Peter Koning: Hey, JR and Lewis, do I have you on the line?

JR Criner: Yes, sir.

Lewis Schrock: You still do.

Peter: OK great. Thanks for coming on the call today. Let's get started. If you could just briefly tell us, give us a quick intro for the two of you, what your roles are at The Planet, and then we can get going into discussing your affiliate strategy.

JR: Sure. My name is JR Criner, and I'm the channel program manager here at The Planet. And I oversee our reseller, referral, and strategic partner program.

Lewis: My name is Lewis Schrock and I'm the channel marketing manager, so I'm responsible for building out the marketing programs that basically support JR's team and outreach to our sales partners.

Peter: OK, great. Let's start off by maybe talking a little bit about your affiliate strategy and then just overall philosophy. How important is it to The Planet to having partner programs in general, and then tell us a little bit about the history of starting your affiliate program.

Lewis: Well from the standpoint of partnerships overall, we see the ability to work with a number of players that can bring business to us, or work through us to represent our products as really a critical area of growth for us and the company. We've had a strong base of resellers in the past. We announced the affiliate program, about a year ago, JR?

JR: Yes sir.

Lewis: Yes, about a year. And then just recently this year added referral partners. So we really see that those influencers in the market who have an understanding of how hosting and cloud services are going to aid in the end use market from small business all the way to small to medium enterprises as being critical to introducing The Planet and the type of capabilities that we have to their customers. And so the partnerships are critical to us continuing to see growth and to increasing the understanding of the benefits of the programs and the products we offer.

Peter: And do you have some sort of feel, as far as whether it's numbers or percentages of the mix of revenues and so on. Like how much does the affiliate program and the partner program contribute to your revenue?

Lewis: The affiliate program specifically, though not an enormous percentage of our total revenue, is a consistent provider of revenue. And we see it as something that reaches out and really aids in the visibility and information about The Planet in terms of increasing our brand awareness on the web. So we see our affiliates as people who can share a lot of information and make people aware of what The Planet has to offer. Because they are typically focusing on smaller businesses, the dollar sales are not necessarily as large as say some of our largest managed hosting sales, but they are still substantial and introduce critically the dedicated servers and dedicated solutions and some of our services to a large part of the customer base. JR, do you want to add anything there?

JR: Yes, I just wanted to add I guess it would be appropriate to say at The Planet we're the world's largest privately held dedicated hosting company and so as part of our effort, leveraging our power to choose from co-location to dedicated hosting to two different layers of managed hosting, a large portion of our business has been derived from e-commerce activity. So it's a natural extension of our business to leverage the affiliate community, which by and large are made up of folks who have tremendous e-commerce capability, that own relationships with other websites that we never touch, to help drive revenues.

So our initial foray into this usually drives between one and three percent of our total monthly revenue. Now in comparison with our other programs, our current resellers and special contract folks are driving roughly around 30% of our monthly revenue.

Then our referral program which we just launched, we expect it to contribute significant revenue shortly. But that kind of gives you a breakdown of where the programs fall today. We have some exciting things that we're doing around the affiliate program that we think will substantially increase its contribution to our monthly recurring revenue and I'm sure we'll cover that shortly.

Peter: OK, yes, I'd love to hear that once we get into it. And I definitely see what you're saying. It's not necessarily a huge percentage on a monthly basis. But it's definitely important for you as sort of like a branding and a customer acquisition mechanism, so that they come in and later on they'll upgrade to more expensive solutions, right?

JR: Exactly.

Lewis: That's exactly it, yes.

Peter: Sounds great. Now I just signed up as an affiliate for The Planet, so I know a little bit about. I can tell right away you're running through a ShareSale network. Can you maybe expand a little on why you chose that? One of the big questions I always get with my affiliate software review site is "Should we run our own software or should we maybe join the network?" I'm interested in knowing why you chose the network and why you chose ShareSale and how that's been going for you.

