educational

Pay Site Revenue Streams: Part 1

This morning I'm contemplating various pay site revenue models, and some of the basic numbers behind them. If you're as new to the pay site game as I am, you might want to look at some of the things that I am considering, and how they might apply to your own business plan.

Dawn Elizabeth is in the process of soft-launching her new pay site, and I'm chewing on some of the numbers in an attempt to add a little more science to the process. You see, her basic "$29.95 per month" price point was initially chosen because "it's less than a dollar a day" and heck, a buck a day for all the cool stuff that she's rolling out is worth it, IMHO.

This sort of "grab your dick and say WTF" approach to running a business is not necessarily the best way to go, however, and so I thought that I would jot down a few notes, and contemplate the results in a foamy bubble bath while it snows out on the beach. Here's a look at some details:

Membership Fees
One might naturally assume that the primary income stream for a pay site is through direct site membership sales, and I'm likewise going to assume that. But I always try to shy away from assumptions, and will look at all aspects of the revenue stream as the site evolves; seeking opportunity here, mitigating revenue loss there:

As for the direct membership sales, Dawn is currently offering credit card users a 3 Day Trial for $2.95, that will automatically recur at $29.95. Online Check users will not have a trial option, instead paying $30 flat for a recurring monthly membership fee. Web900 users who wish to bill their fee to their telephone account will receive a non-recurring $30 for 30 days membership.

This balance of trial and recurring memberships is a simple beginning that will allow for easy testing of price points, and membership options. She may expand these options with discounted 3 month and 6 month non-recurring memberships in the future, but until more is known about the financial structure of the operation, offering "long term" discounted memberships is unwise. The reason for this is really simple: until you fully understand the numbers, the discount you offer may render your member unprofitable, and this makes your site a hobby, not a business.

Offering trial memberships is important for a number of reasons: maybe the prospect really wants to see if your site delivers what it promises before making a longer term commitment, also, for a great many people, spending "less than $3" for a ton of porn is no big deal. But the truth of the matter is that many pay sites are profitable only because the member forgot to cancel his trial membership, and then maybe even put it off for another month before getting around to it. Procrastination is the friend of all sorts of subscription services:

Ok. So a member is worth either $2.95 or $32.95 (after 3 Day Trial) or $30 upfront, and likely even more down the road, depending on how long he or she remains a member. While the percentage of memberships that initially recur after the 3 Day Trial will play an enormous role in the underlying mathematics, is this all that must be considered? Of course not: ...it is not immediately available, so her margin must take that initial 10% "hit" into account.

Processing Fees and Reserve Holdbacks
Since she'll be using ibill to process credit and debit cards, online checks, and provide web900 services, Dawn will incur a 15% transaction processing fee, as well as 10% reserve holdback. The 15% processing fee, ibill's highest fee bracket for lower-volume sites, while steep compared to using her own merchant account, is a reasonable bargain given the level of service they provide. From 24/7 customer service that will handle any member's issues while kitty's out to play, to fraud control and password management, ibill allows her the freedom and flexibility she needs, while protecting her own merchant status from excessive charge backs or any membership related problems.

As far as the 10% Reserve Holdback goes, this is an amount held in escrow for 6 months to guard against fraudulent operators and excessive charge backs. While this escrowed money is returned to her six months later, providing that she runs everything above board (which is not a concern as she will definitely please her members), it is not immediately available, so her margin must take that initial 10% "hit" into account.

At this point, it might appear that we have a handle on the incoming revenue stream, but I have a feeling that we're only at the beginning. Stay tuned and see what I mean: ~ Stephen

Copyright © 2024 Adnet Media. All Rights Reserved. XBIZ is a trademark of Adnet Media.
Reproduction in whole or in part in any form or medium without express written permission is prohibited.

More Articles

opinion

To Cloud or Not to Cloud, That Is the Question

Let’s be honest. It just sounds way cooler to say your business is “in the cloud,” right? Buzzwords make everything sound chic and relevant. In fact, someone uninformed might even assume that any hosting that is not in the cloud is inferior. So what’s the truth?

Brad Mitchell ·
opinion

Upcoming Visa Price Changes to Registration, Transaction Fees

Visa is updating its fee structure. Effective April 1, both the card brand’s initial nonrefundable application fee and annual renewal fee will increase from $500 to $950. Visa is also introducing a fee of 10 cents for each transaction, and 10 basis points — 0.1% — on the payment volume of certain merchant accounts.

Jonathan Corona ·
opinion

Unpacking the New Digital Services Act

Do you hear the word “regulation” and get nervous? When it comes to the EU’s Digital Services Act (DSA), you shouldn’t worry. If you’re complying with the most up-to-date card brand regulations, you can breathe a sigh of relief.

Cathy Beardsley ·
opinion

The Perils of Relying on ChatGPT for Legal Advice

It surprised me how many people admitted that they had used ChatGPT or similar services either to draft legal documents or to provide legal advice. “Surprised” is probably an understatement of my reaction to learning about this, as “horrified” more accurately describes my emotional response.

Corey D. Silverstein ·
profile

WIA Profile: Holly Randall

If you’re one of the many regular listeners to Holly Randall’s celebrated podcast, you are already familiar with her charming intro spiel: “Hi, I’m Holly Randall and welcome to my podcast, ‘Holly Randall Unfiltered.’ This is the show about sex, the adult industry and the people in it.

Women In Adult ·
trends

What's Hot Now: Leading Content Players on Trending Genres, Monetization Strategies

The juggernaut creator economy hurtles along, fueled by ever-ascendant demand for personality-based authenticity and intimacy — yet any reports of the demise of the traditional paysite are greatly exaggerated.

Alejandro Freixes ·
opinion

An Ethical Approach to Global Tech Staffing

One thing my 24-year career as a technologist working to support the online adult entertainment industry has taught me about is the power of global staffing. Without a doubt, I have achieved significantly more business success as a direct result of hiring abroad.

Brad Mitchell ·
opinion

Finding the Right Payment Partner

Whenever I am talking with businesses that are just getting started, one particular question comes up a lot: “How do I get a merchant account?” It’s a simple question, but it has a complicated answer.

Jonathan Corona ·
opinion

The Taxman Cometh for Every Business

February may be the month of romance, but it is also a time when we need to think about something that inspires very little love: taxes. April is not far away, and the taxman is always waiting. This year, federal and most state income taxes are due Monday, April 15.

Cathy Beardsley ·
opinion

The Continuous Journey of Legal Compliance in Adult

The adult entertainment industry is teeming with opportunity but is also fraught with challenges, from anticipating consumer behavior to keeping up with technological innovation. The most labyrinthine of all challenges, however, is the world of legal compliance.

Corey D. Silverstein ·
Show More