About affiliate programs of hosting companies

Today we would like to talk about the main pros and cons of affiliate programs of medium-sized hosting providers. This is relevant, because more and more companies are abandoning their own monolithic infrastructure somewhere in the basement of the office and prefer to pay the hoster, instead of messing with the iron themselves and keeping a whole staff of specialists under this business. And the main problem of the hosting market affiliates is that there is no single standard: everyone survives as he can and sets his own rules, restrictions and the size of the rewards. Well, we would also like to know the opinion of potential participants in these programs.

Three types of modern affiliate programs

It may seem to a person who is not familiar with the concept of “affiliate program of a hosting provider” that they are talking about some kind of preferences for clients or promotions and discounts, but in reality the “affiliate program” is just a model of selling hoster services through third parties. If you discard high formulations, then all affiliate programs come down to one simple thesis: bring a client to us and get your gesheft from his check.



We remember that each hoster has its own rules and cockroaches, so we can conditionally distinguish three main types of affiliate programs:

• banner referral;
• direct referral;
• White Label.

All affiliate programs come down to the “bring a client” thesis, but in each case there are some nuances and peculiarities that are worth remembering if you plan to get involved in this story.

Banner referral system

The mechanism of work of this type of affiliate programs speaks of its name. The advertising and referral model is mainly aimed at webmasters and offers the latter to post information about the hoster on their sites with an indication of a referral link, according to which a reward will be charged in the future.



The advantages of this system is that it does not require any special gestures from webmasters and allows you to passively search for additional sources of income using managed sites. I placed a banner or clickable link in the basement of the page and sit like a fisherman, wait for someone to follow this link or banner to the hoster and buy its capacity.



However, this system has more pitfalls than benefits. First - perhaps it would be more profitable for a webmaster to screw a Google or Yandex banner instead of advertising such a highly specialized service as hosting. The second - in the banner model, there is always a problem of deferred sales, when the client found information from one device and made a purchase using a direct link or from another workstation. Modern analytics tools, userID assignments, and a session pooling mechanism, of course, can reduce the percentage of "losses", but these solutions are far from ideal. Thus, the webmaster risks charity work instead of receiving at least some penny from a regular advertising banner on his site. In addition, many hosters to work on this model require to be their customers, which is not always suitable for our webmaster.



And of course, it is worth remembering the meager remuneration for such an activity. Usually this is 5-10% of the net check of the attracted customer, although there are exceptional offers with a rate of up to 40%, but they are single. Plus, the hoster can set restrictions on withdrawal via the referral program, as it is, for example, Selectel does, and set a cap of 10,000 RUB. That is, in order to get the first money, the webmaster needs to bring the company of clients for 100 000 RUB without discounts, promotional codes and promotions. This means that the amount of the necessary check can be safely increased by 15-20%. This translates into the prospect of never seeing money for attracted customers.



In general, there are enough potential problems. Technically, anyone can take part in this affiliate program: after all, a referral link can be distributed on social networks or advertised on channels, in communities or on media platforms. But in fact, such a system is fully suitable only for administrators of highly specialized resources, on which the percentage of potential buyers of the hosting provider’s capacities simply rolls over, provided that there is either no cap on the output or is purely symbolic.

Direct referral system

It's still simpler than in the banner model. Direct referral system for partners implies a model in which the partner literally "by the hand" leads the client to the hoster, that is, takes an extremely active position in this process. In fact, a direct referral program is the performance of the function of the sales department as a partner. The host can only sign the contract and provide the client with power.



In this model, rewards are higher and reach at some hosting providers and data centers 40-50% of the check amount (provided that the partner has brought many customers, someone very large or a buyer for a certain tariff), or even a one-time practice payment of 100% of the monthly cost of the tariff. The average reward fluctuates around 10-20% per check.



The main target audience of such referral programs is outsourcing companies that provide infrastructure services. Such a system is viable, as it can be beneficial to the end customer. For example, no one excludes the option of an agreement between organizations on partial or full offsetting of referral remuneration against the services of a company supplying outsourced services.



But here again there are pitfalls. For example, some hosters pay only a one-time fee, or limit the payment period if the total check for the given customer or customers is too low. Thus, hosting providers are trying to "stimulate" the activity of partners, and in fact - reduce their own costs. Here you can also write down numerous restrictions on the type of services provided, for which referral bonuses are awarded, stipulated restrictions on the volume of purchases, payment periods (usually a minimum of a month, and sometimes even three), and so on.

Programs in the White Label category

Behind the beautiful phrase “White Label” lies a completely resale system that is familiar to us. This type of affiliate program offers to completely sell third-party hosting facilities under the guise of their own. It comes to the point that the hoster guarantees that the client will in no way intersect either with billing or with the brand of the final capacity supplier.



A similar program can be called somewhat adventurous, but having the right to life. True, in this model of attracting referrals you get all the problems of a hosting provider regarding billing, communication with a client, legal support, and so on without direct access to the goods you are selling, that is, without access to equipment.



Such a model looks really viable for aggregators - large enough players who have the White Label category partner status right away for a number of popular hosters of different price categories. Such organizations can provide a sufficiently large pool of services to their customers, have established relations with the technical support of each of the hosters. We must not forget about the powerful sales team, which ensures the profitability of the entire enterprise.



By the way, many hosting providers work on a similar hybrid model: without having their own data center in a specific region (or without it at all), they rent racks for their equipment from some major player or data center, and already at this is building your business. Often, such partners additionally resell the hosting partner’s capacities if their own racks are not enough for some reason.

And what is the result?

At first glance, an interesting situation turns out: participation in the referral program is necessary for everyone except end-users of computing power. It seems that this whole story is based on principles similar to the principles of network marketing Herbalife. But on the other hand, everything is not so clear.



The first two models (referral-banner and direct referral) have a recommendation system. That is, the partner of the hosting provider, as it were, says “this hosting should be used, because ...” and gives some arguments in the form of price, support or physical placement of the data center of the capacity supplier. In today's competitive environment, taking care of our own reputation is a top priority. No one in their right mind would advertise a frankly bad hoster to their own customers. The only question is whether referral deductions are worth it to engage in similar advertising of someone else’s business.



In the case of the White Label program, things are much more complicated. Here a lot depends on how the partner will work, what level of service he can provide in terms of support, billing and just tariffs. As practice shows, some cope, while others cast a shadow over the entire domestic hosting service market.



This is important for us, because we have our own data center, equipment and experience, but we are actively developing an affiliate program right now. So what, in your opinion, should be the ideal referral program for a partner or end customer? Speak in the comments or on Kobyakov@miran.ru .