Monetizing Traffic

Scott Rabinowitz
2007 is here, and with its arrival there is no doubt that much thought is being given by virtually every adult firm and webmaster in the business as to how best to generate greater (and sustained) value from traffic assets. There is much time and energy given to industry discussions on the various ways to generate traffic for websites to meet exposure and sales goals. On the flip side, it is exciting to see more people in the industry looking at alternative viewpoints of how best to make use of traffic a site already has, and, in particular, the effective monetization of traffic through any and all legal means to generate revenue.

Before we examine some of the methods available to both novice and senior webmasters alike, we need to discuss valuation methods and viewpoints. One cannot fully determine the value of new techniques for making money from one's traffic unless he or she has a clear-cut view of what the ad inventory is worth. The writer looks at all traffic as ad inventory as, in effect, we are all in the online advertising business, with regards to adult Internet traffic. On valuating traffic, certainly an easy way to gauge is by how much revenue is generated per month from current income streams derived from this traffic. If a webmaster is sending a variety of sponsor program ads and happens to convert much better than average, it is possible that the existing method of monetizing is best. If one were to sell ad placement for high premiums, he or she might need to charge ad rates that are far and above what most companies would consider fair market value when looking for media buying options.

An example that we have had some direct experience with relates to the small group of paysite operators whose subscription sales income has suffered. It cannot be easily improved and therefore leads the site operator to look at other ways of generating income from the traffic amassed so far. For instance, there may be a paysite that, after operational expenses (hosting, labor, payment processing fees, content, marketing, traffic, legal counsel, etc.), usually brings in $5,000 per month. While the income is generally stable, there seem to be hills and valleys in the recurring income numbers, which can make budgeting and financial forecasting much more difficult. Beyond the monetary portion of this example, factor in that, through prior successful efforts with SEO and non-affiliate/ paid ad traffic sources, the paysite is bringing in enough traffic every month for the owner to easily send out 100,000 clicks a month to other web sites off of his or her network.

If the paysite's traffic is of consistent quality, the traffic that could be steadily sent out could be worth more than 10 cents per click to other sites who have more robust paysite operations. On that basis, a paid advertising business model, with its own legal issues, costs and back office logistics to consider, could generate $10,000 per month that the owner would not have to share. There is no waiting for processor payments and no operating costs incurred as a paysite operator. I am not advocating that people take this approach with paysites en masse. The example provided is there for those who are perhaps in an operational bind in which their own paysite growth is hindered, yet they have a solid source of ad inventory that could be monetized with less opportunity cost than the existing money-making method for website traffic.

For well-established sources of targeted traffic in various adult genres, the ad sales option is there. This option affords webmasters a few choices in terms of facilitating the ad sales business model. Owners can hire and train staff, buy an ad server license, purchase some servers, set up an invoice process and see what happens. In this case, they are taking some capital risk if the learning curve for an ad sales approach is slower internally, or access to potential advertisers is altogether limited. Alternatively, owners can hire independent brokers or ad agencies that have all the necessary resources to manage ad sales, including access to buyers, and let the agency provide a steady advertising income stream from the established site (or network) traffic.

Despite my own bias towards the ad sales model, seeing as though I'm part of an ad agency, there are plenty of instances where traffic is of such exceptional value in terms of conversion ratios that webmasters should always send to competitive sponsors with appropriate payouts and site products to match their traffic audience. I have seen traffic streams firsthand where, even if limited in volume, sales conversion ratios have been in the 1-50 range or better all the time. Assume for a moment that there is a sponsor that pays $30 PPS for popup free sales, which is necessary to keep great search engine traffic supply. At a 1-50 conversion generating $30, that makes the effective value of each click sent to the sponsor 60 cents, which is great. If, however, the webmaster went to the sponsor and wanted to sell cost-per-click (CPC) paid traffic campaigns at 60 cents, he or she would not get a favorable response from many companies. It seems crazy if the traffic can be worth the price in sales output, but if owners try this, they are asking to shift the burden of conversion for payment (at a high level) to the sponsor by making them pay a heavy premium for every click. Agencies that sell CPC ads for a living may have traffic sources that can convert at great ratios, but in many cases, the wise move for high-conversion traffic is to send to PPS or qualified revenue-sharing programs where the effective value of traffic sent out to sponsors generates the high per-click value the traffic is capable of making.

Most adult-traffic monetization methods have one thing in common: Someone down the line of sites receiving a traffic source must shoulder the burden of conversion and wait out the recurring cycles for a paid access site to generate the ROI. This justifies this business process. For affiliates or brokers who have specialized traffic streams of the highly targeted sub-niche variety, the placement of paid-access sites should always be reviewed as an option to generate income from site traffic. If one has been steadily successful sending sales to other people's niche paysites and have enough recurring access to relevant content, then certainly "having your own shop" should be considered. If the revshare sales for sponsors rebill for months at a time, while the sponsors' paysite quality determines the rebills continuing on, it takes the input of highly qualified traffic to make the equation work. Providers of these targeted leads are partway to having a successful paid access business of their own. The risks, overhead and legal considerations are not to be ignored by any means. Making the transition from an affiliate or paid advertising monetization model to a paysite model is not for everyone and requires a well-executed and, ideally, a properly capitalized business plan.

Methods for effective monetary use of web traffic are not universal. Whether you choose to be a super affiliate, a provider of paid ads or a paysite operator, solid research, advice from legal and accounting professionals, planning, human resources and capital allocation will apply. The barrier of entry for certain monetization techniques may be lower by some methods than others, but where a high-value source of existing traffic is concerned, be sure to take the long-term view when evaluating options. High revenue is good, but stable revenue is great.