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Join Our Research Team at DMA 2014
Oct 20, 2003
Case Study

How Friendfinder Network Reached 1 Million Paid Subscribers by Breaking the Rules

SUMMARY: If you're interested in how to sell online subscriptions, you'll enjoy learning how FriendFinder beats big-name competitors with a sort of divide-and-conquer strategy. Instead of building one big brand, the Network has launched 16 niche sites - and plans to launch an additional site every three months from now on.
CHALLENGE

Back in 1996, when it launched its first paid subscription-based site, Friendfinder Network Inc. was ahead of its time. Few content services existed outside of the "adult" and high-tech markets.

These days, however, the marketplace is crowded with more-famous competitors, including Match.com, Lycos' Matchmaker, Yahoo Personals, and Spring Street Network's hip personals for Nerve.com, Salon.com and TheOnion.com.

Plus, business challenges are increasing:

- Outbound email campaigns containing the sorts of wording a personals site might include are harder to get past filters

- Everyone's fighting for the same top affiliate and performance-based advertising relationships to drive traffic

- Consumers switch Visa and Mastercards more quickly than ever (often as much as every six months), which cuts auto- renew accounts.

How can a dating site without a famous brand name survive? And, with a reported payroll of more than 150 staff salaries to meet, how can it possibly be profitable?

CAMPAIGN

To wrest subscribers away from the throng of competitors, Friendfinder Network focuses on three buck-the-trend strategies:

-> Strategy #1: Building a niche site network

The majority of e-dating sites focus on being as big and broad as possible, so new visitors will find at least a few other members they'd really like to connect with.

Friendfinder Network went in the opposite direction. Instead of focusing all of their resources on one broad site, over time they launched a total of 16 niche sites, including the initial site FriendFinder.com, as well as:

AdultFriendFinder.com
Alt.com
Amigos.com
AsiaFriendFinder.com
BigChurch.com
Dine.com
FilipinoFriendFinder.com
FrenchFriendFinder.com
GermanFriendFinder.com
GradFinder.com
IndianFriendFinder.com
JewishFriendFinder.com
Korean FriendFinder.com
NiceCards.com
NudeCards.com
OutPersonals.com
Passion.com
SeniorFriendFinder.com
ShareRent.com

The sites were all built using the same premise that most dating sites use -- the home pages featured photos of happy people and a search form to start looking immediately. Then visitors are converted into free registered members who are allowed to post a limited profile and send a single email per day to any other member.

Next, registered members are prompted to return to the site frequently - and hopefully convert into paying subscribers - with a daily email featuring new members they might be interested in meeting.

However, the Network never assumed that the pricing and term length best for one niche would work across all markets. They tested a wide variety of offers on each site, including two levels of membership and a choice of four term lengths (one, three, six and 12-months) all with auto-renewal. Term prices ranged from $19-139.

-> Strategy #2: Focus on (smaller) affiliate marketing

From nearly the very start, Friendfinder's campaigns have been completely pay-for-performance. Of course back then, most sites wouldn't run ads without a hefty CPM, so the marketing team focused on building an affiliate network instead.

Later, as the rest of the subscription world began to focus on affiliate marketing, Friendfinder again continued to buck the trend. Instead of lining up pay-for-performance deals with portals, other subscription sites, and name-brand content sites as everyone else was doing, Friendfinder focused on the little guys -- making deals with as many independent individuals as possible.

The Network's marketers tested a variety of pay-out options to discover what formula would motivate more of these affiliates to join the program, including options such as :

- A large percent (35-100% depending on the site) of a new subscriber's first payment even if the subscriber purchased a whole year up front.

- A lower (often $1-2) per-head bounty for each new free member. (These bounties were often higher for female members to help the sites avoid the male-overload that plagued the industry.)

- A flat bounty payment of perhaps $25 per subscription, no matter what term the subscriber chose.

