Sex Education

November/December 2006 Issue: Page 60

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If you can get past the content, there are plenty of lessons to be learned from successful adult industry affiliates.

You may or may not approve of what they are marketing, but nearly everyone can learn something from the strategies that the adult industry uses to capture consumers online. The thriving adult industry has a history of pioneering many online marketing techniques and continues to provide useful lessons in how to attract and convert an audience.

From the creation of the affiliate model to monetizing user-generated content, where sex sites go, mainstream marketers often follow. The selling of sex products and content has grown to become a more than $2.5 billion annual business, according to publisher AVN Online, as each year 72 million people visit the more than 4.2 million adult content websites.

SPOIL YOUR PARTNERS

While search marketing and display advertising provides most of the traffic in many industries, affiliates drive most of the visitors to sex sites. Adult affiliates are treated more like partners, and publishers are unafraid to show their gratitude. Keeping affiliates happy is paramount in the hypercompetitive adult world, says Clark Chambers, general manager of adult affiliate network NicheBucks.

Like many consumers, affiliates don't have much brand loyalty and will work the partners that offer the better returns if they aren't satisfied. Chambers, who got into the business because a friend needed someone to oversee his exploding affiliate program, rewards his best affiliates with gifts on top of their generous commissions. He has given jewelry, video games and digital music players to his best affiliates, including one teenager in Russia who makes more than $7,000 a month.

Affiliates do the primary search engine marketing and optimization, which reduces the risk for publishers and eliminates competing with them for the same keywords. Chambers makes sure that his affiliates have access to current conversion statistics and a variety of marketing tools, including a steady stream of images through RSS feeds to attract new customers. Adult sites will even host the affiliate websites for free, according to Chambers, who has been managing adult affiliates for eight years.

Adult sites will pay more than the first month's subscription fees in commissions to keep the traffic coming, according to an adult industry consultant who asked that his name be withheld (he says his family doesn't know where he works). The payouts are very generous to prompt affiliate webmasters to work harder for the program, and because they can easily find other content sites to promote, the consultant says. Publishers also emphasize the personal touch by being readily available to their affiliates and quickly responding to their phone calls, and by meeting in person at industry events.

PROMOTING COMPETITORS

The adult industry has not only nearly perfected the art of affiliate relations, but also grows stronger through publishers earning extra revenue by also acting as affiliates themselves. "Co-opetition" is the practice of promoting competitors' websites when visitors try to exit a website without buying something, according to Jim Lillig, president of marketing consultancy Synergy Intermedia. "It's a last resort after exhausting all the other ways to monetize" visitors, he says.

While many publishers may not be willing to promote competitors by acting as an affiliate, Lillig says publishers may be able to earn more revenue from those who don't buy from them than those who do. Lillig, who helped to build Mr. Skin, a subscription website focusing on celebrity nude scenes, into a successful franchise says, "98 percent of customers leave most websites without buying something." Admitting that you may not have a product that suits every taste is a difficult but significant realization for publishers looking to maximize their revenue.

Ed Kunkel, the chief operating officer of SexSearch.com, agrees that pitching competitors' products helps to grow sales across the industry. "[Competitors] have the audience you need and vice versa," Kunkel says. "It's a huge world you have access to; there is plenty (of demand) for everyone to make enough money. ... Since there is no way of completely dominating a market, you might as well share the wealth amongst each other."

Analyst Greg Sterling of Sterling Market Intelligence says that publishers who link to their competitor's sites can benefit. "Intercepting a person before they leave a site in an unobtrusive way would be successful in capturing some number of sales," according to Sterling. He says applications developers such as customer relations management software company LivePerson are experimenting with displaying competing products as a last resort.

By acting as an affiliate for niche adult publishers (such as sites focusing on older women or those of a specific ethnicity), publishers can also track the conversion rates of different types of content and then develop their own competing sites, according to Lillig. He recommends creating multiple niche sites to highlight areas of content as well as to learn more about consumer habits. Also, publishers who present information about competing products gain credibility with their audience, he says.

Analyst Sterling says companies can increase their reach by parsing their content and creating niche websites, such as search technology vendor Marchex's development of local search sites from a single database. "The creation of niche sites is a good idea if it can be done skillfully and it's not just spam," Sterling says.

The adult industry is a tight-knit group who know each another and "form a big circle," referring traffic to each other in the belief that it's better if consumers buy from a competitor than if they don't buy at all. Adult publishers who trade links with competitors can increase their traffic without having to purchase advertising, Lillig says.

However, that circle often traps customers by generating pop-up windows when customers try to exit, an annoying practice that continues to get some adult publishers in legal trouble. Lillig says that while the pop-ups may be frustrating, adult sites studied the practice and identified the exact number of pop-up windows to maximize revenue. Though pop-ups are still in use, many adult companies now ban affiliates who create pop-ups that trap users with unending windows.

LEADING THE TECHNICAL CHARGE

Lillig says Mr. Skin was one of the first companies to watermark an image and allow it to be spread around the Internet as viral marketing to enhance branding. Mr. Skin reached millions of potential customers by putting its logo on images and by embedding pre-roll ads into celebrity videos that were circulated via email and through peer-to-peer networks. "They became moving ads," he says.

The adult industry also popularized giving free sample content in exchange for customers providing valid email addresses and co-registration, which gives customers the option of simultaneously signing up for newsletters from competing adult sites, according to Lillig. He says adult marketers took an early lead in tracking email performance, including who opened emails and where they clicked.

Adult sites have also been adept at identifying seemingly unrelated trends in entertainment and integrating them into their product. Continued on Page 2...

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