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  1. #1
    Join Date
    Jun 2012
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    Web Hosting Affiliate Payouts

    I have seen advertisements all over the web for affiliate programs from most of the big hosts.

    The referral rates strike me of being extremely high?

    Take iPage for example. They pay their affiliates $100 per referral. How is this possible?

    Their hosting plan only costs $2.95 per month????

    Even if a customer signed up for 3 years, that's only a total revenue intake of around $110.

    Factor into the equation the $10/year domain name cost and we're talking $140??

    That would put them $30 in the hole for each account.

    Am I missing something here????

    Thanks.

  2. #2
    Join Date
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    A lot of it is the competition needed to capture that customer. You also have to look at the flip side: They aren't just acquiring that customer, they're also blocking their competitor from acquiring that customer. They've also calculated the likelihood that any given customer will purchase additional services such as domains, privacy registrations, hosting upgrades, VPSes, dedicated servers, server management, etc. And that new customer that they just paid $100 for is probably going to tell a lot of their friends about their new web host.

    There's also a phenomenon among web surfers known as aversion. This is where a site visitor will go out of their way to avoid advertisements on a page. An indeterminate number of customers know about affiliate programs, and might wind up circumventing the affiliate process and signing up directly with the host. Some will intend to, others will simply go "Hmmm. iPage? Who's that? I'd better Google them!". They don't click on the affiliate link and wind up landing on the iPage site directly through their search.

    By offering such high affiliate payouts, the host benefits directly from each affiliate's marketing initiatives. For example, most (if not all) of those "best web host" pages are nothing more than lists ranked by affiliate payout value. The customer sees that a given host is listed as #1, so they go to their address bar and type in the host's name. Boom. Acquisition through aversion with affiliate circumvention.

    Most customers probably do click the affiliate link. But if, say, 30% follow the aversion path, the host's acquisition cost goes down by 30% for that channel. Thus, instead of an acquisition cost of $100 per customer, they're effectively paying $70 per customer. Suddenly, that three-year deal becomes profitable for them, AND they're denying revenue to their competition.

    This sort of nonsense is why we don't have an affiliate program for non-customers.
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  3. #3
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    Jun 2012
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    Wow, excellent response. Thanks a lot. The idea of aversion is something that has never came to my mind, but it's true.

    How often do any of us go through the links? I never. Always go: new tab -> google -> name of the host.

  4. #4
    Join Date
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    Excellent post floor9.

    It seems an expensive marketing plan initially but will pay off in the long term. I suspect that over the years, users will get more savvy and the aversion rate will climb. With the affiliates revenue dropping they will endeavour to market harder for their commission, its a win-win for the host.

  5. #5
    Join Date
    Feb 2006
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    Virtually all of the high-paying hosts have long, complicated, scare-tactic sign-ups that try to trick you or scare you into adding anywhere from $20 to $500 worth of extra mostly-useless crap. It's the same people who buy useless extended warranties on devices.

    These companies try to recoup the $100 from the sucker immediately.

    I signed up with one recently (because it was $1 for a year), and it took about 20 minutes to simply get through the ordering process. Trying to find the "No thanks" button was very difficult, as it moved locations from page to page. Then it took about 5 days to actually get the account setup. And, of course, the servers are slow as hell. But some people think that's normal, because they don't know any better.

    However...

    Probably 50-90% of the signups never get past the 3-month threshold for payout, which explains why so many fake sites are abandoned and never updated. There's a lot of fraud signups, and wishy-washy users. Some just come to their senses when they realize quickly that the host is terrible. The accounts get closed before the affiliate commission locks.

    When you lose virtually all of your sign-ups, the infrequent $100 the affiliates might get isn't worth their effort. They have even less interest in hosts that pay out a sensible $5 to $20 -- they thought affiliate marketing was a get-rich-quick method, and $5 isn't what they wanted. Most of them don't know anything about hosting anyway, so it's not a loss. This also explains the worthless WHT members that sign up, try to sig-spam posts with worthless one-liners, and then leave a month later because it all turns out to be a great big waste of their time.

    If anything, the amount of money and time affiliate sploggers waste is karma.

    Almost all of those large web hosts are backed by equity corporations, so money isn't an issue. But I think they've created a bubble in the industry, between overpaying affiliates and undercharging for resources. That simply can't last forever. It will break. Just keep watching the train wreck unfold.
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  6. #6
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    Cool

    Those issues are why we base affiliate payouts on a monthly percentage. Not a ton of money each but we have clients that basically get their site "for free" from their affiliates. That way they have an incentive to recommend us AND to get those people to stay
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  7. #7
    Quote Originally Posted by Macam View Post
    Wow, excellent response. Thanks a lot. The idea of aversion is something that has never came to my mind, but it's true.

