Valuing Affiliates

Rainey Stricklin
Some might remember a time back in the 1990s before affiliate programs were around. People built paysites, bought traffic and tried their best to navigate the limited search engines that were out there. The affiliate model changed the direction of adult content on the Internet and arguably contributed to its enormous profitability. But what if affiliates disappeared? The thought alone may make program owners and individual webmasters shudder in their khakis, but could it become a reality? With the current legal and political climate, are we headed for a future that may not include the traditional affiliate program?

Most don't think so but can see that the current affiliate model may not play such a major role in the future.

"In my professional opinion, and with the increasing competition for traffic and webmasters, I am confident that affiliates will remain a component to the traffic equation for paysite owners," said Albert Lazarito, director of business development and operations for SilverCash. "However, affiliates may not be the primary contributor to the overall success of sponsor programs remaining in operation. Affiliate programs will likely build synergistic business models that will maximize each paid membership through innovative techniques that are direct to consumer."

Lazarito offered an example of paysite owners creating internally owned review sites and populating them with their own sites and traffic trades with other paysites.

"I don't envision a world without affiliates," said Princess Ellisa of and P2Pads. "There is a lot of money that is made from affiliates and their referrals. I think that to say I envision a time when they won't exist sounds as if I don't value the affiliate, which is not at all true. I think that no affiliate program would ever close its doors to affiliates that are willing to do the work, but I also believe that there are going to be more and more situations where the affiliates are competing against the program owners for sales. We are definitely not far off from this reality as we are already starting to see this conflict with some advertisers such as Zango and, to a lesser extent, program owners that feel their rightful free search engine traffic is being stolen by affiliates even though they are using it to promote that owner's site."

Both Mike Hawk, co-owner of Smashbucks, and Kevin K of TopBucks and Plug-in Feeds don't see affiliates going by the wayside anytime soon, though both agree that paysite owners should prepare for the possibility.

"There will always be people who prefer to do different types of jobs," Hawk said. "That's what makes it so diverse and interesting. I don't see it happening anytime soon. There will always be people who want a program and people who want to push a program. It would almost be similar to saying that some people want to own restaurants and some just want to work in them."

However, he added, if you're not securing your own traffic, you could be in trouble.

"I think if you are a paysite owner like myself and you are not getting your own traffic, then you are going to be in a bad place if that day ever comes and the world decides not to send you traffic," Hawk said.

"I can't see us ever walking away from a straight-up webmaster who is in a position to drive quality traffic to our sites," Kevin K said. "There's just no way we can duplicate, on our own, the marketing skills of our webmasters. It's just too diversified. We'll continue making traffic purchases ourselves, but these buys are broad sweeps at the market. In this business, webmasters still got juice."

Securing Traffic
Kevin K added that most paysite owners, however, are taking steps to secure their own traffic outside of affiliates. "More and more companies are diversifying their product offerings and finding offline channels to move it," he said. "This is very much the case in DVD sales."

Aside from the possibility of affiliate traffic decreasing, competition also is increasing. As Lazarito points out, affiliate programs have proliferated in recent years, with service programs popping up to make creating your own affiliate program simple.

"With decreasing barriers-to-entry in this market, sponsor programs have embraced products like NATS, bulk content providers, and minimal investments in third-party credit card processing fees," he said. "Entrepreneurs have launched numerous partnership programs that are relatively low risk with low return, but they are happy with their quality of life. With cost containment and hard work, many of these newer programs have taken market share from many of the larger affiliate paysite programs. This is simply the evolution of an industry and is no different from other industries."

But if these paysites couldn't depend on affiliates to be their sales and marketing force, would they survive?

"If they are prepared to create their own traffic sources and buy their own traffic, then they should be able to compete with large affiliate programs since they will no longer have to worry about offering $70 per join payouts to stay competitive," Kevin K said.

"In my opinion, if the paysite is 'niche' orientated, then it will have demand in the market regardless of the affiliate program," Lazarito said. "Many smaller paysites yield extraordinary retention and modest revenue. More importantly, it is easier to manage a smaller number of websites rather then 100-plus. Therefore, overhead and management favor the smaller paysite owner."

So what should paysite owners do to begin generating their own traffic and reduce their dependency on affiliates as their main sources of traffic? Search engine optimization and paid traffic sources are probably the most obvious options, but there are other sources out there to be tapped.

"Create interesting free sites, blogs and other platforms that will complement your existing paysites," Ellisa said. "I think more than anything, though, buy traffic through trusted sources. Don't be afraid to test new things, since what works with one site does not always work with another, and testing is the only way to determine what will work for you."

Lazarito agreed. "Assuming you have a significant cash-flow budget there are numerous ways you can buy traffic in adult and in mainstream. If you do not have an affiliate program, many people make a strong living brokering traffic and ultimately selling traffic to those who need it. Ultimately, generating traffic is a trade secret and is very difficult to share in an open forum. Many of the current ideas we have are rooted in significant business planning that has significant 'good will' value to our team."

Kevin K suggested seeking out reputable traffic brokers to do some of the work for you. TopBucks uses offline sources such as DVD inserts to drive traffic to its sites in addition to working with video-on-demand companies.

And while a world without affiliates is unlikely in the near future, the individual webmaster may be limited by legal or political restrictions. Paysite owners should do what they can to build a traffic foundation on their own.

"Webmasters and the sales force will always be a big part of any major program, but doing what you can to survive without them would be a smart move, and then everything they bring in is gravy," Hawk said.

Ellisa agreed that affiliates aren't likely to be shut out of the picture anytime soon, but generating your own members is likely the most cost-effective way to go.

"I do believe there will always be a space for affiliates in the adult market place as well as the mainstream world," she said. "As for programs, both big and small, I do think there is a lot to be gained from focusing advertising dollars on what affects your bottom line the most. As programs continue to monetize their traffic and calculate exactly what one member is worth to them, they will see that they can buy those members in at less of a cost then paying per signup."

Rainey Stricklin is VP of marketing and webmaster relations for gay affiliate program