[State of the Industry Debate]: PPS & Affiliate Programs
 

I wanted to open a discussion/debate on PPS for Affiliate Programs.

It is my observation that Paysites who run PPS program where the payout is higher than what they take in the first month, run a numbers game in hoping the member rebills and doesn't cancel or cause chargebacks.

A huge influx of signups from affiliate webmasters doing their job to send traffic, could cause a paysite to have to payout more money than they take in... factoring in time for money to actually get into the paysite's checking account, and still running in the red the first month.

A paysite would have to have a large reserve (float) of cash to offset this economic issue.

Program owners like Lars with large payouts, have the bankroll to handle a successful spike of signups and are able to payout affiliates.

Programs like Xpays HotelHeiress have a PPS that is less than the monthly charge to the member, so therefore they atleast breakeven during first month of a member signup.

Between Xpays and Lars, there is a multitude of paysite programs with varying levels of payouts, but it seems that affiliate webmasters are attracted to the higher payouts, while also taking into consideration the timeline of being paid out (ie. payouts are done as scheduled).

Certainly the concept of shaving comes into play as almost a necessity for a paysite program to handle the imbalance, but that issue has been bounced around so much that it's basically an accepted necessary evil that happens and affiliate webmasters on the most part are content with the payouts they are receiving, not realizing or missing what is actually owed to them.

With more and more competition from "reality based" content websites that popup overnight with anyone that has a camera, and free stuff out there, Do you see the Affiliate Programs evolving themselves to move towards lower payouts (like the Xpays example)?

Will those with deep pockets (the Lars example) be able to woo affiliate webmasters because of the payouts, causing other paysites to have to offer the same, and possibly risk financial trouble and friction with affiliates if they miss a payout due to the financial teeter-totter?

discuss.


Fight the Popcorn!

When you look at the high payouts and if you have a idea of the cost of doing business, it doesnt add up.

I think the answer to all of this is obvious. I have said for years. Just buy your own content and have your own site and don't get ripped off by anyone...

Click the sig to get started on your road to independance..

You can eve host your website for free when you buy your content from SoBeGirl

Right, you have to put the shaving factor into the equation to make it balance.

But programs that do have a high payout, could have their businesses setup such that they have the float that replaces the need for shaving.

To do this, you would have to be a big enough player with the capital to successfully run a high PPS system.

When programs in the passed lowered their payouts, they got alot of backlash from affiliate webmasters and those that didn't lower theirs used that as part of their marketing.

Fast forward a few years to 2005, will the lowering of PPS payouts be necessary in order to keep the Affiliate program going?



Fight the Time Warp!

MarcD from ARS answered this in depth on here a few months ago. You have to agressively work the other sources of revenue. You then make it up with size. Content for a site with 30 members cost just as much as for 3000 members.

The arguement from Revshare people was that it was not possible BUT we all would make more on revshare as they retain longer.

Just for the record I like pushing ARS more then the revshares involved in the debate so I am biased.

An affiliate webmaster could license content for promotion on their free site. TGPs like sleazydream pay for their own content to show for the surfers.

Having content, still means the affiliate webmaster is relying on payouts from paysite programs.

So how does buying your own content solve the PPS & Affiliate Program issue?



Fight the Freebies!

Thanks for bringin up rev-share, i forgot to include that.. and I missed MarcD's post then.

Rev-Shares seem to help overcome the PPS issue, since for each member signup, the money to be paid to the affiliate webmaster comes out of the money received from the member. A 50/50 split may end up being like 80/20 or even 90/10 (referring the net result to the paysite, not meaning the affiliates gets more of the rev-share) once credit card fees, bandwidth, overhead, etc are taken out, but atleast profit is assumed to be generated on each sale on a month to month basis.

A high PPS could get more money in the short term, but over the long term, a rev-share arrangement would catch up as the member stayed. The issue is whether the content offering is good enough to satisfy the member to continue to rebill for months.

Knowing that consumers are impulsive, they may be signing up for just that 1 month, and then leave.. whether to explore another paysite with more/original/etc content or just had their curiosity or fix filled and moved on.

Paysites would most likely be able to spot this consumer behavior and therefore might be skewed to sticking with high PPS in order to make affiliates happy (and risk the economic issues), because a rev-share arrangement may see less money coming to affiliates if members are not sticking around.



Fight the Re-hash!

