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  1. #1
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    How do web hosting make money?
    How do Web Hosting Company make money if they give $100 commission to affiliates for selling $5, $7 or $10 web hosting?

    Hostgator give $100
    web.com give $120

    How do these company make money?

  2. #2
    Affiliate Manager Steven.C's Avatar
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    Many of them require the new customers to prepay for a year or more of service, which covers the commission. They make their money back after that. If they provide good service, its pretty much an investment of free service for a year knowing that it'll pay off with the second years renewal.

  3. #3
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    Hosting Biz Model....
    Quote Originally Posted by youyap
    How do Web Hosting Companies make money if they give $100 commission to affiliates for selling $5, $7 or $10 web hosting?

    Hostgator give $100
    web.com give $120

    How do these company make money?
    Hey You

    I'm unfamiliar w/ the exact biz model, BUT:

    There are 57 million websites in the US alone. That number seems to grow every year. 90+% of them need a host cuz pretty much all of them have no idea HTF to find a /www file or how to load one.

    Most larger Hosts have both dedicated and shared servers. Did you know you could host 100+ websites on you home computer ?? Who knew ?? Perhaps more.

    So, here is the deal from my perspective. A decent biz servers is like around 3 grand [some are more, a few are less] then there is the security guys, rent, and TXU. - gotta have electricity, right ?

    10 USD/ mo x 100 sites per server is like a grand a month. If the outfit has like 100 servers, that's like 100 grand per month plus any ads they might get paid for add ons like domains, secure registration, dedicated servers, and SSL's etc. etc.

    Of the number of ads they place on the net promising you that you can get 100 USD for pushing their wares, how many people actually take them up on it ?? A few thousand MAYBE ?? So the ads will cost them what ?, a few hundred grand or 2 months worth of revenues perhaps ??

    Someone like YAHOO! has perhaps a few MILLION websites hosted on their servers. Go Daddy {Haiko De Poels front end} Has probably at least a million sites hosted.

    I typed in About: Hostgator on ask.com and I got this on the first result:

    Hostgator offers web hosting, reseller hosting, and dedicated servers. Over 1,800,000 websites trust Hostgator for their web hosting needs. ... HostGator Logo...
    76k - 11 sec @ 56k
    www.hostgator.com/ www.hostgator.com/ Cached
    1.8 million sites ! ?? Times ten bucks a month ??? That's like 180 million USD PER MONTH. Are you kidding me ?? And all Haiko has a is a Lexus.

    Not only does Host Gator make like nearly 2 BILLION usd a year plus any extras I mentioned above, but the ridiculously low 200 grand they paid to guys to push their wares is a friggin' tax write off. Even if they paid more like 20 million USD / year in advertising, that's Peanuts compared to what they make, and it is all a write off too.

    And think about it for a moment. Do you think that the security emplyees cost all that much when you are talking a few thousand servers to maintain as opposed to millions of web sites ?? Same with TXU, if you got hudreds of sites on one server, you are talking about a point of diminishing costs. There comes a point when the millions they spend on employee pay checks and the millions more they spend on rent and electricity actually wind up only costing them PENNIES per website hosted. A few bucks a month per website maybe ?

    Then there are corporate discounts. Do you think TXU charges HostGator the full rate for their electricity every month ? I doubt it. And stuff like domains. Why does Haiko sell domains for 8.95/yr when they are 10-15 USD all over the internet ?? How many domains does the big H sell a year anyway ?? So then what about HostGator then ?? Perhaps they do not have all 2 million sites domained through their service, but what if it were 10% ? -200,000 domains is a lot of money every year. This is called Residual Income for both Host Gator and the outfit that actually owns the domain. Do you think host gator pays more than 3 USD/ year for their domains ?? At 600,000 USD/year, do you think that the guy that actually owns the domains making some serious cash ?? Do you think he will be willing to bend and offer some steep discounts on them ?? When discounts are offered, do you think that host Gators Monthly/ Annual Residual Income goes up ?

    In this case it is BOTH about what you make AND what you keep. Then get the tax write offs on top of it. Right ?

    Hope this helps !!

    Steve
    DreamLinux.net | Registered Linux User 453976 | PM me to view our sites. It's a Google thing.

