
So You Just Bought Sex.com For $13 Million – Now What? - bjonathan
http://techcrunch.com/2011/01/04/so-you-just-bought-sex-com-for-13-million-now-what/
======
codingthewheel
Single-word domains from the common vocabulary usually make for shitty brands.

Probably because business efforts behind these domains are rather
transparently profit-seeking and wired for the short-term, make a quick buck,
approach.

Also there's a good amount of technological quackery that goes on in the
hyping of these domains to not-so-tech-savvy investors who don't realize that
a typical 14yo kid understands intuitively that "sex.com" is probably a crap
parked site or link directory, whereas pornhub.com, on the other hand,
provides a service that 14yo will love.

 _"..and we've got a GREAT domain name, pets.com, I mean, if you want a pet,
where you gonna go? We're right there."_

Labors of love are what win and enable you to eventually fleece your customers
and have them thank you for doing it -- not having a 13 million dollar domain.

~~~
puredemo
Are there _any_ single, common word domain brands that have been successful? I
can't think of a single one.

~~~
aberkowitz
From what I understand, Diapers.com is a highly successful business. Their
parent company Quidsi, who also owns Soap.com, was recently acquired by Amazon
for $540 million.

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melvinram
I would go with a reoccurring membership porn site.

125k daily visitors x 1% conversion rate = 1250 new customers per day

1250 new customers per day x 365 days in 1 year = 456,250 new customers per
year (reached at the end of the first year)

456k new customers per year x $120/year in revenue (assuming $10/month) =
$54.7mil per year in revenue

(though the math isn't fully accurate since it doesn't take into account churn
but it works to illustrate a point.)

With a tiny bit more brains, you could take that up to $100mil/year, prove the
stability of the revenue and sell for 10x of revenue at a cool $1 Billion
Dollars (Dr. Evil pinky finger lift)

Obviously it's much easier to be an armchair quarterback and pull numbers out
of thin air than to execute and create real value.

~~~
InclinedPlane
What justifies assuming a 1% conversion rate?

How many people do you run into walking around town, what would justify a 1%
conversion rate in selling products to them? Just because 1% seems small does
not mean it's a guaranteed conversion rate.

~~~
jacquesm
1% would be a very badly converting adult site so I would think that would be
an ok assumption.

~~~
generalk
I don't know if you have stats or if you're just making numbers up, but in all
seriousness if you have the conversion rates for some popular sites I'd love
to see them. Just for curiosity's sake.

~~~
jacquesm
I do but I can't give you the exact figures, that's not my decision to make.

The big problem is probably defining what people call 'conversion rate',
typically that's 'virgin traffic' divided by actual sales.

The problem with that particular definition is to track accurately how many
people have never seen your site before.

For a site that is growing steadily the number of 'new' visitors that will
eventually convert over the life cycle of their account is a number that
always relates all of todays 'new' traffic to the total sales of today, but
the sales of today were not typically caused just by people that visited today
for the first time.

So accurately tracking conversion rate is not as simple as it may seem at
first glance.

Also, and this is a completely different issue, conversion rate is _not_ the
most important figure at all, and I find the thread we're discussing this in
amusing because even though the first poster in the thread accurately
identifies recurring billing as an excellent revenue driver it completely
misses out on the life-cycle aspect of an account, and typically accounts do
not last forever.

Industry standard is 3 months, so if your subscription site has a 1%
conversion of free traffic to paying members then you will still only make 3
times your monthly charge on them.

To do better than that you'd have to work really hard on tweaking that 3 month
figure, _retention_ is almost as important (if not more important) as initial
sign-ups.

That's where the real money is.

~~~
JeffL
Really interesting for me to read this analysis. For my online game,
conversion of people who visit the landing page is about 0.5%, but once
they're paying, churn is in the 3%-5% range per month, which is around 25
months retention on average. So for me, it seems that the real money is in
trying to get the conversion rate up and I'm mostly ignoring the retention,
because it seems like I'd have to do a lot of work to move the retention rate.

I guess people looking for sex are quicker to pull out their wallet but also
quicker to be satisfied.

~~~
jacquesm
You've got a goldmine there!

With a retention like that you could drop your conversion rate even further
(so market more aggressively) and still come out on top.