In this biz there is no such thing as "hoping" its all numbers, and its all on how
you work them. No programs will not drop to a lower payout, they will simply
find other sources of income from the same pot of gold, ex: Exit's & Up-Sells.

Regards,
Russ

The reason why people like Lars can afford a $120 PPS promotion is not only because they have cash in the bank (not saying he has none) or, god forbid, shaving.

You are comparing a paysite with a webcam site. The whole concept is different and it is impossible to compare the two!

Please do not forget this.

Did you just indirectly accuse Lars and Xpays of shaving?

Which is true:

a) you are not reading every word in the post
b) don't understand what you have read so you are making up a summary
c) posting to stir up "controversy"
d) don't really have a clue


To answer your question directly, NOT AT ALL. Xpays and Lars are held in high regards in this industry.


Fight the E) All of the Above!

If you send someone 100 sales and get paid for 90 of them, then yes you are being ripped off and that should be the end of the story. But too many webmasters deny what common sense tells them and if a program offers $30 instead of $40 (or whatever) they won't promote it. Thus we all but force paysite owners to be dishonest. What we don't know is which shave only enough to cover our greed and which take advantage of the situation to shave more deeply.

But it is also an illusion that revshare is inherently better. Many program owners are forced to give up a bigger share than makes sense (it is mainly smaller sites which can least afford it that have to attract with big %ages) so the pressure to be dishonest is still there. And particularly recently, sites with nothing to suggest they will retain members longer than the average PPS site are going the revshare route. If a site only retains for 1 or 2 months... well work it out for yourself.

Revshare works best if the program owner is honest and if the site has solid appeal to its subscribers. Can you think of even 50 well-known sites which fulfil both those requirements?

I understand your point.. but to an affiliate that needs to decide what site to send traffic to, the content is still the same.. naked people having sex. They want to get the conversions and to get paid.

The web surfer doesn't just think they are looking for certain types of porn. Some are impulsive and are drawn in by the banner or link that the affiliate displays to the surfer.


Fight the Apples and Oranges!

Well the answer to narrow the gap is obviously private promotion and internal growth. There is nothing wrong with an affiliate program pursueing members by itself without webmasters.
Infact if the Affiliate program has its own exclusive content this provides an edge to break out with the easy sign-ups before providing the content to affiliates in the larger traffic channels.

The correct answer is C.

An attempt at a silly beaten horse of a thread is not enough to get page views!
WTF!

Um... why do i need pageviews? Am I a sigwhore?

I wanted to get people's insights to the issue presented. If it's been posted a million times, then it's one more.. no one has to read nor post in this thread, and it can die a thread death as many do.

But, posts like jayeff are the nuggets of good debate that make sifting through useless dribble.


Fight the Wasted Space!

Now that's an insightful post... thank you for participating.


So if an affiliate does provide their own pictures in order to entice surfers, they could themselves become a paysite. The evolution of a successful affiliate webmaster.. though it is certainly understandable that big affiliate webmasters never want to do their own paysite even if they have the traffic, because of the overhead issues of running one.

Also, that some paysites run without an affiliate program, by purchasing traffic, traffic exchanges, etc, to essentially remove the need for affiliates?


Fight the Evolution!

In my opinion, this is a false statement.

~Ray

sorry, didn't mean for it to sound like a fact or a truth.

I acknowledge there is an art to being a successful affiliate webmaster, that includes knowing what programs to promote, and when to promote them (ie. what the surfer might be interested in looking at)... and by no means trying to say that it is a science if you just did X, Y, Z you'll make big $$$.


Fight the Misunderstanding!

FTS - Affiliates should be a last resort. I mean they gt a time and a place.

Lets use XPAYS for example with Paris. They required a strategy to blow the doors off all traffic channels to sell somthing that was HOT HOT HOT in the buzz. The life line of the content required that it stun the net out the gate. Affiliates were the answer.

I never been in favor of the affiliate webmaster for the most part. Albeit they have a time and place but not always. They simply got to many demands, burn through content and worse the affiliate program is essentially losing 50-60-70% on a site.
If it converts and the ratio is good it is silly to loose that much revenue.

Its clear alot of guys do not know what they are doing, operating a program seriously takes experience there is simply no other way of bringing one out of the dust to the penthouses of Hollywood without a good taste of smart choices.

The bottom line for me has always been VPC (Value per Click).

Log your own outbound clicks, and look at how much money you make for sending those raw clicks.

