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melvinram

I would go with a reoccurring membership porn site.

125k daily visitors x 1% conversion rate = 1250 new customers per day

1250 new customers per day x 365 days in 1 year = 456,250 new customers per year (reached at the end of the first year)

456k new customers per year x $120/year in revenue (assuming $10/month) = $54.7mil per year in revenue

(though the math isn't fully accurate since it doesn't take into account churn but it works to illustrate a point.)

With a tiny bit more brains, you could take that up to $100mil/year, prove the stability of the revenue and sell for 10x of revenue at a cool $1 Billion Dollars (Dr. Evil pinky finger lift)

Obviously it's much easier to be an armchair quarterback and pull numbers out of thin air than to execute and create real value.

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What justifies assuming a 1% conversion rate?

How many people do you run into walking around town, what would justify a 1% conversion rate in selling products to them? Just because 1% seems small does not mean it's a guaranteed conversion rate.

I don't have anything specific in the adult industry to base my assumption on but it's based on looking at the conversion rate of many sites in many different industries. 1% seems to be the low-end of what a site can convert at if you do the basics right. But I'll admit it's an assumption that needs to get tested.

1% would be a very badly converting adult site so I would think that would be an ok assumption.

I don't know if you have stats or if you're just making numbers up, but in all seriousness if you have the conversion rates for some popular sites I'd love to see them. Just for curiosity's sake.

I do but I can't give you the exact figures, that's not my decision to make.

The big problem is probably defining what people call 'conversion rate', typically that's 'virgin traffic' divided by actual sales.

The problem with that particular definition is to track accurately how many people have never seen your site before.

For a site that is growing steadily the number of 'new' visitors that will eventually convert over the life cycle of their account is a number that always relates all of todays 'new' traffic to the total sales of today, but the sales of today were not typically caused just by people that visited today for the first time.

So accurately tracking conversion rate is not as simple as it may seem at first glance.

Also, and this is a completely different issue, conversion rate is not the most important figure at all, and I find the thread we're discussing this in amusing because even though the first poster in the thread accurately identifies recurring billing as an excellent revenue driver it completely misses out on the life-cycle aspect of an account, and typically accounts do not last forever.

Industry standard is 3 months, so if your subscription site has a 1% conversion of free traffic to paying members then you will still only make 3 times your monthly charge on them.

To do better than that you'd have to work really hard on tweaking that 3 month figure, retention is almost as important (if not more important) as initial sign-ups.

That's where the real money is.

Really interesting for me to read this analysis. For my online game, conversion of people who visit the landing page is about 0.5%, but once they're paying, churn is in the 3%-5% range per month, which is around 25 months retention on average. So for me, it seems that the real money is in trying to get the conversion rate up and I'm mostly ignoring the retention, because it seems like I'd have to do a lot of work to move the retention rate.

I guess people looking for sex are quicker to pull out their wallet but also quicker to be satisfied.

You've got a goldmine there!

With a retention like that you could drop your conversion rate even further (so market more aggressively) and still come out on top.

Don't bother optimizing the conversion, the retention or any simple formula but instead focus on optimizing the one number that matters: net profits.

If I have a goldmine, it's been eluding me. I'm not that great at marketing and seem to be able to only get so many people in with adwords. People pay $10/mo, so a new user is worth something like $200 and I'm currently bringing them in via adwords at about $50 each, but that's the average and if I up my bids, the cost to bring in more will be about $80 each, which seems high considering how long it will take to make the money back. I only get about $3k spend/mo with adwords at the current bids.

Edit: Costs are already so low that the only way to increase net profits would be to increase revenue per user, perhaps with added micropayments, but it seems to me that with so few paying users <1200, I should be trying to get a larger user base and then later increase revenue per user?

If you have a proven conversion funnel and high retention, you should be able to absolutely blow this thing up via Facebook Ads. AdWords is hardly the ideal channel to drive significant game traffic(unless you're awesome at Content Network).

Or set up an affiliate program paying about $1 per free signup.

Don't know if I'm awesome at content network, but about 95% of my adwords clicks are coming from the content network and not from actual search.

I get people via Adwords at less than 20 cents a click. According to Facebook, the minimum bid for people who like online games or mmorpgs, or other categories I've tried is currently well over a dollar. I did get some clicks from Facebook when their ads were fairly new and the minimum bids weren't so high, but conversion rates were much lower than those from Adwords.

A couple of ideas:

- increase your price (see: http://news.ycombinator.com/item?id=1639712).

- consider partnering with sites that you select to send you traffic and give them a kickback of for instance $20 / signup.

Agreed. Retention is key to any subscription based business.

And I was thinking 1% was too generous. My guess would be more like .01% to convert.

In a world where porn is mostly free, I doubt you could get a 1% conversion.

You doubt that based on what?

http://srv349.rackco.com/showthread.php?t=119198

This company promises 1:300 rate. subscriptions. 1 out of 300 unique visitors will join. I had 1200 unique visitors and no joiners.

http://www.upiu.com/articles/pornography-business-is-booming

She the conversion rate from viewers to paying members is about one in 200

Anybody that promises you a guaranteed subscription rate is not above board in one way or another.

How traffic converts from one site to another is a matter governed by a very large number of factors, typically if you sell balsa wood aircraft advertising on a site for knitting supplies is not going to net you a lot of customers.

I've been 'helping out' a fellow HN'er with a bunch of traffic and to date we've yet to see a single conversion. That doesn't mean that his product is bad or that the traffic is lousy, it simply means there is an impedance mismatch.

So you can only determine what works and what doesn't by trying it. But once you are spending money on clicks then that 1% is a good ballpark figure because that's what you'll need to make money on your traffic buys unless there is a scam involved.

On 'junk' traffic (exit consoles and other bad tricks) conversion rates can be as low as 0.01% or worse, on good or great (matching) traffic it can be substantially in excess of that 1%. Audience match is key, and that goes for any form of traffic buying, adult or non-adult makes no difference, if the user lands in something they didn't expect on the 'far' side of that click it had better be a positive surprise or you've just effectively made your precious domain worth less.

I suspect it's not that easy or the previous owner could have restructured the business and its debt instead of declaring bankruptcy. Truth is there is no money left in sex/pornography.

You consider you'd get 125K new daily visitors, while in reality it's probably (mostly) the same people visiting the site.

Why would people come back to a landing page littered with ads, more than once every few months?

Yep, it's an assumption that would need to be tested and considered.

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