Don't bother optimizing the conversion, the retention or any simple formula
but instead focus on optimizing the one number that matters: net profits.

~~~
JeffL
If I have a goldmine, it's been eluding me. I'm not that great at marketing
and seem to be able to only get so many people in with adwords. People pay
$10/mo, so a new user is worth something like $200 and I'm currently bringing
them in via adwords at about $50 each, but that's the average and if I up my
bids, the cost to bring in more will be about $80 each, which seems high
considering how long it will take to make the money back. I only get about $3k
spend/mo with adwords at the current bids.

Edit: Costs are already so low that the only way to increase net profits would
be to increase revenue per user, perhaps with added micropayments, but it
seems to me that with so few paying users <1200, I should be trying to get a
larger user base and then later increase revenue per user?

~~~
il
If you have a proven conversion funnel and high retention, you should be able
to absolutely blow this thing up via Facebook Ads. AdWords is hardly the ideal
channel to drive significant game traffic(unless you're awesome at Content
Network).

Or set up an affiliate program paying about $1 per free signup.

~~~
JeffL
Don't know if I'm awesome at content network, but about 95% of my adwords
clicks are coming from the content network and not from actual search.

I get people via Adwords at less than 20 cents a click. According to Facebook,
the minimum bid for people who like online games or mmorpgs, or other
categories I've tried is currently well over a dollar. I did get some clicks
from Facebook when their ads were fairly new and the minimum bids weren't so
high, but conversion rates were much lower than those from Adwords.

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Ryan_IRL
I don't think I've gone to random domains since I was on a 14.4 modem. I find
it pretty hilarious that that domain can break even just parked.

~~~
jrockway
It's not breaking even, right? The domain was 13 million. It makes "almost 7
figures" a year. So in 13 years, assuming that people still keep visiting a
bogus site, it will have paid for the domain registration.

If you just want to break even, you should probably just register a google.com
typo domain for $20, and then you need a lot fewer visitors to break even.

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dotcoma
Sell it for $15 million to someone who is more of a sucker than you are.

Isn't that the same plan Goldman Sachs has for its 'investment' in Facebook?

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vaksel
Sex.com doesn't seem to be that lucrative of a domain name(not 13mm
lucrative)...if it was, more companies would try to rank for the term sex.

right now it's

    
    
      1. Wikipedia Article
      2. FBI Sex Offender Registry
      3. Psychology article
      4. Porn Tube Site
      5. HIV charity
      6. Virginia State Police Sex Offender Registry
      7. Music Review Blog
      8. Sex Pistols music site
      9. Georgia Sex Offender Registry
      10. Center for Sex Offender Registry
    

I'd bet there is a ton of traffic because people just want to see what kind of
site is hosted on sex.com, so its a lookie loo situation, where you'll have a
crappy conversion rate. So a traditional porn site won't work that well.

A better option would be to open a casual encounters type site(basically adult
friend finder), and charge $5-10-20 bucks a month under the guise of making
sure that there are no fake profiles.

~~~
grzaks
Don't you think google threats porn/sex sites kinda different than others? I
bet non-porn sites rank better for non-porn keywords than porn sites ('sex' is
not necessarily porn keyword). And there is nothing porn SEO experts can do
about it.

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il
Make it an adult dating site...it has the makings of a strong brand.

The significant type-in traffic will help get over the network effect issues
that plague most dating sites, and your traffic is very targeted- people
looking for sex(or at least naughty pics). So you'll quickly have a core of
active users you can leverage to build your audience.

Dating sites done right are FAR more profitable than porn sites.

~~~
matwood
_Dating sites done right are FAR more profitable than porn sites._

That seems odd to me because if the dating site works people will not be
coming back.

~~~
tomjen3
Elsewhere they say the industry standard is 3 months average length of a
membership. It properly takes that long (maybe not consecutive) if not more
for somebody to get of the dating market permanently. A porn site has little
chance of going viral (who wants their facebook status to be "John is browsing
cocksuckersluts.com"?) and almost no chance of an upsell - but I know that
people share recommendations of online dating sites and when there they are an
excellent place to send people to other partners (looks like you are going on
a date! Do you want to buy flowers and reserve a table for two at a romantic
dinner?) something that is not likely to happen on a porn site.

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jyu
The most obvious ideas are porn site, adult dating site, etc. The biggest
challenge is figuring out the highest and best use. I think the best use is
turning sex.com into the authoritative site for sex questions / videos. With
this approach, you can get a captivated audience and build a lasting brand.

Sex is something we all want to know about, but it is still taboo to publicly
talk about in the US, UK, India, etc. I notice other posts mentioning
developing a porn site, or adult dating site, but those seem like low hanging,
1-off sales. By building a brand, you can generate a higher customer LTV. If
the owner of sex.com can afford to pay $13 million, he should be able to
afford several million to develop expert content, products, and a long term
business.

To give you insight in the value of creating a product company, look at Bill
Phillips who acquired EAS in 1996, and solid it for $160 million in 1999.
<http://www.ergogenics.org/231.html>

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bbuffone
I would re-open the craigslist.com "Adult" section.