Whomever you make the most money with is who should get the bulk of your traffic.

Test out lots of different Affiliate Programs that cater to your particular Niche or type of traffic. Once you have a few that you are comfortable doing business with and make you the most money start working on other sources of traffic.

Great thread Brandon!

Back when sales were fast and furious, the average affiliate sent all his traffic to maybe a half dozen sites owned by 2 or 3 sponsors. Even when affiliates started to get into 'niched hubs' and the whole concept of filtering traffic, most traffic was still sent fairly indiscriminately and with money rolling in freely, no-one minded too much if their surfers hit warps, popup hells and the rest. All that has changed, at least for the majority of experienced webmasters who source most of the traffic. Now they take care where their traffic is sent, don't expect it to be jerked around too badly, and want most if not all the extra sales links to carry their codes.

Since I don't have a paysite I have to guess, but I would expect the cost of sales for many sites to be 5-10 times what it was in 2000. And that is laid on top of the "simple" calculations we have always played with about payout v direct income and the need for cross-sells and up-sells to make up the difference (all of which has also become harder because of surfer experience, Visa, FTC, etc).

The effects of all this will be far-reaching. We are going to see a lot of mergers and names going to the wall. And inevitably, a lot of sponsors will figure out it is cheaper and they have more control, if they buy traffic directly, rather than rely on an expensive and fickle affiliate network to generate it.

If Halycon was still running his F*cking Brilliant post of the day contest, I would definitely nominate your previous post and jayeffs.

:thumbsup


Fight the Lurkers!

excellent feedback... your observations go to the heart of what an affiliate webmaster should do in order to watch their business.

Given all that an affiliate webmaster can do to optimize his traffic and where he sends it to, it still comes back to the paysite being able to continue to pay the affiliate for the sales.

Is part of your own analysis of which sponsor to promote, is how solid they are on payouts vs. a high PPS?

For example, if program A paid out $25 PPS on a $29.95 membership and paid out solidly, would you go with them over program B that had $40 PPS on a $29.95 membership and appeared to be paying out webmasters on time?

Factor in also, that Program A may have less of a reason to shave as jayeff pointed out, whereas program B may have to shave you such that your effective payout is actually less than $40 PPS (due to the shave).


Fight the Razors!

oops, reply didn't work right, i was referencing AlienQ's previous post above as being particularly insightful (and jayeffs).

:thumbsup


Fight the Goof-ups!

FTS you missing the factor of cross sale in episode B.

If ya score a cross sale a payout can be increased easily. In some cases it is worth it for an affilaite to pursue PPS with Cross sales. The Payout flow is larger collecting on the upsale and the conversion to make upto 40 or more.

Figuratively a Program can do Veritable payouts and say "Upto $45 Per Member!" and still keep a straight face when saying so. In effect the base could be $25 per member but if 1 or more cross sale occur's more can be paid out. 25- 35 -45 etc.

As I have been an Affiliate Manager (among other things) for the Programs in my sig I am a little biased. In as much as it is possible to, I will put that aside to answer your questions.

How do you define a "Solid" Program? Is it based on their length of time in Business? The amount of exposure they get on Boards (both positive and negative)? The history you personally have with them?

For the sake of answering lest assume it is a combination of all three.

How do you define "Appearing" to payout on time? Let?s go with the same criteria as used above.

I would use a program that I made the best VPC with.

When you track your own raw outbound clicks sent to a site/program and look at the amount of money you get paid for sending those clicks it is very easy to determine who to send your traffic to. If you don't get paid by a Program for traffic you sent them you stop sending. If you continue to get paid by a Program you have a good VPC with then you continue to send to them.

The psychology behind who pays out how much on trials and what their re-bill prices are don?t interest me on a business level. The amount of thought put into all that could be better used to generate more traffic or make more money.

I like to look at the ROI for the time spent on anything I do. That which makes me the most money gets most of my attention.

Thank you for bringing up another facet of this discussion that does have relevance in context to shaving.

A cross-sale is definitely an instrument that can be used by the paysite in order to offset the money that is lost on the PPS.

A separate debate (or maybe if it turns out in this one), is such a thing as a "good cross-sale".

One agrument in defense of cross-sales is that if it is done right, meaning full disclosure and could be of interest to the surfer, then having it made available could entice more sales

Having it pre-checked has the same defense above, that as long as the consumer knows about what is going on, that the cross-sale is complementary to their current purchase, then it is a way to make up the difference in the high PPS model.

