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I'm actually surprised at how poor the economics are. There is a preconceived notion that porn is a cash machine (which it may still be) but just not here.
Lastly, and this might be old news, but isn't "freemium" a pricing strategy and not a business model? In this case, I'd describe their business model as member subscriptions and their pricing strategy is freemium. Same thing with Salesforce.com. Maybe it's just semantics, but calling freemium a business model seems to rebrand the "free trial" pricing strategy as something new when in fact it's been around since, well, there was commerce.
I think of Freemium as a business model because it has several implications beyond just pricing - it dictates how you try to acquire traffic, what the key metrics are that you track, how you design your product, etc. I think of it as in-between advertising-based models and subscription-based models, which are two clearly distinct business models.
Payout information - http://tinyurl.com/8b9mlp
These are basically for swingers and adult-services, which means there isn't the typical burnout of a dating site when you finally settle down with someone. People on AFF are likely to continue using the services over time, and settling down is about the last thing that audience wants to do ;-)
What is the good stuff? Cams.com, etc? Are most people buying a multi month package - as i dont think the lifetime would be high on month to month renewals as the value prop of strict adult casual dating is low given their are not many real women on aff - mostly decoys.
The good stuff I was referring to was adultfriendfinder - seeing a "nude" pic of someone who lives in your same town, after looking at "clothed" photos on friendfinder. Although there are probably ten men to every woman, there are actually a lot of legitimate woman who use the service, and not decoys as noted. Andrew actually worked hard to keep solicitors off the site. The geo-targeted banners use real people. Subscriptions average about three months. And a lot of couples belong to the service - swinging is HUGE on AFF - it was eye-opening, let me tell ya...
I've no doubt that there is a legit business among swinging couples. Monogamy is by no means the only reproductive and social strategy pursued by the human race.
Also, I was curious to see what their overall revenues/profits were. $240 millionish through the first 3 Qs of 2008 (a $320 million run-rate) with a very healthy 69% gross margin and about 6.7% operating margin. After their interest (debt service?), they turned a loss on the year. It seems that they are running a profitable business as of this year - but need the IPO to get rid of the their debt.
So porn is profitable - even in (maybe especially in?) a down economy.
Thanks for the thread
- Skip
this is a great and insightful writeup so thanks for sharing your analysis. Keep up the great work!
You can't do anything as a free member.
Markus.
Wikipedia says: "Anyone can join and post a profile for free but cannot respond to messages from members until they pay their membership fee."
So maybe you can't do anything very useful, but it seems like members can at least create profiles and do some basic searching/browsing of other peoples' profiles.
All the paid dating sites work the same. 1. Every time you view a profile you are presented with a signup screen. Every time you want to message someone and every time you want to view a profile as a member you must become a paid subscriber. Free members can only view 3 profiles before a paid screen comes up allowing you to view more.
Singlesnet on the other hand is a true freemium dating site. On singlesnet any user can message a paying users but only paying users can message both paying and non paying members.
I signed up for a free account to see how much was free. As a free member you are able to create a profile, and you can search for other members. Yet you can only an index of the different members with their username and picture. You can not read details or contact them. Since the object of the site is to create contact, i would say that the free membership is not a free product. It is rather a way for people to get a look at the people they could contact if you pay.
As I understand freemium it is based on giving away a free product that people can actually use. Some of the most mentioned examples illustrate this, you can have great use of sites like linkedIn og flickr without paying. Since the features available for free members does not amount to a service of any use what so ever, I have to agree with Markus. AFF does not use a freemium model. Rather a “get a look at partially naked people before you pay” model.
Nice digging here, it's actually surprising to me that they seem to be spending less than 50% of revenue on customer acquisition; i've heard from a few people who know the very large dating sites in and out that it's closer to 75% for mature sites (which AFF definitely is). So regarding profitability - this is one crazy profitable business, unless things like fraud and chargebacks are huge. What's so interesting about AFF etc is that they satisfy a basic need for a lot of people - and therefore enjoy very good lifetimes.
I'm in the process of starting up a new service oriented subscriber site and one of the hardest pieces of competitive information to find is how much does it generally cost in marketing to sign up a subscriber?
I imagine it varies massively between business types. It would be really interesting to find some kind of comparative breakdown.
The article mentions that they must receive somewhere around 200K new subscribers/month and that they spend roughly $100M/year on marketing so perhaps it's somewhat accurate to say that their marketing cost per subscriber is roughly $42?
Thanks,
If they are spending about $100MM in SEM and affiliate costs, then you end up at about $2 per member.
Since the conversion from member to sub is about 10-20%, that means their cost per subscriber is roughly $10-$20.