~~~
klbarry
Actually, that's a great idea - making a version of this at sex.com, with ads,
could be amazingly lucrative.

~~~
iwwr
But don't base it from the US.

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staticshock
_The reason he doesn’t simply jump into the lucrative online porn industry?
Because such an endeavor would close the door on other, more mainstream
options, narrow down his exit possibilities – such as selling to a public
company – and limit the ability to take the business public in the future,
Jeff says._

I've noticed recently that most porn businesses are, in fact, private. The
TechCrunch article alludes to this as obvious, but to me it is not. What would
be the obstacles to taking a porn business public?

~~~
jacquesm
> What would be the obstacles to taking a porn business public?

Nothing, really:

<http://www.forbes.com/forbes/1999/0614/6312214a.html>

~~~
neworbit
I don't think you're likely to contest that 1999 was an easier time for IPOs.

Private Media and Playboy are both public. And unprofitable. And not
especially worth all that much these days; you'd have a hard time getting a
"real" IPO done even at Playboy's 180M market cap, let alone Private's 20M
valuation.

~~~
jacquesm
The question was 'obstacles in the way of taking a porn company public', as
far as I know there are none (legal or reporting wise).

I don't know why a porn company going public would be any less 'real' than any
other company.

1999 was an easier time for IPOs but not an easier time to make money online.
Don't mistake the money that was pumped in to the market for turnover, there
are many more people making cold hard cash online now than there ever were in
1999.

The one problem with porn as a business is that the number of potential exits
is very limited, another problem is that the market is very fragmented which
will likely limit the size of the players.

~~~
neworbit
Oh, as regards real, I mean dollar volume. You won't get Goldman to underwrite
an IPO for such a small valuation. You could certainly do a shell merger or
bulletin board/pink sheet listing.

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mattblalock
The owner's no dummie, but dang, maybe a little more planning?

How about they just buy my company (or hell, hire me), rebrand to sex.com,
advertise mainstream utilizing a real ad agency, and easily turn in 20-30
million over the next 3 years.

~~~
puredemo
Your domain name seems extremely sub-par for how high quality your site is.

I messed around for a few minutes and came up with:

    
    
      funtickle.com
      meowsex.com
    

Not sure if those are any better, but just wanted to see what was out there.
;)

~~~
mattblalock
It is one of my biggest weaknesses, but I figured once I'd proven it possible
with whatever domain, I could search out another one. It's in my plan for this
year, begin investigating new domains... neither of those seem very fitting,
but thanks for considering it!

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puredemo
I'd go with a daily blog style page, something like "Today's Big Thing," but
sex-related. Fresh daily content guarantees you a recurring audience and makes
it so you potentially only need one employee, the editor.

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levigross
1\. Open up a website for students. Student EXchange = sex.com 2\. Stack
EXchange can get a shorter name or use them as a short URL.

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elliottkember
Wait until the next stupid bubble and sell it for a profit. Easy money.

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mattblalock
If I had 125k more visitors a day, I'd make around $272,100 a day.

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404error
How about anonymous postings of sex encounters/sex fantasies?

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rorrr
How can you possibly go bankrupt with a domain name like that?

You would have to hire a very expensive team and completely mismanage your
funds.

It's a goldmine. You're pretty much guaranteed to get traffic.

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MoreMoschops
The last time I paid for sex it only cost me dinner and my self-respect. I bet
you get a really good time for $13 Million :p

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iwwr
<http://anything.com/>

<http://can.com>

<http://happen.com/>

<http://on.com>

<http://the.com>

<http://internets.com>

~~~
Groxx
<http://theinternets.com>

* gasp __* someone bought The Internets! _All of them_! What'll we do?!

~~~
mattsidea
does anyone have any idea what i could use shag.me brought it a few years ago
when the .me come about but still dont have any idea what could be a good idea
for a site all ideas welcome,

thank you

matt