So cross-sales (pre-checked or not) is one way to "not shave", but the other side of that debate is that it's the consumers tat are the ones stuck with the bill when the pre-checked cross-sale was not apparent to them at point of purchase.

For those consumers that pay attention to their credit card statements, it could create a chargeback as well as attention from the consumer protection side of the Attorney General's office.

It's a calculated numbers game as one poster presented. There is some factoring that x% won't catch the transactions, nor chargeback, that makes enough money to carry the float.

So it seems both shaving and cross-sales can factor into the equation of running a high PPS program where sufficient capital in the bank to float the difference is not available.

For programs that do utilize shaving and cross-sales, is it really wrong for them to do so? Wouldn't their argument be that they are looking out for the intersts of the affiliates by working out the system that ensures that they atleast get paid? (granted, less than what it should be)

Is the alternative just to not shave and not have a high PPS, but yet face competition for affiliate webmaster's traffic that go towards the higher payouts?

or that shaving is a necessary function of a program and that affiliate webmasters should not worry about it, and be satisifed with what they receive (afterall, if you don't know you are being shaved, you don't have a problem. if you think you are being shaved, you move your traffic elsewhere).



Fight the Tissue Bandages!

So then "shaving" is not much of an issue, because as you are tracking your results, and you are happy with them, then it doesn't really matter if the program shaves or not.

I agree with your analysis that ROI is the key, but being satisfied with what you perceive as your ROI, encourage or send a message that it's better to have a high PPS and shave, then it is to price the PPS that is lower than the membership price, such that from a business perspective, that makes sense (ie. not paying out more than you take in?)

I'm not saying that a lower PPS wouldn't or couldn't shave, but its the perception that shaving is necessary when you have a high PPS.

So the risk issue seems to be this:

1) If a paysite does a high payout, they are hoping statistically that members rebill and they make their money and the risk to affiliates is that they get paid less than what they could have earned.

2) If the paysite does a lower PPS, then less risk for the paysite if a member doesn't rebill, but possibly less ROI for the affiliate webmaster, so therefore the risk to the paysite is getting less traffic.



Fight the Dilemma!

I personally think that PPS is a dying beast.

Years ago you could afford $30-40 payouts based on average member retention alone. There were far fewer paysites and people stayed around a long time.

Then there were exits also which added to revenue.

As member retention deteriorated and affiliates wanted console free tours and would only send their traffic to console free programs, the only way to make up the difference in payouts was pre-checked cross sales.
These are a dying beast also, thanks to the new visa 1% rule.

My guess is most programs that are paying out high amounts per sign up do so because they have to.
The way chargebacks work is a person who signed up 3 months ago charges back and it shows up today. That chargeback is counted against this months sales (for purposes of the 1% rule) even though the initial sale happened 3 months ago.

The reason alot of programs won't (can't) lower payouts drastically or switch to revshare only is because the massive loss of traffic they would incur would put them out of business.
Not because they would be taking in less revenue, but because they would go over the 1% allowed by Visa and be unable to process credit cards for any of their sites.

A 2.95 trial membership is not worth $35 no matter what kind of voodoo math you try to use to get there. People paying this much are losing $$ or have the shave set high enough to offset the losses. Its as simple as that.
The reason they still pay this much is because they have to in order to stay in business, as I stated above.

:2 cents:

Also Brandon, when you refer to the "Float" you're talking more like 4 months than 1 month if you're talking about paysites with trials.

If you pay even $25 on a site that rebills monthly at $30, its going to take a few months to get into the black because only one third of your trials are going to rebill to monthly memberships (industry average)
Then out of the 1/3 that you keep you need them to rebill 2 more times on average in order to make up for the 3 x $25 that you paid out to the affiliate for the 3 trial members.

This doesn't take into account other revenue streams of course, but you get the point.

I have recently spoken with someone that was thinking of starting their own affiliate program, and they were trying to figure out how they could afford to implement a PPS offer as well as the revshare option.

My personal opinion is that unless you have extremely deep pockets it shouldn't even be attempted. You could go bankrupt within a month if you don't have the financial backing to make the payouts while waiting for the member to retain long enough for you to start turning a profit.

I have approached some smaller programs that offer PPS to see if they would like to get invloved as the upsell for SexPicturesPass (we filter our traffic by niche) and the primary concern that has been expressed is that we would give them more signups than they could afford.

