They always say the adult industry pushes the Internet forward so I thought I’d take a look at the Friend Finder Networks (you know the Adult Friend Finder ads) SEC filing to see if there’s anything we can learn from their business, which did $243 million in revenue in 9 months in 2008. You can also read Andrew Chen’s take on it.
- Visitors (59 million/month)
- Anyone who visits, even if they don’t register.
- Referred through affiliates, search, word of mouth
- They believe they have large numbers because of their focus on continually enhancing the user experience and expanding the breadth of services.
- Members (4 million new registered users/month!)
- Those that have registered for free and given an email address
- Subscribers (1 million paid subscribers/month)
- 77.2% of revenue from subscriptions
- $19.06 revenue per subscriber
- 18% churn (# that cancel each month)
- Paid Users
- Users that pay for products/services on a usage basis.
- 19.6% of revenue
- Content and services people want (sex sells): Face it, it’s true – there’s money in adult content. They also have “General Audience” sites (i.e. BigChurch.com, SeniorFriendFinder.com), and while they account for a small fraction of the traffic, these “General Audience/Non-Adult” sites account for 8% of the paid subscribers at $16.28/subscriber.
- Reliable revenue through paid subscribers: It’s nice when you’re users pay you for a service and you’re not reliant on advertising in come. Will we see more premium membership social networking sites in the future? What kinds of things would you be willing to pay for on a social networking website?
- Strong affiliate network: You’re in a strong position when you can enable other businesses to exist. Google Adsense is a great example of this. Their success is your success.
- Scalable Website Platform and Model: Apparently they can launch their “friend finder” network in any niche as demonstrated by the church and seniors segment. Even if each new niche doesn’t become a large percentage of total revenue, as long as each segment is profitable then can continue to roll out new niches and incrementally grow the business. In essence, creating a long tail 1 site at a time.
The Name of the Game: Conversions
The key for them to make money is to continually increase their conversion rates of free members to paid subscribers. Pretty much every business comes down to conversions – you just need to figure out what the right metrics are and maniacally improve them.
Some Interesting Risks They Note
- Decreased content contribution from users: This is a risk for many of the consumer-focused social networking sites today that rely on the uncompensated contributions of users. Since the value of the sites comes this free content any decrease would be an obvious blow. If financial compensation is needed to continue the contributions that’ll have a negative impact on the bottom line.
- Inability to diversify and innovate products & services: There’s always new competitors adding the latest bells and whistles and if your site doesn’t keep up then users may leave. That doesn’t mean you have to implement everything under the sun, but you need to at least make sure the majority of users have their needs met – and those needs do change and grow.
Notable Social Networking Features
- Loyalty Program: Give points to users for participating on the site and allow users to redeem them for things like upgraded memberships or more prominence in searches. This sounds like a great way to incentivize users to contribute content.
- Cupid Reports: Automatic notifications of potential matches when the member joins the site. This sounds like a great way to push interaction amongst members.
- # of customer service requests
- # of user actions (images/videos uploaded, messages sent, etc)
- referring link/domain, traffic source
- e-mail domain
That’s all for now. It’s always neat to peek under the hood of another business to see what they’re focused on and what they’re worried about. I found the couple of risks I noted to be particularly interesting.
Any thoughts? What risks are you worried about? Are you tracking the right metrics?
Justin January 6th, 2009
Posted In: Business Plan, Learning