Lewis: From my perspective it's ideal for an organization like ours, where ShareSale aggregates a lot of the activity and provides that backend accounting so that from the internal standpoint, we only have a single point of contact from a payment standpoint. They also provide excellent tracking and reporting.

In addition, the nice thing about the network is that they provide a conduit of other interested parties. So they increase our visibility to the publisher community out on the web. So what we like is the fact that the visibility of ShareSale has been one of the sources of affiliates in addition to the presence on our website of having our program and being able to refer people who might call in and say do we have a program and we can direct them to our site to sign up to ShareSale.

So the benefit to us has been the aggregation and ongoing management that they provide, which lowers the internal cost of maintaining the program.

Peter: So are they actually managing your affiliate program, or do you have an in-house person for that or a third party company?

Lewis: I'm managing the program for what we're doing today, and what they provide for us is basically the tracking and accounting services, the payment services out to the affiliates.

Peter: Oh, OK. So you don't have to worry about payments and cutting checks to the affiliates, that's all handled by ShareSale?

Lewis: Exactly.

Peter: OK, great. One of the benefits of using a network you said is that you get visibility into the affiliate community as a way of marketing your programs. Do you do anything else to market your affiliate program?

Lewis: At this point we haven't been extremely aggressive. Our entire sales team is aware of the program, so they refer some interested parties into the program. We also have, obviously, the whole section on the website referring people in, helping them understand if the affiliate program might be a good fit for them. So if they have that web presence, if they're communicating, blogging, whatever their activity is on the web, and it makes sense for them to potentially be able to link through and send referrals through to us, we try and make it easy for them to sign up.

Peter: OK. And how has this been working with the ShareSale tracking system? Have you found it to be adequate as far as giving credit to the affiliate who referred you the sales?

Lewis: So far, in the time that I've been running the program, because I took it over about three or four months ago, we've had really no major issues. If any communication back and forth is necessary, it's usually resolved relatively quickly. They give me good reporting tools so that I can aggregate and track what's going on, on an ongoing basis. And then they also have outbound tools, which I haven't utilized extensively yet, but the ability to get promotions out and messages out to the affiliate base. So they really do facilitate that two-way communication. In addition to that, the accounting and reporting functions.

Peter: Sounds like a really good program and a good partnership outsourcing that to them.

Lewis: Yes, it's worked out well for us.

JR: Absolutely. And if we tried to do that ourselves, the internal cost involved probably would make it prohibitive for the return we're getting today. And so it might have been something we would not have done otherwise.

Peter: I know that there are other hosting companies that run their own affiliate tracking systems, but I've been an affiliate to some of those hosting companies and one of the big points of contention that I have is that they just don't keep up. Because they have their own developers working on it with their left hand and not really keeping up with the latest things. A lot of them don't even have like sub-ID tracking. I know they have that, so if an affiliate wants to compare three different websites they run and compare which ones are bringing the best return on investment, there's is no way to do that with some other hosting affiliate programs because they just don't have that to refine tracking.

The only way to do that would to sign up multiple times in different accounts and that becomes a real hassle for the affiliate.

Lewis: Exactly.

Peter: So, you talked a bit about the reasons for having the program and the success you are having with it and some numbers. Thanks for those from JR. I guess one question I have is there something or anything or any challenges you're having with the affiliate program that you are trying to work on and overcome?

Lewis: I don't think there are challenges. I think that we have a goal this year of increasing the focus and continuing to grow the affiliate program. We want to make sure that we are -- we would like to continue to be more aggressive in having potentially from affiliate, at least the pool for all our network affiliates, offers that might be a little bit more unique than say that people might get on the site. Or if we can continue to monitor the types of things that they are selling for us, make specific offers and promotional offers to and through them. So our belief is that the greatest goal is to try and keep the program fresh for the affiliates.

The onus is almost on me to make sure that we continue to be a good partner for the affiliates so that they continue to benefit that's prominently listed and speaking to the market about the offerings at The Planet has.