  4. #4
    ABW Founder Haiko de Poel, Jr.'s Avatar
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    Continued Success,

    Haiko
    The secret of success is constancy of purpose ~ Disraeli

  5. #5
    Affiliate Manager Steven.C's Avatar
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    Quote Originally Posted by SteveWilliams
    1.8 million sites ! ?? Times ten bucks a month ??? That's like 180 million USD PER MONTH. Are you kidding me ??
    You got the general gist of it give or take some. Your numbers here are a bit off. They have tons of reseller, multi-domain accounts. So they are not getting that $10 for all 1.8million domains. But they are indeed making millions/year.

  6. #6
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    please stay with the topic
    the best reply was first reply. The other reply have drift of topic. What i like to know is how they make money if they pay out $100 commission. Also for hostgator and web.com you do not have to sign up for 1yr. You can do month per month...
    That should be a lost if customer cancel in 3 months or so. Any one know how they make money?

  7. #7
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    My Numbers Suck....
    Quote Originally Posted by SeeksSteven
    You got the general gist of it give or take some. Your numbers here are a bit off. They have tons of reseller, multi-domain accounts. So they are not getting that $10 for all 1.8million domains. But they are indeed making millions/year.
    Steve

    Yeah I kinda saw that going in. I'm the big biz guy [sort of] but I'm unfamiliar w/ the host biz. I'd need to see their spread sheets for a few years running to get a really good window on it.

    I just hope that I contributed to both ABW and this user in some way.

    Steve
    DreamLinux.net | Registered Linux User 453976 | PM me to view our sites. It's a Google thing.

  8. #8
    ABW Founder Haiko de Poel, Jr.'s Avatar
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    Admin Note:

    Don't re-post the same Q in other parts of the forum.

    And watch your attitude ... if you can't figure out a hosting co's business model, that doesn't give you the right to poo poo anyone's answer. Be thankful that they took the time to post a reply.

  9. #9
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    Exclamation Sorry You Thought My Half Hour To Type Post Sucked...
    Quote Originally Posted by youyap
    the best reply was first reply. The other reply have drift of topic. What i like to know is how they make money if they pay out $100 commission. Also for hostgator and web.com you do not have to sign up for 1yr. You can do month per month...
    That should be a lost if customer cancel in 3 months or so. Any one know how they make money?
    Say You

    I'm sorry you thought my half hour to type post sucked. I told you EXACTLY how they make money. You did not read it ??

    Quote Originally Posted by stevewilliams
    10 USD/ mo x 100 sites per server is like a grand a month. If the outfit has like 100 servers, that's like 100 grand per month plus any ads they might get paid for add ons like domains, secure registration, dedicated servers, and SSL's etc. etc.

    Of the number of ads they place on the net promising you that you can get 100 USD for pushing their wares, how many people actually take them up on it ?? A few thousand MAYBE ?? So the ads will cost them what ?, a few hundred grand or 2 months worth of revenues perhaps ??

    They are making their money in VOLUME. It is also a ratio.

    Steve
    DreamLinux.net | Registered Linux User 453976 | PM me to view our sites. It's a Google thing.

  10. #10
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    Thumbs up Thanks H !...
    Quote Originally Posted by Haiko de Poel, Jr.
    Admin Note:

    Don't re-post the same Q in other parts of the forum.

    And watch your attitude ... if you can't figure out a hosting co's business model, that doesn't give you the right to poo poo anyone's answer. Be thankful that they took the time to post a reply.
    Thank H ! I appreciate that. I spent 30 mins trying to help out.

    I just hope I did.

    Steve
    Last edited by Steve Williams; July 12th, 2009 at 02:01 PM. Reason: Texas Spelling Spree.....
    DreamLinux.net | Registered Linux User 453976 | PM me to view our sites. It's a Google thing.

  11. #11
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    I know they may make money other area. Everyone know that you can host 100's of sites on one server and make money but if those 100s of site are send to you by affiliates, how do you make money from it? So there are loosing money giving out pay to affiliates?

