everybody. This is Stella

TFT, and this is heating Shah. And today, on the startup chat, we're gonna talk about affiliate programs

like talking about more than your sales and market. We just want a bullshit and chat about business and life. And hopefully, while we're doing that, provide along value todo for people trying to get shit done. Yeah, we don't want to give you feedback. That's bullshit. You want you to do

your best and how to use it for your business When you want to acquire more customers, I'm gonna shoot this first real quick and then we'll get into its tell because it is like one of those more rapid fire ones, because it's the topic and we haven't talked about it. But it's super important one because its affiliate partners referrals. There's this whole category of somebody is bringing me leads and or sales for my business, and I'm giving them some kind of commission. That's essentially what an affiliate it's I I love the idea of having affiliates or even partners that are bringing you commission are bringing you customers for a commission. I think it's one of the key channels that and especially and B two b and in SAS that works really well. It also works really well in e commerce. And for me, it has everything to do with what? One key metric, if this is gonna work for you and it's gonna sound crazy, but like it Z I mean, it's pretty standard, but the key metric that I actually go for it is if my product already has high word of mouth, it is more likely that an affiliate program or for referral and partnerships are gonna work really well,

yeah, that makes so much sense. It hurts. But I'm still sure, exactly, because not every product Yeah, and I'm sure a lot off the startups that have that are considering or have chosen let's invest in affiliate programs or referral programs to fuel our growth have never stepped back to ask this very simple question. Do do we get any word of mouth for our customers and people who know about us talking about us at all like it seems like a very fundamental first step to answer before you go, let's pay the money, give them incentives to do it. But But I'm still I would be surprised if a lot of people thought about that first. So one thing you know, one interesting thing about, um affiliate programs is that or four programs is that I do think my sense is that, uh, you know, within the sort of community,

there's kind of, ah believe that this can work really, really well for and consumer products, right? Kind of recommend a friend, this type of thing, but in B two b in SMB, or even worsen in enterprise when you sell to more kind of corporate serious customers, just offering them some amount of money or a gift card or this or that might not work as well. And and so you know, there are some exceptions that I can think of Dropbox being a really big, unpopular one that was kind of a kind of approved consume, and consumers used it, but professionals and businesses also use it. But I remember their affiliate their referral program off like, you know,

if you share it on Twitter, you get another X amount of free free space. And if you posted on linked and you get free space and if you invite 10 people, you get more free space. That model really worked brilliantly, and I don't actually know the guy that did that for Dropbox. But not every product has that kind of unique value proposition of future said where that would make sense. But I'm curious. Would you a Do you agree? And have you seen this being true or not true? That it'll be to be SNB Startups have less successful the affiliate programs or referral programs than consumer startups, and if so, it doesn't feel your program referral program. Does it always have to be money like a gift card? Or you get 50 bucks if you refer a friend if you get a click or something? Or have you seen other models that work well

at the end of the day? Like the affiliate programs work for two reasons. One, because there is somebody out there that has an audience that wants to refer your product to their audience. That's an affiliate program. Write a referral program is more like your own customers. Bring in more customers, um, by referring each other. Uh, and so I think there's nuance between the two because typically, affiliate programs are designed around somebody making money actual money, like not credits or anything like that. But money while drop boxes. Referral program is all about people, uh, getting credit for getting extra,

specifically getting extra story. So give 250 megabytes get 210 megabytes. So for everyone, you and by you get extra 250 megabytes. And that's really what worked for them. In fact, they have de emphasized that will program now, compared to what? How popular They made it back in the day. It was a double referral program, which means that both sides are getting into an incentive for, uh, you know, signing up for inviting or whatever. And I think it really helped grow the business toe where it is today. It wouldn't be nowhere near where this today without that,

Uh, and that incentive wasn't a money incentive, Really. It was a story incentive. It was when it storage was a currency. These days, storage is as big of a currency. I mean, we have a terabyte on her hard drives. Back then, we had, you know, get gigabytes of hard drive. It was like 20 gigabyte hard drives when they started, and I think that made a big difference. And then,

in terms of affiliate programs again, I'll repeat. This, like the reason that Philip programs don't work is because nobody there. You can't figure out who should promote it. You can't incentivise them. And when they when people come to your site and they sign up, they don't stay or they don't pay. So you have an affiliate. Program doesn't really scale your business. If a bunch of these factors are not, you know, work. So you need a great on boarding experience. You need a great path to monetization of your own user so that the affiliate is happy when they get paid out when your customer pays and it happens in a reasonable amount of time. Another factor is a lot of times you'll do math on your end and look at your funnel and figure out what your customer acquisition cost is and then be able to give a new affiliate for every sign up a certain amount of money.

So then they're not worried about the customer pay right there, just worried about getting you to sign up. And if you have your term metrics in place and you have your numbers in mind and all that, you can come up with a good number that an affiliate would get. The thing is, then that's really a port. Knowing what your own customer acquisition cost. Is there a hypothetical costs of you are doing paid acquisition and being able to figure out what you're willing to pay for a new sign up? Uh, this way you could give affiliates money for every sign up instead of having a weight and b two b until your customer pays, you could. Oftentimes I could be 40 days, 30 days or even longer, so I think that's a key reason thes programs fail. Another reason they fail is you can't find affiliates. There are there isn't a natural audience out there, and a lot of them that is really a lot of them, or a few of them, with a lot of ah, big audience themselves that wants Teoh promote services like yours.

Beautiful. Yet it makes a little sense and remember even talking to you to Anthony, one of my co founders, that close who used to work at eBay a long time ago. And they had, like all kinds of problems with affiliates that would, like, hack the system and create either, you know, create these, like fake automated accounts that will click on something and signed up for something to chart t get their money. But there were no real humans behind it, or it was like just whatever you call that, like like crowdsourcing farms somewhere in the world that would like real humans being paid a penny to do it. And then they would get, you know, whatever 30 cents from eBay for for that human action.

And there was a constant fight between this kind of affiliate program, and people tried to take advantage of it, right to make money on. And so is that If you don't think it through, if you don't understand who your customer base is, where your users are, what the sentence? Our that our line for both sides, it can. It can seem like an easy thing. Why don't we just pay people to be our extended salesforce and go out there and and promote our product and get us a lot off new customers? That seems like a super pilling idea. But if you don't think it through carefully and If you don't make sure that the fundamentals are there for your business, it could be, ah, thing that doesn't do anything or thing that might do do harm.

You'd be surprised how many people out there and we talked about this in prior episodes that even for us, new small startup it would you offer is like some kind of a crazy, attractive affiliate program that doesn't have a lot of safeguards in place. Some scammer will find you, and then they will put it on some scammer forum. And all of a sudden a shit one of these people will will attack your system. It it is surprising, but it does happen a lot, so you have to think this through very carefully. But if it works, it can be a great driver for growth. Hey, great.