Peter: OK. So then we talked before we started the call, we touched on one of the topics we might have talked about the success stories. You have success stories, but you haven't got any yet that you might want to release all the details. And I could always do that any time later But can you maybe give the listeners a feel for some of the successes just sort of generally that some of your affiliates are having?

Lewis: There seem to be a couple of categories where we've seen consistent on-going business. We have a couple of affiliates that seem to be very effective at remarketing our site. So they are running advertising campaigns across the web on multiple sites and referring business to and through us. We also have a couple that are blogging on the topic of hosting, being able to recommend and talk to the market about some of the benefits. And they seem to keep driving consistent business through. So it's going to be a couple of models that have from my exposure today have worked pretty well at driving a consistent volume of business to us from the affiliates.

JR: Just to add to that. One of the other areas that we have been of assistance is we've actually been able to help several of our affiliates with larger sized opportunities, larger sized managed hosting, larger sized location opportunities, multi-server dedicated hosting opportunities and so forth, whereas in the past they have dealt with individual servers or core to cabinet slots, things of that nature. We've been able to help with some of those larger scaled opportunities. So as a result they've been able to obviously earn more commissions since we have been able to deliver for them on the larger sized deals.

Peter: OK. Would you say that the mix is typical of the affiliate industry? What I mean by that is most merchants that are running affiliate programs will say that maybe four or 5% of their affiliates are the ones bringing in the bulk of the business. would you say the same kind of skewed, sort of 80:20 rule or 95:5 rules for your program?

Lewis: That's probably not out of line. I think we would match up with that. It's sometimes challenging to get a full feel for if a high number of affiliates that sign up, the degree that they actively promote and market is always a little more obscure to us. So as a result you do end up with that sort of percentage. And so that is right in line with what we've seen.

Peter: OK. And have you had any issues with fraud where someone might sign up someone else through their link with a stolen credit card and that kind of thing? Are there any issues there and what sort of things have you done to cut back on those concerns?

Lewis: We've tried to monitor whether there are sites where we do see consistent but if you see a relatively random. As a result, I don't think it's the issue with the affiliate as it is just with the general marketplace, sometimes taking stabs at seeing what they can get with a credit time information. So we just monitor that. We have not actually identified any challenges with the specific affiliates around that. As soon as see an across-the-board challenge we just monitor it for the validity of the transaction.

JR: I was going to say, that's my area where a ShareSale helps us, because leveraging ShareSale gives us the time to actually vet those opportunities and notify our partners that, hey, this is a bad deal, so as a result this is what's going to happen. But that's really where a ShareSale comes in. And we have a pretty well-vetted abuse department as well. So we can kind of vet those things but I wouldn't - Lewis, feel free to correct me. But I wouldn't describe it as the fraud is prevalent in the affiliate programs.

Lewis: No, no. I don't believe so. That's what I was attempting say, is that I really don't think this is an issue associated with the affiliate program. I think there is a challenge in the market in general.

Peter: Right. Right. And it's probably because you are using a network. I mean, the only time I've heard of issues with affiliate fraud is when it's a privately run program and they maybe pay the affiliates a little too quickly. And so by having that delay and having -- they have seen it all before at ShareSale.

Lewis: [laughs] Yes.

Peter: So that's probably an extra advantage or extra benefit for you.

JR: That brings up a couple of key issues, right? One is that for our partners that we do walk through this in the initial phase but for The Planet we paid out 45 days after we get paid, not after the sale. So number one, we're sure that it's a viable deal because we will have been paid on the first month's service and then we make arrangements to pay the partner. The other issue that has popped up - and, Lewis, you may need to help me here -- is that in terms of a dispute reconciliation, it is very, very important that the affiliate always knows what your affiliate ID is and that the opportunity, if it has not been registered through ShareSale, that it be registered directly through The Planet prior to the end-user client signing the quote.

