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XPays

John Stuart
XPays.com, the patented affiliate model that Internet businessmen like to call "affiliate pooling," has grown into an industry behemoth.

It has a global network of about 14,000 webmasters in more than 50 countries, according to its co-owner, Evan Horowitz.

"XPays is one of the only 100 percent tracking affiliate programs," Horowitz said. "It's a commerce network that monetizes ad space, and supplies sales and revenue for sponsors. We aggregate goods and services of other companies, as well as our own."

In simple terms, XPays works this way: All traffic sent into an affiliate directory is tracked, including the webmaster referrals; any commerce, including video-on-demand (VOD) pay-per-minute (the "Hotel Heiress" sales on XPays' phenomenally successful Paris Hilton sex video); mobile phone use; and any link, anywhere. XPays enables affiliates to receive income via pic-per-sale, percentages of VOD sales, sex toy sales and per-call percentages on mobile phone use.

Nine Years in the Biz
"And it's all tracked through one account," Horowitz said. "We know how to help webmasters grow. We have nine years of experience in the biz."

While it's true that XPays went online in 1998, it really began earlier, in the dormitories of the University of California at Berkeley. That's where Horowitz met his current business partner, Michael Landau.

"We became friends the first day of school back in 1990," Horowitz said. "Michael was a computer science expert. That was one of his majors at Berkeley, and he was already very skilled with the Internet, programming and whatnot. He helped me in my first job, which was selling metal fabricating equipment into Silicon Valley, right out of college. He made me a bulletin board for buying and selling machine tools. We basically became a middle-man, and did about $600,000 to $700,000 in machine tool sales in 1995. We thought, 'Machines are cool, but we don't want to be stuck in the machine tool business.' It wasn't exciting for me. I was more excited by the stuff we were doing on the Internet. Computers were just coming into their own at that point."

So Horowitz and Landau created Official Search, an Internet search engine for finding only official sites.

"Then somebody came to us and asked, 'What are you doing with your adult searches?' Michael and I decided to do a deal with this adult company to sell our adult searches. We went from selling credit card applications to Amazon Bucks, where we made nothing — less than $10 a week — to putting in all the search results for one adult company, and it grew to the point where this company said we can do whatever we want to promote their sites. We didn't want to deal with the risks of processing credit cards for adult, and we didn't want to risk producing content, so we built an affiliate program for another adult company that had eight or 10 sites. We hosted the front door of those sites, doing all the affiliate tracking."

The new XPays site added customers like the Python video sites and TrafficCashGold, relationships that have lasted down to today. But Horowitz wasn't totally confident in the company's future back then. He hung on to his full-time job while nurturing the new, small operation that shared a server which cost only $15 a month. The simple site, for which Horowitz created the graphics, now is a historical curiosity that can be seen on Web.Archive.org.

"You can tell when you see it that I'm not a graphic designer," Horowitz said.

Just about the time when XPays went on the shared server, Landau graduated from law school, celebrating it with a 10-day Hawaiian golf vacation with Horowitz. When they returned, tanned and re-energized, they were amazed to learn that XPays had done $35,000 in sales while they were putting golf balls.

"I quit my job, and we got an office in San Francisco, which we've had now for nine years," Horowitz said.

Just because Horowitz and Landau recognized a good thing when they saw it, doesn't mean they just rode the wave and counted their money. XPays has undergone constant tweaks and improvements over those nine years, fighting to stay ahead of the ever-changing curve in Internet competition.

The most recent changes are an example.

"We redesigned the site, updating the affiliate features to meet today's webmaster needs," Horowitz said. "Most of the changes we've made in our program have come from affiliate requests. XPays' host partners write in with suggestions for improving the interface with the affiliates. We have a lot of data there. We're not just showing hits, sales and money. We're showing hits-to-VOD per-site, per-hour, with referral URLs showing front-page hits.

"It makes the affiliates' daily ritual of going through stats and analyzing data easier. It was a challenge to integrate all that into one login, because we have so much more data than programs that merely sell memberships. We're selling memberships with dozens of sites and reporting them individually.

"Looking forward, we are in beta on some next-generation XPays tracking software, which will provide affiliates with the choice of encrypted or unencrypted URLs, and more improved date-range functionality."

By far, the most successful new improvement has been the addition of RSS feeds, which are non-duplicate entry-generating feeds. Unlike "morphing feeds," XPays' RSS feeds give completely non-duplicate entries for every affiliate.

