Welcome, Guest. Please Login or Register
  HomeHelpSearchLoginRegister Latest Rules Support  
 
Page Index Toggle Pages: 1
Send Topic Print
Golden Rules of Rented Referral Management (Read 7608 times)
ruicarlov
VIP Member
*****
Offline


PTCMan! The doodle superhero
of the PTC world!

Posts: 1479
Portugal
Gender: male
Golden Rules of Rented Referral Management
12th Nov, 2015 at 5:43pm
 
Rented referrals are commonplace in the PTC industry, but people often don't research enough about them or don't make any calculations, which in turns leads to a lot of people yelling scam and saying RR never make any money.
Rented referral management is first and foremost a mathematical endeavour. With a simple excel spreadsheet and a bit of info, it's possible to predict whether an investment in RR is bound to be sucessful or not.
With about 25k rented referrals under my belt, spread across several PTC sites, I thought I'd share some golden rules you should follow when planning to rent referrals.
Back to top
 
 
IP Logged
 
ruicarlov
VIP Member
*****
Offline


PTCMan! The doodle superhero
of the PTC world!

Posts: 1479
Portugal
Gender: male
Re: Golden Rules of Rented Referral Management
Reply #1 - 12th Nov, 2015 at 5:49pm
 
  • 1. Referral extension discounts are not only your friends, they are essential allies. Use them

Renting referrals at their base price are not profitable. I have never met a reliable long-living site where this didn't happen. You must use their discounts when extending the rental period of your referrals. Often, only the biggest discount (extending for the longest time possible) can make an account profitable. Sometimes a small buffer may exist, but discounts under 25-30% usually spell disaster.

Important information to collect:
  • Referral renting and rental period extension prices - Obviously
  • Earnings per each referral click
  • Expected referral averages based on other members' stats - Search the forums for several sources of data. Data from members with at least 3-4 months of RR ownership is preferable. Is a site lacks members posting their rented referral stats, investing is not advisable.


With this data in hand, you can calculate the BEP (break-even point), which is the absolute minimum average your rented referrals should have in order for you not to have a loss.
For the ones new to this, please use the following formula:
BEP = Referral price * (1-%Discount) / Earning per each RR click

This is the simplest formula, which doesn't take into account other variables like premium memberships, which I'll adress later.
Calculate the BEP for each renewal period to see if a certain extension period is profitable or not.

I'll illustrate with an example. Let's say Mr. S is a Silver member at Yougetprofit wanted to try to rent some referrals. Let's say his membership cost covered by his direct referrals, so he doesn't need to add it to the equation. Referral base price at YGP is $.20 per month. Mr S. found from an older member, Mr. R, that his usual RR averages are around 1.2 clicks per referral.
The BEP for the various extension periods are:
  • 30 days -  5% discount - BEP = 1.583
  • 60 days - 10% discount - BEP = 1.500
  • 90 days - 18% discount - BEP = 1.367
  • 150 days - 25% discount - BEP = 1.250

  • 240 days - 30% discount - BEP = 1.167
  • 365 days - 35% discount - BEP = 1.083
  • 720 days - 40% discount - BEP = 1.000


As you can see, holding rented referrals is only expected to be profitable for discounts 30% and above. Even if Mr. S got averages of 1.25, he would make no profit, and may even lose a bit, since he should always set a little cash aside. Some of his referrals may turn inactive in the future need replacing (recycling) which has a small fee per each referral.
Back to top
« Last Edit: 12th Nov, 2015 at 5:57pm by ruicarlov »  
 
IP Logged
 
ruicarlov
VIP Member
*****
Offline


PTCMan! The doodle superhero
of the PTC world!

Posts: 1479
Portugal
Gender: male
Re: Golden Rules of Rented Referral Management
Reply #2 - 12th Nov, 2015 at 6:34pm
 
  • 2. Always invest in a way which guarantees you can follow rule nr 1 .

Now that you know that you must rely on the big renting extension discounts, comes a second important step. Plan your investment so that you are able to renew all the referrals you rent with the aforementioned discounts.
This means that renting referrals demands spending high amount of capital upfront. Obviously, extending referrals for a long time costs much more than simply renting them for 30 days. Expect renewal costs to be 4-15 times higher than the initial 30 day renting.

For example, if Mr. S wanted to rent 200 referrals, he would need $40. But to extend these referrals using bigger discounts, he would need the following:
  • 150 days - 25% discount = $150
  • 240 days - 30% discount = $224
  • 365 days - 35% discount = $233
  • 720 days - 40% discount = $576

This means the renewing costs would be 3.75 higher than the inital renting cost with 150 days extension, and go up all the way to nearly 15 times higher in the 720 days extension.
The option which guarantees the maximum profit is the latest. However, it requires investing double the amount when compared the second most profitable option (365 days), while but the aditional benefit is quite small. If you have a lot of free cash lying around without any good investment opportunities for it, going for the 720 days might make sense, but if your capital is limited, it may be more efficient to chose another option, like renting for slightly less time or rent less referrals.

