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Finding the Right Payment Business Model

Finding the Right Payment Business Model

November 28, 2016
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" The concept of suddenly having to drive traffic to two different sites is a showstopper for a lot of site operators. "

One consistency among nearly all paysite owners is that they are creatures of habit. After all, how else could someone tirelessly produce or procure similar content steadily in order to update their commercial enterprise or labor-of-love on a weekly or daily basis? Through passion or routine, it becomes habitual.

We see it with the frequency (or most often the infrequency) of site upgrades, redesigns and overhauls and even more so with the adaptation of emerging tech and standardization trends. It took paysites nearly five years from the time Flash video became obsolete everywhere else to resist abandoning it in favor of MP4. Just with the Elevated X paysite management software platform I co-created we saw about seven years go by between the time we introduced a mobile-optimized paysite option and the time when the industry consensus was that mobile compatibility is a guaranteed must-have for a site to avoid failure. I can list more examples but most site owners know that this is the truth.

The same goes for business models. We introduced a membership-based paysite software platform in 2006. In 2010 we introduced video-on-demand purchasing due to client requests and then due to low demand and those requests having been “brainstorming” wish list items rather than something anyone actually wanted, we removed it a year later in 2011 … only to reintroduce a modern version in 2016.

Unlike standards, business models present a new opportunity — one for revenue. If someone is running a successful membership site, adding an option for a la carte purchasing of content or loading of funds into a sort of online wallet or selling token packages can only add to the bottom line. And if a site only sells clips, offering a higher priced recurring membership only serves to do the same. This is true on a very simple scale, anyway.

If this sounds so obvious, then why do so few paysites make use of both business models?

There are three main reasons:

1. Fear of cannibalizing one form of sales to feed the other.

This, believe it or not, is a fallacy. Just as many producers once feared opening paysites because they didn’t want to lose the massive revenue from DVD and VHS sales, many site owners fear that offering customers a new purchase option will cut into their profits. What studios learned with paysites was that people who bought memberships were not the same people who bought DVDs or VHS tapes. The end result was a new revenue stream and the ability to drive web sales from video sales and vice versa. The same is true for those buying memberships vs. single digital videos.

2. Not knowing how to operate the new format of site.

If you’ve had a paysite for years but only operated on the membership model, the concept of selling content on a per item or token package basis is very foreign. And so is going from selling clips to supporting members who have a higher expectation for a higher price, especially if a site has any hopes of recurring past the initial signup.

The concept of suddenly having to drive traffic to two different sites is a showstopper for a lot of site operators.

3. Fear of risk.

This ties loosely into No. 1 above but there are multiple fears related to changing business models, even if it just means adding a new one. Many paysite owners selling memberships lack an easy method for simply plugging a clip store setup into their existing business framework. Even for my own Elevated X CMS software customers, aside from the short time we had VOD from 2010-2011 and now in 2016 when we reintroduced it, many were forced to use alternate methods be it dedicated, entirely separate VOD software or a hosted service like Clips4Sale.

For my own software customers, adding a clip store to their existing membership sites or a hybrid of both within the same website is now easy. I wish my company was bigger … but sadly despite our success in this industry, our software still only powers a small fraction of the adult paysites online. This means that the vast majority of sites, perhaps as high as 80 percent who are not using one of maybe two-to-three halfway decent platforms that do this, have no easy way of utilizing both models.

The end result is that doing both is a costly endeavor. For a membership site operator not using CMS software that offers both options, it means buying a new product, possibly moving an old site to a new platform, new costs, time, etc. For a clip store owner it often means much more as many clip store owners don’t operate their own sites and simply sell on hosted platforms like Clips4Sale. Going from being on someone else’s site to operating your own site, obtaining your own billing accounts, paying the high risk Visa and Mastercard fees, getting your own web hosting and so on appears to be a monumental undertaking.

Here are the first three mental steps paysite owners can take to move toward maximizing paysite profits through use of both membership and on-demand sales:

1. Realize you won’t lose sales.

You aren’t shutting down your existing site or losing any of its traffic or sales. All you’re doing is offering a new purchasing method for people who may not be interested in whichever one you currently offer.

Right now if someone visits your site, he or she may not like to buy that way. There are people who like to pay for a trial or monthly membership, enjoy the site briefly and cancel. Some will stick around. Many will rejoin again later. By adding membership options you’ll immediately gain the ability to sell to these new customers. On the reverse, many people don’t like to pay more for memberships and prefer to browse and buy only what they like. iTunes is proof of this concept and it works exactly the same for adult paysites. It’s win-win for everyone, most of all for you, the site owner.

2. Realize you don’t have to obtain new traffic.

If you look at how some of the very big studio sites are doing this, you’ll notice some of it seems a big shady. They’re selling memberships for streaming only sites and then upselling downloads or VIP memberships and all sorts of trickery to get more money from the customer. I never suggest that but only present it here because it tells us the formula works. You can have a single site, a single brand if you will, that offers customers multiple payment options and feeds it all from the same traffic source.

If you use a site like Clips4Sale, guess what? You can still run a membership site and link it to your clip store if you don’t want to create your own clip store as part of your paysite. And guess what else? You can sell memberships to your clip customers who prefer to purchase that way.

You’re simply adding a new revenue stream and can use your existing traffic pool and continue to build your brand in a way that lets you control it 100 percent.

3. Realize you can start on a low budget to mitigate financial risk until you see a return on your new business model.

In contrast to clip sales, it doesn’t take a high average of daily or weekly membership sales at $29.995 or $39.95 a pop to cover the high risk credit card fees and pay for basic operating costs like web hosting.

And unlike being on a hosted platform, when you operate your own site, be it a clip site or a membership site, you have total control over far more than just traffic and content. Once you take that step you’ll gain far more options both for promotion and for increased sales. These options range from being able to make deals with other sites to trade member area ads and special member only price deals to upselling other sites, services, toys and adult products, to leveraging your other business model to drive more sales to whichever is deemed most profitable.

If you own a clip site and I told you it was possible that your highly profitable clip store could be driving twice that revenue to a membership site without you losing any clip site traffic, you probably wouldn’t hesitate to drop $1,500 upfront for credit card processing, site software and budget web hosting and put a few weeks’ time into building a site as a gamble. And if you own a membership site and I told you that just by offering the ability to sell clips you might see new low volume sales as “low hanging fruit” and increase your revenue by 7-10 percent with little to no additional expense you’d probably give it a go too.

As the late, great comedian George Carlin said in one of his most famous comedy routines, “Take a fucking chance.” Neither pay site business model option is going to make you rich instantly but offering both is guaranteed to increase your bottom line over time. By this time a few years from now it will be odd to see a paysite that doesn’t offer both just as it’s rare to see any successful site that isn’t at least mobile friendly. The train is already moving; all you need to do is climb aboard.

AJ Hall is a 16-year adult industry veteran, winner of the 2016 XBIZ Tech Leadership Award and CEO of Elevated X Inc., a provider of popular adult site CMS software. Hall has spoken at industry trade shows and written for several trade publications. Elevated X software powers more than 2,000 leading adult sites, has been nominated for more than a dozen industry awards and won the 2012, 2014 and 2015 XBIZ Award for Software Company of the Year.


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