CPA stands for “Cost Per Action“.
CPA is very simple: you get paid when someone clicks on your affiliate link and completes an action.
The “action” can be just about anything, but usually consists of:
There are two reasons that I prefer CPA over banner advertising, Adsense, and most other affiliate marketing strategies.
1. Higher on the Value Chain
To make the most money from your site, you want to get as high up on the value chain as you can.
Here is what the value chain looks like for digital products (using a $40 ebook as an example):
As you can see, Adsense, banner ads, and CPC/CPM models put you at the bottom of the value chain.
On the other hand, selling your own product, promoting targeted affiliate products (ie. web hosting), and CPA offers tend to put you higher up on the chain.
(FYI: the values in the diagram don’t add up to $40 because there are clicks and leads that don’t convert).
Keep in mind that physical products have 2-10x more hands in the pot (distributors, warehouses, suppliers etc.). That’s why Amazon Associates only make $100 when someone buys a $2500 laptop.