrid, the share of the marketer might be down to 15% or 10%, due to the fact that there is also a flat fee involved with CPL. So as we can see here, sometimes there are the opportunity costs involved with these sorts of agreements.
The hybrid commission scheme might also not be attractive for some brokerage companies. The problem here is that they still have to pay the cost per lead payments to the promoters, despite the fact that some of those new accounts might not bring in any revenue. In addition to that, they have to share revenues with the marketer. Consequently, some brokers might prefer to pay the lump sum to the affiliate for a new client and then be able to retain all of the income revenues.
Other Considerations
It goes without saying that when choosing an affiliate program, the purely financial considerations are not the only factors in the decision-making process. Many experienced affiliate marketers know that the relationship and trust with the account manager of the brokerage company are very important.
The signing of the agreements is essential, however, it is the job of the account manager to make sure that the terms and conditions agreed upon are honored by the company they represent. Consequently, it is important to find a good manager, who treats the affiliate marketers fairly and pays them the amount which they earned by recruiting new clients for the broker.
Another important consideration when dealing with Forex affiliate marketing is to find the broker with a good reputation. It is quite clear that if the marketer starts to promote those brokers who are not properly regulated and treat their clients dishonestly, then the reputation of the affiliate will suffer as well. This can be a serious blow to the affiliate marketing business. Consequently, it is essential for marketers to conduct proper due diligence to avoid such unpleasant situations.
Broker’s program vs Network’s program
In addition to the commission schemes, the Forex affiliate programs are further divided into two categories. These are the brokers’ programs and the networks’ programs. Each of them has its own distinct advantages and downsides.
The upside of joining the broker’s affiliate program is that there is no middle man involved. Consequently, the marketer works directly with the brokerage company. This gives the affiliates the ability to negotiate directly with brokers and potentially earn higher commissions.
The downside with this state of affairs is that in many cases, it might take a significant amount of time for the marketer to receive the commission, typically ranging from several weeks up to a month.
The alternative to this arrangement is to work with the networks. The first benefit here is that the processing time of the payments is in many cases much faster, often within a week. Also, it is worth noting that networks typically work with several brokerage companies. Consequently, they can give marketers the opportunity to recruit clients for several brokers and earn a higher amount of commissions in the process.
The obvious disadvantage of working with networks is that they essentially represent a middle man. Consequently, they will retain some of the revenues. As a result, the commission percentages or flat fees are highly likely to be much lower than when the marketer works directly with the brokerage firm.