If it happens post-quote signing, there's really not a lot we can do about it. And quite honestly is most of them are using the banner ads, it's all going to be registered through ShareSale anyway.

But we have had a couple come through where they have referred business that wasn't through the ShareSale process and had asked to be paid on it, but we had no pre-registration of the opportunity before the closure of the sale.

And so that's possibly left a couple of our partners high and dry, so to speak, because the proper process wasn't followed.

Peter: Would you like to add anything to that, Lewis?

Lewis: No, I think that's a good summary. We've tried to be as fair as we can in this situation, but realistically it's a real challenge if don't have any solid information that is trackable information. Which is, again, really to be a well-managed affiliate you can actually track that affiliate program, you can track that activity all the way through. So we really prefer to try and keep the flow through with the tagging that's provided by the program.

Peter: OK. Now, before we wrap up here, you had hinted earlier on that there's some exciting new changes you're going to be adding, with some improvements to the program. Could both of you or one of you ask -- I'll let you take the mike and tell us what's coming down the pipe.

Lewis: There are a couple of directions that we are looking to pursue in the next year. We want to continue to expand the network offerings that we have. So we're currently exploring that activity in addition to expanding the offering in terms of specific promotional activities in those, so that it is used more engaging for the affiliates that have signed up with us. So I think there are really two big buckets there, but we believe that by both increasing the flexibility that we can offer on the network side and then the promotional and marketing offering, we can continue to be the type of partner that our affiliates and the publishers will say, "These are people that we want to give prominent position, because they help us."

Peter: Can you be more specific or give some examples of what it is you are ...

Lewis: I'm probably a couple of weeks away from that. [laughs]...

Peter: OK. No problem.

Lewis: But I'd be glad to give you an update on that in a couple of weeks, as soon as I get some dates locked in.

JR: Yeah, just to add to it, there are other affiliate networks out there aside from ShareSale that we can tap into to help leverage that community as well. In addition, what we have also done -- Lewis, if you don't mind, I'll just add this in there. With our referral partner program we've actually treated that as a way to help our affiliate partners that are going to consistently bring in opportunities that generate more than 1,000 MRR monthly recurring revenue to the company, whereas instead of going through the ShareSale process they can come to the plant directly and actually earn a commission over the life of that contract.

Now, it goes from 100% of the first month's MRR down to 10% for per month for the contract, but if it is a three-year contract, of it's a lucrative contract, it may be more advantageous for the partner to take that route.

So we're actually trying to provide our affiliate partners other avenues with which they can earn more revenue per sale. In addition, if some really get ambitious and want to look at our reseller program as well, we have a new reseller program that Lewis mentioned that we're still a couple weeks away from really launching and confirming the specifics on.

But for those that are going to really drive volume where there is significant server sales and significant managed hosting opportunities each month, there are some real advantages to that program as well. But if putting it on the paper is not their cup of tea, then that's where our current affiliate program with the revamp where we are going to have more banner ads and things like that, to keep things fresh.

And then also the referral partner program that we have called Platinum Partner Plus. It can also help them earn additional revenue that if the sale size is above $1,000, then the term is year longer. So we're just trying to do other things to help people get better opportunities to earn more revenue.

Peter: OK, so I guess the only question there I would have at this point is because affiliates don't always know who's clicking that link, right, to you -- it sounds like for the referral program you would be probably having affiliates that are more actively involved in hosting and more aware of their traffic or have a relationship with their traffic. Versus the affiliate who is walking about hosting and doesn't really know who's clicking the link and whether they should send them through the affiliate program or have them fill out a form and send them in as a referral.

JR: Well, Peter, that's what we're seeing an increase in is that the affiliates are actually trying to find more about the leads and the people that are clicking through on the banner ads, as a way of providing qualified leads back to us as opposed to simple click through. Now obviously many still do that. But we are seeing kind of a separation between those that just do the click through piece and those that actually are trying to find out more about the opportunity before it is presented so they know which program it should go into.