If "shaving" was a proven variable in the equation of how a VPC is determined I would definitely consider it. But shaving is an unknown variable.

By sending traffic to numerous programs that have different payout structures you should be able to determine the true worth of your traffic.

It isn't about encouraging shaving or sending a message, it is about find what your traffic is worth and maximizing the profitability of that traffic.

Program B pays 60% more then program A in your example. So if A is converting at 1:1000 then B can convert at 1:1600 and be equal.

The simple answer is not all program are equal. If a high power program owner is working the email list, the x sales and upsells. Plus is willing to share that revenue with a higher payout, why would you not push that program? He is shaking the money tree harder.

Tushycash is an example of someone who was shaking the tree with exclusive content and great sites.

This topic is SO tired that I almost think sticking a pencil in my eye would be less painful than reading it, but the reality is PPS is the most successful pay model to date. Revshare, PayPerClick and all other models to date come no where close to the success of PPS.

Why? because it works for all parties involved... :pimp

Programs don't have to shave to make it work either, here's a thread which will enlighten some of you... http://gofuckyourself.com/showthread.php?t=408940


Last here's a real life example, I get a check every month from a Revshare site that I quit promoting in 1999 and there is still 6 rebills every month for which I recieve $17.97 each...

So for those 6 joins, I have recieved somewhere in the neighborhood of $1132.11 for EACH one for a total of $6792.66 and counting...

I'm sure that the program owners would have loved to give me just $35 on those... or a total of $210 instead of $6700+... On top of that, they could have emailed them other offers, sold them penispills, live chat, etc in the member areas for even more profit...

aha! Thanks... I'll put my pencil down now, but that was close! :winkwink:

In summary: An initial membership fee is a very small part of the revenue equation. :thumbsup

we could do a PPS webcast of you sticking said pencil in your eye and make a bundle Wizzo. If you do it in Canada you won't even have to worry about the medical bill. ;)

We might just have to, just prove how it works, but doing it PPS I bet we make enough profit to pay the medical bills... :winkwink:

ElvisManson: thanks for the time you put into respond, you gave alot of great input. Value Per Click (VPC) is certainly a good way to analyze your ROI since that number tracks your overall track record. VPC is a stat that is computed on your side, so it would be an unfactorable variable to include shaving, since that would be the same as an opportunity cost (lost). The bottom line from VPC perspective is overall what works and to make adjustments in what you do and have the VPC quantify your overall results. So if shaving is a known factor on the paysite side, then the end result of that shave does affects your VPC number, you just don't know it. As long as you maintain a comfort level of a VPC, then shaving is not a factor; managing where you send your traffic, the conversions, and the payouts are the key factors.


Lenny2: excellent examples and posts! Very interesting point you made that lowering payouts could be a problem for programs, because it could mean less traffic that they receive from affiliates,therefore less possible sales, and reduces the number of good charges they have against chargebacks to maintain their 1%. So yet again, another numbers game issue.


Wizzo: thanks for the link..long thread and going through it now. MarcDe's input about how PPS works for paysites in the long run is a great one, and it highlights the point that you need alot of short term bankroll to handle the PPS, that makes you more money in the long run. Having alot of signups occur is usually "a good problem to have", but various factors as discussed in this thread does cause the paysite to get to a real problem of being able to make those weekly/bi-monthly payouts without much of a float. I have heard where some paysites had to tell their big affiliates to stop sending them traffic because they were getting too many signups. It seems like a steady flow of signups could work well with the high PPS model, until a big wave comes in.

Aly: agreed, and in looking at the analysis that wizzo and others have provided, doing a high PPS now means making more money for the paysite in the long run, if you can manage the float. Being able to upsell other products to a current member where you don't have to pay any commissions, certainly is another "tool" that a paysite can use, and one that had not been brought up til you mentioned it...



There are alot of newbies and mainstream businesses coming into the adult space, lured by get-rich-quick dreams. It's my observation that the golden days up to 1999/2000 are now seeing paysites working through the logistics with more business (and luck) precision. Same is true with affiliates, that it's not as simple as just putting up some sponsor-provided images and signing up to the highest paying programs.

It's the knowing of the "science" and the experimenting with the "art" that illuminates those that are successful.

Any other issues or points missed that might be factors on paysites or affiliate sides?


Fight the Summary!