Here's another word of advice: Don't overestimate what your RR will earn during their first 30 days.
Ever since you rent them, referrals start earning money for you. But as mentioned earlier, you'll need at least 4 times more money to extend these referrals that you used to rent them. No matter how good they are, they will not generate that much cash. If you rely on them to cover most of your renewing expenses for the next 8 months, you'll end up very short on funds.

Let's say Mr. S rented 200 RR for $40, and only had planned to set aside $10 to renew them. During those first 30 days, the referrals clicked very well, and he got a 1.6 click average from them, more than he expected considering Mr R's previous data. Since each click is worth $0.004, at the end of the month they earned him around $38. Now Mr S has $48, but he needs to spend $228 to renew everyone for 240 days. Anything less and he'd be using a discount bracket which would not make him any profit.

When cash is short, only rent the amount of referrals you know you'll be able to renew.
In layman's terms, don't make the step longer than your leg.
Back to top
« Last Edit: 13th Nov, 2015 at 1:38pm by ruicarlov »  
 
IP Logged
 
ruicarlov
VIP Member
*****
Offline


PTCMan! The doodle superhero
of the PTC world!

Posts: 1479
Portugal
Gender: male
Re: Golden Rules of Rented Referral Management
Reply #3 - 12th Nov, 2015 at 6:47pm
 
  • 3. Not all paid memberships are born the same

Buying memberships at PTC sites is always a must when you have rented referrals. It is often the only way to make profit, as free memberships usually give you low value per each click. However, when using them when you only have RR, you must include the membership cost in the BEP calculations. Using yearly paid memberships, the expression becomes:
BEP=[Referral Price * (1-%Discount) + Membership cost / (365 * Nr referrals)] / Earning per each referral click

Paying for the membership will increase your BEP, but from this expression you can see that the higher the number of referrals, the smaller the effect of the membership cost on your BEP (since that cost is divided by a bigger number of referrals).
When it come to RR, more expensive memberships can usually benefit you in two ways.
  • Higher earning per each referral click - The benefit is obvious
  • Higher upper limits for renting referrals - The more you rent, the lower the burden of the membership cost.

But the most expensive membership may not be the best for your BEP. Pay special attention when two paid memberships have the same earning per referral click and differ only in maximum number of rented referrals.

For example, let's say Mr R. was looking around Twickerz thinking what membership he should choose. He compared two memberships, Gold Plus and Platinum. The first one, costing $250 a year, had a limit of 2000 rented referrals. The second, costing $500, had a limit of 2500 RR. RR earnings was $0.01 per eack click and base renting cost was $0.27 per month. Using 720 days extension (40% discount), and renting the maximum amount of RR each membership allowed, he calculated the following:
  • Gold Plus with 2000RR - BEP = 0.574
  • Platinum with 2500RR - BEP = 0.595

In this case, the higher number of referrals was not enough to offset the higher cost of the Platinum membership. Of course this membership had other advantages, like free replacement of inactive referrals that don't click for 7 days (vs 9 days in Gold Plus). But BEP remains calculation remains one of the most important factors.
But can you still get higher profits with lower BEP? You can, depending of the BEP diference and expected referral averages. The daily profit can de given by the expression Profit=(RR Average - BEP)*Nr referrals*Referral click rate
If the referral average was 0.73:
  • Gold Plus scenario - Daily Profit = $3.12
  • Platinum scenario - Daily Profit = $3.37

Platinum was slightly more profitable, but you had to invest over 25% more.
With a more realistic average of 0.65 (taken from other members' data).
  • Gold Plus scenario - Daily Profit = $1.52
  • Platinum scenario - Daily Profit = $1.37

The expected earnings were actually higher in the cheapest option.
Be sure to make your maths when selecting memberships
Back to top
« Last Edit: 13th Nov, 2015 at 1:41pm by ruicarlov »  
 
IP Logged
 
ruicarlov
VIP Member
*****
Offline


PTCMan! The doodle superhero
of the PTC world!

Posts: 1479
Portugal
Gender: male
Re: Golden Rules of Rented Referral Management
Reply #4 - 12th Nov, 2015 at 6:47pm
 
  • 4. Size does matter, but a bigger downline isn't always better.

