How to Optimize Your Affiliate Spend
You’re spending a lot of money on acquiring traffic to your site from affiliates. The key to preventing over-spending on this traffic is to quickly determine the value of the customers arriving from each affiliate.
The Conventional Approach
Traditionally, operators collect data on customers from each affiliate channel over a period of weeks, months or even years to determine the average customer value delivered by each affiliate. This is a very costly approach, because during this lengthy measurement period, you are inevitably wasting a huge amount of money over-paying for customers from certain affiliates.
The Modern Approach
Recently developed predictive customer modeling technologies are now able to accurately estimate the future lifetime value of new customers within days of their registration on your site. Armed with this customer insight, marketers are able to quickly determine the maximum CPA they should be paying to each individual affiliate. For example, if the average future lifetime value of all customers delivered from a particular affiliate during the first three days of using that affiliate is $150, you will be able to negotiate with the affiliate to only pay $50 per customer (assuming your target is 33% of lifetime value). If the affiliate is not willing to lower the CPA to that level, you know to walk away – before you’ve spent thousands of dollars acquiring leads with a negative ROI.
For this approach to work, you need to have very accurate predictions of the future value for each new customer. The leading technology in this space is based on behavioral micro-segmentation. This technology analyzes the behavior of customers during their first few days on the site (e.g., game preferences, play frequency, wager patterns, deposits and withdrawals) and segments them into small, precise groups of similar customers. Based on months or years of existing historical data about customers with similar behavior, the technology can make very accurate predictions of the future revenues which you can expect to receive from these new customers.
Optimize your Affiliate CPA
Your goal of working with affiliates is to ensure that every customer you acquire is profitable for you. By implementing predictive customer modeling technologies, you will be able to quickly know how much you should pay each new affiliate for each customer they deliver. Furthermore, you will be able to continuously optimize all your affiliate spending and ensure a profitable customer acquisition operation.