All These Programs Closing...

[Lee]

I dont understand why they are closing their doors and not changing their business model, some of them have been around since before i started in the industry and simply modifying their business model rather than shutting down completely would seem to be the better option for both the program and their affiliates.

Every single program that has closed in the last 6 months has one thing in common, shady billing practices and paying on a per sale basis.

It really would seem like revshare is going to be the way the industry moves forward when it comes to new affiliate programs and i must say, im liking this a lot, we've been over promising and under-delivering as an industry for years, there is no long term sustainable growth for a program paying out $40+ on a $2.95 trial, a few of us have been saying this for a long time and nobody paid any attention to the writing on the wall, maybe now that the proof of this is being seen in far reaching messages industry wide those program owners who still operate on a PPS business model will start to change and adapt those models for the better of everyone, the industry, the surfer and, their affiliates.

Regards,

Lee

[gayonlyporn]

Ive always been curious how the business model works. maybe you can help me

i guess $30 is your average monthly income per sign up. $15 of that has gone to the affiliate, take your tax, processing fee etc and i guess its actualy the affiliate who comes out with more?

[GayGeek]

The business model works like this:

If you don't have affiliates send traffic to you, very few of their traffic signups will find your website and join your site on their own.

So...

With affiliates...
$30 x 50% x 1000 signups = $15,000 in your pocket

Without affiliates...
$30 x 100% x 1000 signups x only 2% of those would have found you = $600

You can argue that more than 2% of those members that affiliates sent you would have eventually found you on their own. But even if you bump that to 10%, that's still only $3000, far less than the $15,000 you make with affiliates.

Simply put: If you offer 50% payout to affiliates, then 50% of those members they send you would have to found your site and joined anyway to break even.

This is a bit of an oversimplification, but pretty much holds true.

--Aaron

[gayonlyporn]

I get the traffic bit, i was reffering to who makes the most out the deal. The affiliate of the producer?

Im only asking as im wondering which way i should move in the future

[Lee]

Producers dont even enter the equation on the PPS business model, the vast majority of membership sites operating on this business model dont actually have much content inside them other than the 'exclusive' content that was created to update the sites for the first month or two of their lives.

After the first few months, all that is added in terms of 'new' content is stuff the programs get made for new paysites or, DVD content.

If you have ever been inside a PPS members area and compared it to a revshare sites members area you will see a world of difference, one is packed full of leased feeds, very little 'actual' content and jammed to the hilt with upsells from the second the member logs in, the other, is riddled with a wide range of content, stories, feeds, images, movies, etc, etc with very few upsells inside the members area.

Cost wise, i made a post a few years ago about the profitability of the PPS business model and how for a program to actually recoup their initial cost of paying the affiliate for the signup, a member needs to rebill at least twice, many dont because these types of members area are no different from any of the other PPS sites members area in terms of the content available to them.

Regards,

Lee

[GayGeek]

I agree, Lee. Hence why I was talking revshare and not PPS.

If you're wondering who gets richer, the affiliate or the producer, that's a tough question to answer. It depends on the expenses of each company and how much business they're doing.

Not to mention this isn't a 1:1 relationship. An affiliate like GayGeek sends traffic to hundreds of different sites, each of which has multiple (sometimes hundreds) of affiliates sending them traffic.

So who makes more money? It depends on the producer and it depends on the affiliate. I'd say that producers ultimately have a higher level of variance in their income than affiliates do. They have the ability to invest more money in their business and extract a greater return. A greater overhead is not necessarily an advantage though, and many a porn business has gone bankrupt because their businesses are much more difficult to run.

I'd say you should ask yourself what sort of investment you're looking to put into the business. If you're young or ambitious and want to spend years building up a company with a significant initial investment and your profits being reinvested into the business, you may do well on the production side.

But if you like the idea of spending your day quietly in a home office and don't want to be tied down to a business with a mess of legal and practical requirements, then you might prefer the affiliate side of the industry.

--Aaron

[Bec]

I'm guessing it would be a lot easier to just build a new program, have new sites without upsells, using the rev-share model for affiliiates and upgrading to larger videos and pics and other goodies for the member area all in one shot.

If they leave the current sites up, we all know that there is no way in hell that every affiliate is going to pull every link out there to their sites, so it's 100% profit from "defunct" affliate links. (not to mention the hundreds of blog posts) Nice way to build up a nest egg while putting together a "new" program. My $0.02

[FriskyMatt]

Do you think the sales tools and/or content the site provides affiliate has anything to do with the recent programs closures? Some programs do a great job at helping their affiliates sell while others don't.

[Matt 26z]

Every single program that has closed in the last 6 months has one thing in common, shady billing practices and paying on a per sale basis.

I think a lot of it over the past year or two or three has been a last ditch attempt at making money.... Them going out in a hail of gunfire.

[Lee]

I think a lot of it over the past year or two or three has been a last ditch attempt at making money.... Them going out in a hail of gunfire.

Agreed, they wanted to get as much $$$ in the bank the last few years as possible and at the same time, im sure a few of them also had the mindset of 'fuck the rest of them' by flooding the market with free porn.

Im actually amazed at how many of the larger PPS programs launched their own free tube sites in the past year or two that are packed with pretty much full length DVDs and exclusive content shoots just to grab the traffic. Unfortunately, as with their business models, they never put the forethought into these tubes to realize all they are doing is giving away more free porn, hurting their bottom lines.

As of right now, porn membership revenue is a dying animal, there needs to be a major shift in the paradigm of how we all monetize our traffic if we're to still be here in another 12-24 months time... Whilst still hoping more programs close in the process to balance the marketplace.

Regards,

Lee

Regards,

Lee

[webnet]

maybe its because only close the affiliate program, so stop to pay affiliates.

[GayGeek]

I view all of this as a market correction. The porn industry is about as close to unrestricted capitalism as you can get, with sites ranging from those run by highly ethical webmasters to others that consort with spammers.

I dunno much about the straight division of Euro Revenue's business, but its only gay sites seemed to be fairly good (if new). SIC Cash, on the other hand, has been following the "sell crap porn for huge per-per-sale payouts with 10,000 upsells to recoup our costs" business model. As such, it's not much of a loss that their affiliate program is going under.

I am more curious to see how Rainbow Revenue handles the transition. It takes care of its sites considerably better than SIC Cash looked after its small lineup of gay sites, but even they run dangerously close to this business model.

--Aaron

[TSGroup]

Market correction that is. There are just too many programs and sites, last few years we saw 10 programs starting every month and they are all the same.
The big boys are slow in changes - as in any other business. Investing millions in content didn't work because with torrents\file sharing this competition advantage didn't help for long. Now we have tons of content all over the internet.
Content uniquness is the key. Not the HD quality or anything you can simply go and buy. Nope, time to think and invent - and that's where "good-old" business dies no matter how big it was. You can see it all over, not only in the internet.

[JOELK]

I can't agree with you more Lee. Preach it!

[GTS Mark]

Most are not shutting down completely, only stopped taking affiliate traffic.

I'm working with a couple that are just buying traffic on their own now.

Business as usual otherwise.