  12. #12
    ABW Veteran Mr. Sal's Avatar
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    Cool
    Quote Originally Posted by youyap
    the best reply was first reply. The other reply have drift of topic. What i like to know is how they make money if they pay out $100 commission. Also for hostgator and web.com you do not have to sign up for 1yr. You can do month per month...
    That should be a lost if customer cancel in 3 months or so. Any one know how they make money?
    How do these company make money?
    Now I know why you do want a better answer to that question...

    Like someone else said the other day... is your friend...

  13. #13
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    If that is true then they will be no need for forums because you can get all answers on google. Type it in google and let me know how that turn out

  14. #14
    ABW Veteran Mr. Sal's Avatar
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    Type it in google and let me know how that turn out
    I just typed youyap on G. and I got some results...

    So unless it's a coincidence, it looks like you already are into the web hostings biz...

  15. #15
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    Quote Originally Posted by Haiko de Poel, Jr.
    youap, I guess you missed this answer. You pay more up front to acquire the customer and you have to supply good service and customer service to keep them long enough to make money on them.

    If you are a new hosting service and don't have the capitol to work that way, then you will need to wait until you have enough reserve to be able to.
    Deborah Carney
    TeamLoxly.com BookGoodies.com ABCsPlus.com

  16. #16
    http and a telephoto
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    Quote Originally Posted by youyap
    If that is true then they will be no need for forums because you can get all answers on google. Type it in google and let me know how that turn out
    lol, usually many of the results are threads right here
    Deborah Carney
    TeamLoxly.com BookGoodies.com ABCsPlus.com

  17. #17
    OPM and Moderator Chuck Hamrick's Avatar
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    Its all life time value based on the average length a customer stays with the brand. I manage a program where the site sells an $8.95/month hosting package based on a yearly commitment. For the affiliate program we offer special links to a $4.95/month annual package and pay affiliates $90.00 in commission, $125.00 if you are a top producer. This is because someone who purchases a basic hosting package generally upgrades in a year to a professional package to host more domains. Then a certain number move up to the premium package for unlimited number of domains to host.

    Plus, people who buy hosting (like affiliates) generally need more domains, email packages, web design and SSL. The ones that stay with it and are successful will need shopping carts too.

  18. #18
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    Quote Originally Posted by Chuck Hamrick
    Its all life time value based on the average length a customer stays with the brand. I manage a program where the site sells an $8.95/month hosting package based on a yearly commitment. For the affiliate program we offer special links to a $4.95/month annual package and pay affiliates $90.00 in commission, $125.00 if you are a top producer. This is because someone who purchases a basic hosting package generally upgrades in a year to a professional package to host more domains. Then a certain number move up to the premium package for unlimited number of domains to host.

    Plus, people who buy hosting (like affiliates) generally need more domains, email packages, web design and SSL. The ones that stay with it and are successful will need shopping carts too.
    Well Damn Chuck...

    You just said the exact same thing I did. {see extras, SSL's, Private Reg's, etc.}.

    So I get a little validation today ?

    Thank You !!





    Quote Originally Posted by youap
    I know they may make money other area. Everyone know that you can host 100's of sites on one server and make money but if those 100s of site are send to you by affiliates, how do you make money from it? So there are loosing money giving out pay to affiliates?
    I doubt 80% of Host Gators traffic comes from affiliates. Perhaps I am incorrect in this.

    Host Gator blows big bucks on ads in other places too. Therefore it is a RATIO my man.

    + what Chuck said.


    Hope This Helps !


    Steve
    Last edited by Steve Williams; July 14th, 2009 at 03:14 AM. Reason: forgot quote tag, shit.
    DreamLinux.net | Registered Linux User 453976 | PM me to view our sites. It's a Google thing.

  19. #19
    ABW Ambassador delsol's Avatar
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    In the hosting business (and other similar recurring based business) you have the concept of customer acquisition cost (cac)..

    During the boom days of the internet, cac was easily in the thousands. If I remember well, Hiway hosting (the leader of shared hosting back then with 100,000+ accounts) was acquired by Verio, around 2000, for the equivalent of $2500 per customer. Today still, shared hosting customers are commonly acquired for hundreds of dollars (average probably around $250/customer).

    So paying $100 per customer is pretty cheap. I guess they are paying less, since the quality of these customer (many newbies) might not be as good as an existing shared customer running his site since years. New customers can easily stop their site and often require more support.

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