Site5 Web Hosting Blog

But You’re So Cheap

Posted by Kevin Hazard, December 1st, 2006

You found Site5. By some twist of fate in this mixed up internet world, you are reading our corporate blog when there are more than 100 million other sites on the internet. You may live in Australia, Austria, or Austin, but the simple fact is that somehow you heard of Site5 (and Kevin’s amazing blog posts), and you are here. This information is not earth-shattering, but it gives way to an extremely interesting statistic: If you found us recently, we probably didn’t have to pay anything to get you here.

We are coming off of our most successful month in Site5 history, and we have paid next-to-nothing in advertising in the past six months. Our biggest “advertising” expenses are affiliate commissions for converted sales, and we pay 1/5 what our competitors do for each sale. Something must be wrong with the system. This doesn’t make sense. Wait… Maybe it does.

What’s the Deal with Affiliates?

You might be surprised to learn that in the hosting industry, it is common practice to pay affiliates well over $100 for each new customer they refer. No, that’s not a mistake, and no, that statement needs no qualification. You put up an affiliate link for a web host, a customer signs up for a $10/month hosting account, and you get paid $100. Some quick math would reveal that a $100 payout on a $10/month account is 10 months of service that the host is not getting paid for. These affiliate commissions are clearly built upon an assumption of long-term commitment, but the $20 gross revenue that host gets in the first year (which breaks down to $1.67/mo) would explain why Site5’s plans are so affordable. Note: That $20 gross revenue is likely to decrease significantly when you break out blanket advertising expenses for the year to your hosting revenues, further proving my point.

Site5 pays a small fraction of that typical cost for each affiliate sale, but we can pay off that affiliate expense anywhere from one to four months into the hosting contract. Let’s say we give an affiliate $20/sale. If that sale is on our $20 reseller deal, we gross $220 on that account ($20/mo x 12 mo - $20 payout) in the first year. If that sale is on a $5 shared plan, we gross $40 on that account in the first year. Both of those numbers are greater than our competitors’ $20/account gross, so we would then have more money per account to spend on servers and support… you know, those relatively significant little things.

If you are looking for hosting and you stumble across Site5, we hope that one of our plans and your website needs go together like lamb and tuna fish (thanks to Big Daddy for that comparison). Maybe it has to do with our prices, our specials, or our ruggedly handsome and witty blog writers, but our affiliate conversion ratios are among the highest in the industry. Go ahead, navigate to our site to sign up for our affiliate program and test out that claim. We are currently using iDevAffiliate for our affiliate system, but our entire affiliate program is being overhauled by Matt and David, so you may not get too much experience in iDevAffiliate before our new system drops.

The new system will be integrated directly into Backstage, and it will be designed with an easy-to-use interface. As an affiliate, you will be able to easily set up ads, track sales and get payouts via paypal or have balances applied directly to your hosting account. Because we are tying the system into our customers’ account management panels, every Site5 customer can easily become an affiliate and take advantage of the opportunity to make a few dollars by simply dropping a “This Site Is Hosted By Site5″ link or image at the bottom of their page. When the new system is released, we will probably increase payout levels on a tiered system (the more sales you get, the higher the commission you get per sale). Before you crack your knuckles and prepare to call us out on our diatribe against high affiliate payouts, we are not going to get up to the $100 mark, but because you need a Site5 account to use the Backstage system, we feel a lot better about sharing the wealth with our customers (slash affiliates).

Not coincidentally, Site5’s most successful campaign has been the “Tell Your Friends” Multisite deal simply because our community is our most valuable resource when it comes to marketing and promoting our services. Extending a discount to new customers is essentially writing off the discount to advertising expense. All of the decisions we make for the future of the affiliate program will be with the understanding of the dollars and cents of the hosting accounts (as I discussed above) as well as the common good of the Site5 community… We’ll make Web Hosting Communism work: I’ll be “Karl Heinrich Marx,” Matt will go by “Mao Tse-tung,” you can call Todd “Vladimir Ilyich Ulyanov,” Adam will respond to “Joseph Vissarionovich Dzhugashvili,” and Rod’s can be reached as “Leon Davidovich Trotsky.”

But You’re So “Cheap”

As I mentioned in the recent post about overselling, we do everything in our power to ensure a top quality hosting experience, and our plan pricing is derived from a Keep It Simple Stupid approach. People say we are overloading our servers because our plan prices are so low, but as I explained, a greater percentage of our monthly fee is spent on the quality servers and support you are getting with us rather than the advertising expense you are helping some other company pay.

Rather than relying on large affiliate payouts–not to mention other costly advertising campaigns–to bring in new business, we spend the money providing additional value. And since our offerings are second to none, people who find out about Site5 choose us much more frequently than they do many of our competitors. So in that sense, even our affiliates win, because although we’re not paying triple digit dollar amounts for each referral, the people they send are much more likely to host with Site5 because of the bang-to-buck yield. So the next time you see an ad for a hosting company–whether it be a sponsored Google search result for the keyword “web hosting” (which goes for up to $40/click,.. don’t even ask me about factoring that amount into the equation), a banner on a cluttered hosting directory or a “top 10″ site–know that Site5’s conspicuous absence is our way of saying “Hey, come check out our hosting. We think you’ll like it.” Actually, I’m from Texas, so for the country music fans out there, I can make it a little more clear: “We say it best when we say nothing at all.”

We have been cutting out all expenses that do not make our service better. The result? We have strengthened our hosting infrastructure, improved support policies, implemented new quality assurance systems, and invested in technologies that will ensure the best customer experience possible.

Tell others about this post:
delicious     /     newsvine     /     blinklist     /     reddit     /     fark