    How often do any of us go through the links? I never. Always go: new tab -> google -> name of the host.
    It's also referred to as "leakage" in any type of affiliate business. Take adult, for example, somebody sees a banner ad with affiliate link to a website. OK, maybe they click on it (or maybe they type the URL directly). Maybe they go to the site, and maybe they don't sign up today. They remember the site, come back a few days later by typing the website name in the address bar and sign up. That's a paying customer the website didn't have to pay an affiliate for, even though it was the affiliate who made the introduction which resulted in an eventual sale. All profit to the website owner.

    I've read that the Amazon.com affiliate program is pretty bad in this area because they only use a 1 day cookie. (Don't know if this is true, just what I read.)

    Then we have cases where the web surfer visits a website using an affiliate link, bookmarks it, and has their browser set up to clear cookies when closed so when they go back tomorrow there is no referral cookie set and no affiliate credit to be given upon a sale.

    Even if a site is paying a huge affiliate commission for each qualified customer, they may be getting 3 or 4 or more customers from their affiliates that they don't have to pay for because of the aforementioned reasons.

    Keep in mind the nature of the web hosting industry is to be gobbled-up by a larger company. So, you run a hosting company with an eye toward selling it for big bucks in a few years and your goal is to get as many customers as possible even if it means sacrificing short-term profits. You may starve for a while but if you get bought you are going to be feasting on caviar. They just want to sign up as many customers as possible, profitable or break-even.

  8. #8
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    Quote Originally Posted by cheesedude View Post
    It's also referred to as "leakage" in any type of affiliate business. Take adult, for example, somebody sees a banner ad with affiliate link to a website. OK, maybe they click on it (or maybe they type the URL directly). Maybe they go to the site, and maybe they don't sign up today. They remember the site, come back a few days later by typing the website name in the address bar and sign up. That's a paying customer the website didn't have to pay an affiliate for, even though it was the affiliate who made the introduction which resulted in an eventual sale. All profit to the website owner.

    I've read that the Amazon.com affiliate program is pretty bad in this area because they only use a 1 day cookie. (Don't know if this is true, just what I read.)

    Then we have cases where the web surfer visits a website using an affiliate link, bookmarks it, and has their browser set up to clear cookies when closed so when they go back tomorrow there is no referral cookie set and no affiliate credit to be given upon a sale.

    Even if a site is paying a huge affiliate commission for each qualified customer, they may be getting 3 or 4 or more customers from their affiliates that they don't have to pay for because of the aforementioned reasons.

    Keep in mind the nature of the web hosting industry is to be gobbled-up by a larger company. So, you run a hosting company with an eye toward selling it for big bucks in a few years and your goal is to get as many customers as possible even if it means sacrificing short-term profits. You may starve for a while but if you get bought you are going to be feasting on caviar. They just want to sign up as many customers as possible, profitable or break-even.
    I've just intentionally click on an amazon affiliate link - and my cookies show that all the cookies created today either last 1 hour or until 1st January 2036. It was not totally clear which one was the affiliate cookie.
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  9. #9
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    Every host is different and not all affiliate programs are the same or equal in terms of payout, time/delay to payout, and their verification process for the signups with possibly an expiration date. Also keep in mind that most of these cheap packages do require the customer to pay a year or so upfront at least, which does help justify the commission a bit.
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  10. #10
    Simple trick, They are showing a $3.5/m but when you click on affiliate order url then they will show you a real price.

    - $8.99/Monthly
    - $5.99/Quaterly
    - $5.99 Annually
    - $126($3.5/m) Tri-annually ($3.5 x 3 Year = $126)


    Affiliate user earn $100 and Hosting company get $26 + Customer
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  11. #11
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    Quote Originally Posted by DewlanceHosting View Post
    Simple trick, They are showing a $3.5/m but when you click on affiliate order url then they will show you a real price.

    - $8.99/Monthly
    - $5.99/Quaterly
    - $5.99 Annually
    - $126($3.5/m) Tri-annually ($3.5 x 3 Year = $126)


    Affiliate user earn $100 and Hosting company get $26 + Customer
    Most hosts also try to upsell quite a bit, domains, domain whois protection, etc. If a host is selling $126 worth of hosting, they are shooting for a lot higher ARPU.
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  12. #12
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    And plenty of sales will somehow get lost - whether valid fraud, suspected fraud, invalidated to keep the #s low... etc
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  13. #13
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    Quote Originally Posted by mdrussell View Post
    And plenty of sales will somehow get lost - whether valid fraud, suspected fraud, invalidated to keep the #s low... etc
    Yup, we have all heard the stories. Im sure some are unintentional, however end of the day, some of these web hosts will do what they must to stay in the green (if that means burning a few bridges along the way, some do not seem to mind).
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  14. #14
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    Very interesting thread. I'd like to make my contribution. Bottom line is that most people find moving hosts very painful so once you get a hosting customer he's yours for the life of his website. It's like banking. People don't change banks often and they don't change hosts often.

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