Getting the most rented referrals you possibly can might not get you the most profits.
Sounds strange?
Take a look at the example in the previous rule. An account with 2500RR could yield less money than a smaller account, courtesy of the membership prices. But that's not all. There is another overlooked factor that can contribute even more to this: Rented referral price brackets. The more rented referrals you have, the more expensive it is to rent them. Most sites do this by adding $0.01 to the rent price for every 250 referrals you have, up until 1750 referrals. The most common price starts at $0.20 (in some cases at $0.15), going up all the way to $0.27, like this:
  • 0->250 - $0.20
  • 251->500 - $0.21
  • 501->750 - $0.22
  • 751->1000 - $0.23
  • 1001->1250 - $0.24
  • 1251->1500 - $0.25
  • 1501->1750 - $0.26
  • over 1751 - $0.27

This has a very big effect on BEP, more than membership prices.
In rule nr 3 I showed two situations were the rental referral price was the same - $0.27, the highest price bracket.
Now let's suppose Mr R. decided to take a look into lower memberships at Twickerz, like Gold Membership, at a humble $100 per year, $0.01 per referral click, and a maximum limit of 1000R. He calculated the BEP, followed by Daily profit using an expected RR average of 0.65, like before. He got the following:
  • BEP = 0.487
  • Daily profit = $1.62

This surprised Mr. R. Chosing the cheaper membership and having half the referrals of the Gold Plus scenario, the expected returns were higher, and the required investment was less than half. Could the referral price bracket be really that important? Or was it also a byproduct of the membership price?
Since he was not convinced, he went to Goldenclix, and made simulations for various amounts of referrals, always considering the same membership: Gold Member, costing $800 per year, no limits to max rented referrals, $0.012 per referral click. Here's what he got with all referrals extended for 330 days (35% discount), and an expected RR average of 0.6:
  • 1000RR ($0.23) - BEP=0.597; Profit = $0.03
  • 1250RR ($0.24) - BEP=0.579; Profit = $0.32
  • 1500RR ($0.25) - BEP=0.573; Profit = $0.49
  • 1750RR ($0.26) - BEP=0.573; Profit = $0.55
  • 2000RR ($0.27) - BEP=0.578; Profit = $0.51
  • 2250RR ($0.27) - BEP=0.568; Profit = $0.85

As you can see, profit was not linear with the number of referrals, and there was an optimum at 1750RR if there was not enough money to rent 2250RR, where the BEP was lower again.
When renting refs, be sure to always consider referral price brackets, membership costs and expected averages in order to find the most efficient use of your money.
Back to top
« Last Edit: 13th Nov, 2015 at 1:37pm by ruicarlov »  
 
IP Logged
 
dansbanners
VIP Member
*****
Offline


I love being here!

Posts: 2025
Gender: male
Re: Golden Rules of Rented Referral Management
Reply #5 - 12th Nov, 2015 at 8:49pm
 
rui,

Sounds like you know alot about this topic. You ought to write a blog or actually make money off your knowledge. That is if you haven't been doing so already?
Back to top
 

 
IP Logged
 
SolidSnake
Forum Administrator
*****
Offline


I'm impossible to forget,
but I'm hard to remember

Posts: 3386
Center of the Universe
Gender: male
Re: Golden Rules of Rented Referral Management
Reply #6 - 12th Nov, 2015 at 11:28pm
 
Mr. S and Mr. R?!?   Smiley Smiley Smiley

Wow, that's really inventive and doesn't ring any bells at all! Grin
You should put a note in the end that says:

Quote:
"All characters appearing in this work are fictitious. Any resemblance to real persons, living or dead, is purely coincidental."

Ok, that's an amazing guide, and kind of reminds me that I need to complete my site ASAP, in order to give it the look it requires (and your referral link at the bottom of course).

Let's say that hypothetically Mr. S has read your instructions.. then he would be eagerly waiting to read the next parts.. Wink  Roll Eyes
Back to top
« Last Edit: 13th Nov, 2015 at 3:38pm by SolidSnake »  
WWW  
IP Logged
 
ruicarlov
VIP Member
*****
Offline


PTCMan! The doodle superhero
of the PTC world!

Posts: 1479
Portugal
Gender: male
Re: Golden Rules of Rented Referral Management
Reply #7 - 13th Nov, 2015 at 1:45pm
 
dansbanners wrote on 12th Nov, 2015 at 8:49pm:
rui,

Sounds like you know alot about this topic. You ought to write a blog or actually make money off your knowledge. That is if you haven't been doing so already?


Of course I have been making money off my knowledge.
By applying these rules to my referral management  Wink
Back to top
 
 
IP Logged
 
SolidSnake
Forum Administrator
*****
Offline


I'm impossible to forget,
but I'm hard to remember

Posts: 3386
Center of the Universe
Gender: male
Re: Golden Rules of Rented Referral Management
Reply #8 - 14th Nov, 2015 at 10:22pm
 
That's a really cool approach! The detail of the info is amazing!  Smiley  (...Mr. S would have said...)

Btw, I think you should update the title of each part to 1/4, 2/4, 3/4 and 4/4 to make it clear upfront that another part follows..

Many thanks for your guide Rui!
Back to top
 
WWW  
IP Logged
 
Page Index Toggle Pages: 1
Send Topic Print