educational

Streams of Revenue

Cheryl Cain
In a previous article entitled "Webmaster Pitfalls," I wrote about the 10 biggest mistakes for webmasters to avoid. One of the elements in that list of 10 dealt with the need to diversify your income streams to protect yourself against closures, frozen accounts and other such negative actions. It seems that my suggestion created a bit of a stir for a number of reasons. Now I would like to expand on that concept for the purpose of clarity and understanding of the strategy, as well as to point out the advantages and disadvantages of such a course of action.

Most webmasters are familiar with the practice of using a backup processor. Most employ a primary choice with a secondary standby. This strategy serves three basic purposes: providing the availability of a secondary when the primary is offline or under heavy load; providing an option for those who may not like the primary choice; and providing a ready-made successor should the primary falter. Having a backup processor is a sound concept and works to ensure that processing is always available. But in this age of constant political and economic pressures, as well as in light of the recent rounds of closures and frozen accounts, is it enough?

Consider for a moment the stated purpose of that strategy, which of course is 100 percent processing availability. Except in the rather rare case of a consumer dislike of your primary processor, or perhaps in the less rare case of a preference for your secondary, most consumers will elect the first choice for processing on the page assuming all other things are equal. Essentially your primary would be handling 70 to 80 percent of your online processing. What happens if a catastrophic event took that primary processor down permanently and took your 70 to 80 percent with them? Could your program survive? It has happened before and with some mighty large names in the industry. I assure you, the law of averages say that it will happen again.

This is where the "Rotating Processor" strategy comes into play. In that previous article I mentioned that we keep five processors and rotate their position on the join page. We began that practice in direct response to losing a bundle with one of the first big processors that faltered a couple of years ago. At that time we too employed the back up processor strategy, but that didn't prevent the loss of 80% of our sales – not to mention processing reserves (holdbacks).

The concept of rotating the processors is a simple idea. Using a very basic PHP script, we simply and systematically re-arrange the processor page upon every join click. This has the effect of advancing the processor that was in the number two spot to the top of the list while the previous first one rotates down to the last position. The goal is that each processor takes an equal share of the sales load, in theory, one fifth. In practice, it's not quite so precise as frequent consumers tend to gravitate to whom they used before, but it does spread the wealth a lot more evenly. The bottom line of the strategy is that we never again lose 80 percent of our sales in the event of frozen, closed, or a failed IPSP, while still maintaining the original purpose of the backup processor strategy of 100 percent availability. Losing money at all for any reason is not a very pleasant thought, however, if it must happen, most could absorb a one-fifth loss much easier than 80 or even 100 percent of your recent sales.

Before you run off and start signing up with additional processors, however, there are some considerations that need to be taken into account. Every defensive plan is going to cost you something, and this is no different. Aside from any sign up fees associated with installing a new processor, you also have to consider those pesky VISA charges and related yearly maintenance fees if you are a Western Hemisphere business. Additionally, you'll need to consider your minimal pay out balance if your business is not a large volume earner, as your money may be tied up in processing longer.

Cushioning one's self to economic disaster is always an exercise in creativity and a mixed bag of pros and cons. However, when incorporated into a long-range plan, expansion precautions such as this are more easily absorbed in your operating costs and provide for a more stable disaster resistant business in the long run. With everything else we have to worry about in this industry these days, the ability to avoid a catastrophic loss is just one thing less to worry about.

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