Hello everyone,

I was wondering how these big companies get around 6$ by some client yet the go and pay over $100s to their affilates for referring them?

Is it a sort of gamble (that he won't leave..) or what's the secret behind that?

They probably make the client prepay for 12 months. It wouldn't be much different than purchasing clients from another host for 12 months revenue. The risk may be slightly higher, but maybe they also have a clause where they will take back the commission if the client cancels.

One of the best promotions we ever ran was a "buy 1 month, get 11 months free" deal. We had so many signups and the turnover was only just slightly higher than regular paying customers. After 1 year, we had a server full of happy new customers and many of them had referred other customers to us at full price.

--Tina

I always wondered how they could do this without losing their shirts....

Tina: Thanks for explaining that... it makes sense (can I borrow that for the future?) :stickout:

I have to tell you though when I see a (new) company offering that much $$$ to affilliates the first thing that comes to my mind is "struggling".
<prevent flame disclaimer> This statement does not mean that all hosts offering this are struggling </end prevent flame disclaimer> :cool:

Don't forget the 30% that most of the affiliate management companies charge on top of the affiliate payout.

They don't loose their shirts because they know it will take them 2 years to profit on a client. Atleast that's how 1 big company runs things.

Keep in mind that if the company set aside a certain amount for advertising, maybe the cost of acquisition of a client is $97 anyway, and so they might as well offer it to affiliates as well.

I would also like to add that most of the companies offering these type of rich deals have much deeper pockets than any of us on this forum. I say would probably be the death of a small company to start offering such an arrangement, especially if you have virtually no cash flow to start with.

I would also like to add that most of the companies offering these type of rich deals have much deeper pockets than any of us on this forum. I say would probably be the death of a small company to start offering such an arrangement, especially if you have virtually no cash flow to start with.
I think its possible for a small host to have a good affiliate program with high payments, $100 is about what the big boys are paying and that is probably not realistic but I think an affiliate program that offers $30 to $60 will do very well if you promote it well. Just have to aim at markets where people are not professional affiliate marketers and instead of popular sites that want to make a little money and spread your name around. So if you were a small host start going after smaller blogs to put your button up, or photoshop tutorial sites, or so on. Usually they will forget they are even their until they make a sell.

Also great post Tina, I've been flogging the math for year, not only do you get those customers after a year but if your service and support is good you get word of mouth from those people, any upselling you do with them, you can run internal marketing campaigns on them with great results, etc. Esp depending on your niche or how you divide your clients out. Always a good practice to divide them out into niches that you can use, such as small business owners, midsize business owners, car dealerships, gamers, gaming clans etc. That way if you were adding spam protection and knew small business owners wanted that you could target them with a more direct email letting them know about this additional paid service, or if you were going to offer gaming servers so you can let the gamers know.

They probably make the client prepay for 12 months. It wouldn't be much different than purchasing clients from another host for 12 months revenue. The risk may be slightly higher, but maybe they also have a clause where they will take back the commission if the client cancels.

One of the best promotions we ever ran was a "buy 1 month, get 11 months free" deal. We had so many signups and the turnover was only just slightly higher than regular paying customers. After 1 year, we had a server full of happy new customers and many of them had referred other customers to us at full price.

--Tina

WOW That's the smartest move i've ever heard of ;)

It is a gamble that the clients will stay past the second year. Do the math, you can pretty easily figure out what % of clients need to stay past the first year for you to make money.

It is a gamble that the clients will stay past the second year. Do the math, you can pretty easily figure out what % of clients need to stay past the first year for you to make money.Its not a gamble, you should have historic cancellation rates to use.

Considering that if you were going to *BUY* a customer from another host you would normally pay 12-15 months of the rate, so it's basically the same thing.

Nearly the same amount is spent to acquire a Web hosting client by any other means, so it's an almost generous side effect of capitalism: still receive new clients at the same cost, while helping out your smaller affiliates (instead of spending money with, say, Google). It is rumored that some of HostGator's and iPower's top affiliates now pull in $40,000 a month - that's not too shabby. :)

Nearly the same amount is spent to acquire a Web hosting client by any other means, so it's an almost generous side effect of capitalism: still receive new clients at the same cost, while helping out your smaller affiliates (instead of spending money with, say, Google). It is rumored that some of HostGator's and iPower's top affiliates now pull in $40,000 a month - that's not too shabby. :)
Wow!!! That would be a ton! Shoemoney.com I think makes even more then that with his ring tone and whatever else he does, its a good blog for affiliates, he has a hilarious pod cast too.