Peter: OK, so they want to move a little bit further up the sales chain and get a bit of a feeling for what might be a good solution for that lead, as opposed to just sending them off to your site and having them figure it out.

JR: Absolutely.

Lewis: That's exactly it. And as JR pointed out, what that really allows is a potential growth path for the affiliate if they do want to get more engaged, more in that advisory role on a high-touch relationship, rather than just informational, sort of the passive providing of information. So if they get more active then they can qualify for that referral partner program and as a result potentially link into some higher revenue opportunities from that standpoint.

Peter: Are those part of the changes that you're saying you're going to be more comfortable giving out more information on it a couple weeks?

Lewis: That program is actually active. And that's really one of the reasons that we added the referral program, was that we realized that the affiliate was great for a certain type of business but those more actively involved partners, it provided that upgrade. So that program is out there today. And then on the areas where I'm going to be filling in will be on both additional activities on the affiliate side and some activities as JR mentioned on the reseller program.

So as you pointed out early we sort of have two different programs that are based on referring business over our affiliate and a referral program with the affiliate being the one that is managed currently just through ShareSales. And then we also have the reseller program for folks that actually buy but then provide services using our infrastructure platforms and services on to their customers.

So we have a wide range of programs for people are in this space.

Peter: And if someone wants to be a reseller, I guess they would be then invoicing their customers.

Lewis: That's exactly it. Right.

JR: That's an important distinction. Any time you're looking to be a reseller, you're taking on the risk of the payment side of the house, as well.

Peter: But then tere's more rewards, too.

JR: There certainly can be and in fact for many of our partners it's a way to actually combine services. So in addition to reselling the hosting aspect of it, if they are providing the kind of managed services or technical services in addition to the hosting -- perhaps it's application development, perhaps it's managed services, whatever it might be -- they can easily overlay their services on top of ours and actually package everything together to resell back out to the client and actually add more margin to each side of the sale and earn more revenue.

Peter: OK. Before we wrap it up, can you tell us a little bit about what you feel makes you affiliate program special. Because I'm sure there are going to some affiliates that are going to hearing about this call and reading about it and might be interested in taking a look at sending you some more customers and being an affiliate for you. So what would your, I guess, the key reasons that you feel that they would benefit by joining you?

Lewis: I think that if someone is interested in being both aware of any aspect, as JR pointed out, from co-location all the way through dedicated and managed hosting all the way up to cloud services, one of the main things that makes people come to The Planet and be interested in partnering with The Planet is the breadth of offerings that we can provide. We like to call it the power to choose.

We give a lot of the flexibility to our customers and our partners through that in terms of a range of things that we offer. In addition we believe that by offering a full month of payment based on whatever that contract is, we've had some substantial multi-thousand dollar payments that have gone out through the affiliate program, which we're thrilled to see and we would love to have more people taking advantage of.

We believe that it's a solid program that offers the end customer a range of choice and that creates a good revenue opportunity where we're paying 100% of that first month out to the partner.

JR: And, Peter, you saw first hand, you signed up for ShareSale yourself and the fact that we leveraged ShareSale as our partner -- and Susan hopefully will add some others to the mix. It's very user-friendly, very easy to use. And so we keep payment issues to a minimum. And as Lewis mentioned with our diversified service offering, it really provides a good platform to earn additional revenue.

Peter: That sounds great. Well, I wanted to thank you guys. I'm going to end the recording shortly, but just stay on the line and I'll chat with you a little bit after.

But thank you so much for taking the time for this call. And, Lewis, feel free to get back to me when you have some more to announce. I can always update the blog or add a new little blog post. I'll put some links here on the interviews so people can get some more information on signing up as an affiliate or as a potential The Planet customer.

Thanks again, both of you, for taking the time today.

Lewis: Thank you.

JR: Thank you, Peter.

Peter: OK.

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