Stompernet Insider Talks – Reveals Pay Cuts – Mike Swanson (08/25/09)
So far there has been a virtual news blackout in the Internet marketing world about the Stompernet lawsuit and the details about Andy Jenkins leaving the company.
As a result rumors have swirled and multiplied to fill in the blanks. One rumor was that Stompernet was having or has had financial trouble.
Internet marketer Markus Allen wrote that he was getting emails from people inside Stompernet saying that they were not getting paid:
“Employees of StomperNet haven’t been paid in months AND StomperNet is indeed in receivership status… employees have been given IOUs in lieu of payment.”
According to the lawsuit at one point Andy Jenkins injected his own money into Stompernet in order to keep it afloat.
Now none of this is a big deal for a business – especially a business growing fast. With my own business myself I pile most of the money it generates back into it to make it grow. I see it as an investment.
Yesterday, Dan Theis, who is on the Stompernet faculty responded to rumors clouding Stompernet and Andy Jenkin’s resignation. As far as I can tell this is the first response from someone inside Stompernet to all of the talk going on.
He confirmed that there have been some financial problems at Stompernet and why:
“Some members of the faculty have been asked to take pay cuts – I just offered to take a cut myself. This has happened more than once since StomperNet opened. StomperNet’s membership has not been replenished by a significant promotion for more than a year, and the current business model has high fixed costs that depend on having a certain number of members to operate profitably. ”
“The idea that StomperNet is going out of business is a little over the top – not gonna happen. StomperNet needs to bring in new members (customers) – just like any business does. StomperNet needs a different business model that isn’t driven by large spikes in membership followed by a slow decline. Both of those things will happen in a BIG way with the offer that will be made in September. ”
Stompernet is planning a big launch on the 9th of September in order to bring in some big bucks.
Theis is right though and as an outsider looking in it is easy to to see where Stompernet is going.
There is a path that most successful information marketing companies take when they grow.
They begin with a successful product that generates positive cash flow. At some point though that product loses the initial hype around it or simply reaches a maturation point. To grow to the next step companies then need to make new products.
With Stompernet they began by launching an $800 a month membership site.
That launch generated over $10 million for them in just a few days.
But at such a high membership rate it wouldn’t be shocking if they had a high cancellation rate and refund rate.
The standard refund rate for information products is 10-20%. I’ve found that historically my refund rate is 5-15% when I do promotions.
But I was talking last month with the lead marketer for a $30 million plus online website – one of the biggest sites on the Internet – a top 1000 Alexa site – who had a lot of experience working with financial newsletter publishers and he told me that he found when they charge over $1000 a year for something the refund rate would be in the range of 30-50%. I would think monthly would be at the top of that range.
So I think its safe to assume Stompernet probably had a high refund rate simply because they charged so much money.
Even if they had a low rate though simple attrition could be a problem for them if they have high costs to run their business.
Last year they launched The Net Effect newsletter as a new product at a lower price point to attract new customers. Now it looks like they are going to make yet another product or offering next month.
It is almost imperative that they do a promotion – not only to inject money into the company – but with the Andy Jenkins fallout – in order for those running Stompernet to assert their power in the market place and with their affiliates – to maintain the presence of Stompernet in the market.
As far as the lawsuit goes, Theis wrote that it “makes it plain that these guys did not always agree about how to run the business. However, they did agree on how to resolve their differences, and a process to protect both partners during the negotiations. In the end Andy was happy to sell, Brad was happy to buy and invest. Yes, it took a while for them to haggle their way to a final agreement, but so what?”
Well, the problem is the way people have been treated by just asking about it and the obsessive active cover-up on message boards to prevent news of this from getting out.
It also would appear that what happened was more than a simple disagreement. Even if wrong doing was done then at the least a very nasty fight occurred.
You would think they wouldn’t have tried to hide this, but would have just said we had a nasty fight and are parting our ways. But they didn’t. They wanted to create a false impression – and maintain some sort of illusion, which is not even necessary to maintain their dominance in the IM niche.
That in itself isn’t what interests me. This was an eye opening thing for me in another way. It gives me the impression that the Internet marketing niche is tightly controlled. If you take the WarriorForum for example – the biggest IM forum and meeting place on the Internet – there are threads were people and products are bashed for weeks on end and then specially favored people and products were if a critical comment is made the poster is instantly banned.
For the past week every time someone makes a post asking about what is happening at Stompernet that post has been instantly deleted.
It is an attempt to hide the truth and control the news flow.
I’ve been running a successful online business for over ten years now, but I knew nothing about the Internet marketing niche until early 2008. I learned about marketing from print books. I never knew about Internet marketing courses, forums, or the big name “gurus.”
Then I found about this niche last year and spent a good bulk of my time using the resources in it – buying some of the big name courses – to learn how to improve my business. And I got good results.
However, as an insider looking inside the Internet marketing niche – and as someone who has been successful on the Internet in my own niche – I think I have a unique perspective on the niche.
Stay tuned. I will continue to post on this.
Interesting Mike, I haven’t followed anything in the IM niche for a year or so….$800 a month is ridiculous. I understand maybe $197 a month or something like that…
I’m getting ready to launch an options picking service this fall, not sure if I’m gonna use clickbank though, maybe just paypal and charge a 1 year fee around $300 to $400 like you do.
Hey Mike,
Solid article. Stompernet has really set the bar higher with the production values of their materials and I commend them for that. The price point always was an issue for me. I like Dan a lot, and value his advice and training in SEO and link building.
I wonder what possible benefit they think they can gather from trying to suppress what’s happening? Life’s complicated enough – just tell the truth and move on, FFS. And Warrior forum is like a rattlesnake – much care taken and ample grains of salt… unless you know the quality of the person posting personally.
Mike,
I know exactly what you mean about the Warrior Forum. A few months ago I wrote a negative review about the way one of the IM Gurus was using call centers to promote their products and it was immediately deleted… It was very frustrating. Obviously the Warrior Forum is not impartial.
Thanks for the update on StomperNet.