The Network hired five full-time staff members for affiliate support. Some focus on getting new members started, and some on relationships with top-producing affiliates.

Although new affiliates get a standard auto-responder welcome letter and regular HTML newsletter (link to sample below), they are also personally welcomed by a staff member who checks out their site and gives them a few specific tips via email within 24 hours of sign-up.

-> Strategy #3: Shutting down non-member promotional email

Aware of the dangers of being seen as a spammer especially when you don't control every aspect of promotional list selection, Friendfinder has ceased renting lists and has told affiliates it's against the rules to send mass broadcasts.

Instead, the Network asks affiliates to rely on Web-based marketing, especially search engine optimization.

The Network also focuses on making each niche site richer in content than the average dating site. Members are encouraged to write and post their own articles, join bulletin board discussion lists and get involved in other "community" services.

The Network's marketers hoped this extra content would not only keep members involved beyond their initial personal search, but would also increase traffic through search engine optimization.



RESULTS

Despite its relatively low profile, FriendFinder is holding its own. By ContentBiz estimates, the Company averages just under 1.1 million paid subscribers.* And executives claim the Company is profitable. In fact so much so, that they plan to roll out another niche site every three months for the foreseeable future, says Friendfinder Network President Mike Zhang.

More data:

- While he declined to name specific subscription lengths, Zhang.noted that subscribers to sites such as SeniorFriendFinder and alt.com sign up for longer terms and are more likely to renew their subscription than participants on the broader FriendFinder.com site. "The more niche the site, the longer users stay," he says.

- In fact, some niches, including the alt.com site aimed at alternative lifestyles, offers only longer terms. "One site may not offer a six-month term, while the other has all four choices," Zhang says. "We've tested everything...and we found out that niche sites respond to these offers differently."

- On average, 10% of registered members convert to paid subscriptions.

- 50% percent of new visitors who convert to paid do so within the first 24 hours of visiting a Friendfinder site.

- The highest conversion rate comes from word-of-mouth recommendations: roughly 30% to 40% of visitors referred to the site by friends end up becoming paid subscribers.

- 500,000 affiliates have joined the Network's program, but just as other marketers have found, a tiny percent produce most of the sales. In Friendfinder's case 2% of affiliates produce 35% of affiliate sales.

- The Company claims to pay roughly $500,000 per month in affiliate commissions.

- 65% of affiliates choose the 100% first-payment payout option, while 30% choose the payment-per-free-member option.

Only 5% chose the $25 flat payment. "We tried the flat payment because everybody else was doing it, but now we know it isn't as attractive, because it isn't 100%," Zhang says.

- The extra bounty for female sign-ups has helped even out the male/female ratio. Although FriendFinder.com's registered user base used to include 70% men and 30% women, the site's ratio is now about 60/40 men to women.

- According to Zhang, the no-promotional-email rule, which came into effect earlier this year, has not caused any sort of sales blip up or down.

- Because of the emphasis on search engine optimization, Friendfinder Network has had bad luck with rapidly changing marketing promotions.

For example, when the company created some special promotions for Valentine's Day, few of the affiliates cooperated. Zhang believes that this is because it was just too disruptive to their business model; the sites would have had to stop and re-engineer site copy to drive specialized traffic, something they weren't willing to do for a short-term campaign.

- Friendfinder Network's customers have a lifetime value similar to other paid sites; across the network, subscribers stay on about six months on average. That turnover rate may prove to be very costly - or even unprofitable- for sectors of the network where the company is making 100% first-time affiliate payouts.

* Our 1.1 million figure was estimated by multiplying the 16 sites' total average daily new free registered member rate by the 10% conversion rate and assuming a six-month lifetime.

Useful links related to this article:

Samples of Friendfinder's daily email to registered members, affiliate newsletter, and pre-autorenew note:
http://www.marketingsherpa.com/ff/ad.html


Friendfinder affiliate program:
http://friendfinder.com/affiliates/
See Also:

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