The primary reason for vast differences on payouts for mobile offers (5)
The primary reason for vast differences on payouts for mobile offers
Hello guys, being involved directly in the mobile billing industry for over a decade (yeah the mobile billing has been around for quite some time 
,
I would like to explain the primary reason for huge differences on payouts.
By huge I mean differences in the range of 2-3x , not the 20-30%.
It's best if I explain it on an example:
Let's say we have an AV offer in IN, that uses direct carrier billing. The merchant has 3 carriers connected to direct carrier billing (DCB) and the other 5 are connected with MO flow (click 2 send sms), so he achieves 100% connectivity.
The offer works for both postpaid and prepaid users (if they have enough funds on the account).
Conversions come from both types of users, however the ARPU (average revenue per user) of these users for merchant is different.
Let's hypothetically assume these numbers (the actual numbers are even more segmented, as the ARPU differs on specific operator)
Postpaid DCB - 2$
Postpaid MO - 1.5$
Prepaid DCB - 0.5$
Prepaid MO - 1.2$
The market shares of the users are: 20% postpaid, 80% prepaid.
Based on the ARPU of the entire cohort of users, the merchant defines his offer payout (for example he gets 1000 users in system (of different prepaid/postpaid dcb/mo) profiles and gets 800$ payout from carriers. The merchant calculates his revenue per user and comes to 0.8$ per user. He defines his profit margin and decides he is able to pay 0.6$ to the affiliate network , for any and all conversions generated (irrespective if the users are dcb, mo, postpaid or prepaid).
The merchant approaches the affiliate network (and after the 30%ish comission by the network) comes to 0.42$ payout to the affiliate.
The affiliate network goes ballistic - the payout 0.42$ is not competitive since other merchants are giving 0.9$ payout to affiliates (after the 30% network fee).
The merchant contacts the carrier and asks for the ARPU of all of their users (all services). The number returned is 0.8$. It is impossible to bill higher amounts because there are restrictions in place, regulated by the central telecommunications agency. It is impossible to achieve a payout of 0.9$ to affiliates and have the merchant or the affiliate network profitable.
So what happens next ?
Shaving - which is basically demanded by both the affiliate network (they will not offers with "sub-standard" payouts) and also the affiliates, who have a tendency to flow to offers with higher payouts.
The merchant stops reporting all conversions, and reports only the conversions made by postpaid DCB users. He offers a 1.2$ payout to the affiliates (1.56$ to the network) but only reports conversions of prime users. Everything else is unreported (even tho its billed).
Now everyone is happy and its a WIN-WIN situation (merchant is on top of payouts in affiliate network; affiliate network has a top payout for a certain offer type, affiliate gets access to the top offer).
Well almost happy, since more than 80% of the conversions are unreported since they are made in the sub-prime segment.
Bottomline:
Beware of offers with payouts that stick out (eg a 3$ payout amidst similar offers with 1$ payout). It is technically impossible to bill the same users so high and impossible to achieve such a payout without some sort of shaving.
Interesting
Wow makes a lot of sense! Thanks for this. I have an offer performing exactly like this and I had no idea why.
Good one! Thanks for sharing.
Great info. Thanks
Home > Paid Traffic Sources > Mobile