"We've optimized the feed generation, so that they're not just getting slightly different posts," Horowitz said. "They're getting totally separate posts. Also, we give webmasters the choice of using a box cover or not. We can let them choose multiple genres at once, to generate multiple feeds at once."

The other great recent change in the XPays empire was the addition last April of XVN.com, the exclusive VOD site for XPays.com, boasting more than 300,000 unique pages.

"We wanted to get into the VOD, pay-per-minute streaming business for a long time," Horowitz said. "We frankly weren't satisfied with the other choices that were out there. We looked at AEBN. We looked at HotMovies, and we thought we could do it better. We think we have the most cutting-edge, most functional VOD site on the Internet. We're one of two companies that has both embedded and external players. We've also just made a substantial move to offer the entire site in Flash. All of our players are proprietary."

It took two years and millions of dollars to build XVN.com, according to Horowitz, who claims the site has more than 16,000 titles from more than 300 studios licensed to XVN, with about three new studios coming on board each day. Realizing the risk factor in this new venture is greater; XVN has hired a full-time in-house 2257 supervisor, to make sure all VOD product adheres to the letter of that law.

Paris Hilton Tape
But despite new site designs and the bold foray into a fresh business arena, the biggest buzz XPays receives from its affiliates continues to be the Paris Hilton sex video.

"I thought we would have just a six-month run of great sales with that video," Horowitz said. "Now it's more than three years later, and XPays marketers have been legally profiting from the video by millions of dollars every year. Last year was stronger than the year before. The sales ebb and flow with Paris Hilton's popularity, but even when she's not popular, she's still more popular than anybody."

The spikes in Hilton's popularity — particularly during this year's highly publicized incarceration of the celebrity heiress — are readily seen in the sales figures on HotelHeiress.com, which bumps into the top 1,000 sites in the world during the surges. The cash cow has attracted some unwanted attention, however, probably making the Hilton tape the most victimized by copyright infringement today, according to Horowitz. These infringements have led to the first-ever offensive lawsuit filed by XPays, against Internet Commerce Group (ICG), parent company of CelebrityCash and Mr. Skin. The suit still is active, although XPays filed it more than a year ago.

"If a piece of content is copyrighted, and you enforce your copyright, taking all of your enforcement actions seriously, the content is protected," Horowitz said. "Everybody wants that. Many companies have been so greedy regarding other people's content, that they've tried to fabricate a 'fair use' situation on paper. For example, a site like TheBestPorn.com is a valid review site. It's not infringing on any copyrights. They make their revenue from advertising.

"Correlate that to mainstream media. Court TV has used bits from the Paris Hilton video several times just in the last few weeks, and we give them releases. When they want to use a clip, they acquire an authorized clip that we supply. It's watermarked, they credit us onscreen, and they express to us how the video will be used.

"Then look at the case of Mr. Skin. They used images from our copyrighted content. The next thing the surfer saw was a paid link to join Mr. Skin to see the review of the Paris Hilton sex video. I don't think it's a review in the first place. Mr. Skin is a membership site. So in this day and age, when people are crossing lines on copyright theft, somebody has to be a stickler so the courts can define 'fair use.' If we allow people to use our content to bait-and-switch consumers and webmasters, then over time it would become OK. So the only way to establish your rights in regard to 'fair use' is to file a lawsuit."

On Content Theft
Horowitz has been extremely active in beating the drum against content theft, urging other companies to be resolute and take action. One of his methods involves posting information on a variety of adult message boards, and it has born fruit.

"When XPays determined that it would not allow any bulk email traffic," Horowitz said, "we got the word out, and within days all bulk email traffic disappeared. All it takes is a responsible, diligent effort, and you'll find that most site owners will comply."

Horowitz's principal complaint against sponsors that won't comply centers on those who allow content sharing of copyrighted material.

"It comes in waves," he said. "The actual sharing sites are not a problem. The torrent sites are a problem. They're warehouses for illegal content in movies, MP3s and games. They're what Napster was in the early days, before losing its lawsuit."

Content-sharing headaches aside, Horowitz believes that the same hands-on strategy used in dealing with copyright theft has been the key to the success of XPays.

"Our personalized support and very original, accurate tracking platform makes us stand apart from the competition," he said. "Webmasters who come to XPays are surprised to get replies to their emails. We pick up the phone, we respond to emails, we email webmasters, and I even write handwritten notes on their checks. We have the most honest business model of any company on the Internet."

And while it's obvious that Horowitz takes pride in what XPays has become since its infancy on a $15-a-month shared server rented by two Berkeley buddies, he said there's more to come.

"We feel like we're just getting started," he said.

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