<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by fireflyreaction:
according to doc in the "What are FF miles worth" thread, he states that companies can buy FF miles for as low as $0.005. that would radically change the math. i'm sure radisson is getting that rate with the number of miles they buy. so, for the $1.00 you are spending, it costs them $0.65.</font>
I've never heard of that, because the mean figure for sale of miles has been quoted to be ~1.5 cents per mile.
Giant buyers like Citibank, who partner directly with AAdvantage, can probably get lower rates. There's no reason for AAdvantage to offer lower-than-normal rates to Radisson Hotels since AA's primary hotel partner is Hilton. GoldPoints is even smaller than ClickRewards, and ClickRewards was eminently unprofitable.
So it takes a lot of mental gymnastics to figure out a scenario where GoldPoints/ValueMag doesn't lose money.
The simple explanation - they expected to lose $$, but it turned out to be more than expected because people jumped on the promo in huge numbers.