Drake

Is this the result of mismanagement or changes in the market (ie. losing marketshare to free social network sites)? If it's the latter and AFF banners are still flying on just about ever site online, what does this say about the current and future prospects of other paid dating sites?

I don't understand how a popular dating site like that can be losing money. Their bandwidth costs are minimal, they don't produce nor buy any content. All other overhead is standard stuff - customer service, programming, maintenance. AFF just provides a forum for people to interact. How do you lose money on that? If the rumors are true that AFF is controlled by ex-Ibill execs, it would make perfect sense since they're versed at running enormously successful companies into the ground.

I'm completely spooked about 2009. It's gearing up to be a horrendous year.

cosis

yeah only guys look for sex on myspace

Miguel T

Dont care... I dont promote them.

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Hank_Heartland

It was the growth through acquisition model that got them in over their heads

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The Adult Broker

I will sell all your open inventory ad space and make your money back for you

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SmokeyTheBear

affiliates will leave in droves and thus making their stats drop like a rock making them look even worse than they already do.

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cosis

65pps still sounds pretty good, 130 is crazy

detoxed

I think Lars convinced them to blow too much money

DWB

I could not have said it better. Well put.

It will be a glorious day to watch AFF close their doors. From Zango to stolen content to funding ALL the illegal tube sites, allow me to be the first to say FUCK THEM, I hope they crash and burn.

Of course someone will take their place, but they will fail sooner or later as well.

PXN

I don't think they want to do an IPO in a recession, but they have to since they already default on their debt as mention in the article. In any case I don't think it matters, doing an IPO will only buy them time and they'll most likey file for bankrupt later anyway. So if they did an IPO I would very much like to short their stock.

TarPy

WHOA WHOA WHOA.... did anyone actually read that article?

The unstructured debt is all a result of how Penthouse funded the various acquisition. It really doesn't say that AFF is LOSING MONEY... it says they have a cashflow issue.


Basically, Penthouse was broke, took a huuuuuuuge loan to buy various, and fucked over their investers in the process. AFF and webcams still are throwing off cash, but not enough cash to fix how poorly Penthouse is doing, and all the debt penthouse brought on to buy various.

It's like penthouse bought a home, and now they can't pay the mortguage. Sure, they still feed themselves and have money left over, but not enough to pay off the loans they took out to move in..

Looks like by selling out, lars and andrew have condemned their employees and companies to be crushed under the mighty penthouse falling on them.

Typical poor merger... what's penthouse gain synergy wise from aff? what's aff's synergy with penthouse? poor pairing, mis-matched managment, and a desperation play to even try to buy various which was too big for their britches. And if the penthouse name would have brought substantial value to AFF, then the combination would create surplus value above it's selling price. However, no surplus value was created, and there was still all kinds of debt... bla bla bla


but for real... this bankruptcy has NOTHING to do with their pre-paid placements on Tube site, or AFF's business or business practices at all. It is basically penthouse's execs fucking up on a truly royal scale.

it also sounds like penthouse violated some loan terms which caused this long-term debt to move short term.

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Iron Fist

All true... however making it sound like the tubes had something to do with it just makes it SOUND SO MUCH BETTER!

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maxjohan

I will bid $500 on their picture scrapper to find hot girls.





And on top of that, I never got paid for running that sig deal
when lars were around.

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Donfoolio

I couldn't say it better

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Mutt

what i got out of that disclosure by Penthouse is that the entities to whom Penthouse owes the majority of that 400 plus million in debt to are Lars and Andrew. And they sound like they are pissed off and not willing to negotiate to change any terms. It would seem crazy to sell their company without doing more due diligence but when somebody is offering you 500 million for a company that is nowhere near worth that kind of money it affects your judgement.

If Penthouse defaults on its loans to the previous owners I wonder what happens.

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mynameisjim

Good post.

I think the tube angle most people are talking about though is that if AFF goes down, the prepaid ads go away. Not sure if someone else can step up and pay what AFF has been paying all this time. Only time will tell I guess.

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TarPy

incorrect. The 400 million was already PAID to lars and andrew, hence the $400 million in debt to other people... You have to raise the money to buy it, when they bought it, lars and andrew got paid. I forget who's $400 mill it is, but it sounded like more traditional banking lenders... who are in no position to be cutting people slack right now..

lars is probably off fishin, or driving his car.

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TarPy

there are other buys. Sure, any decrease in demand will affect price of those spots... but enough to break backs... I dunno

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AsianDivaGirlsWebDude

Since everyone is speculating and all - what about this scenario, which has nothing to do with Penthouse or Adult Friend Finder, or the impending AFF IPO...just a made for TV financial thriller script concept I have been toying with:

Two scamming companies, up to their chins in debt due to their shenanigans, conspire to cover up their dubious business practices by having one thieving entity supposedly buy the other out for a ridiculous sum (considering the insolvency of both companies), with the intent of hoodwinking suckers into thinking the company is worthy of investment, thus bailing them both out.

I know, such an idea is truly far-fetched. Next thing you know, people will suggest that money-laundering, or perhaps some other unsavory practices may have been afoot.

It would be a shame to see the funding of sites that steal content suddenly dry up...NOT!!!

ADG

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Antonio

relax, they aren't closing shop any time soon

cosis

i think a few of them can like fling although they may not want too

TarPy

you clearly can't read... maybe you can do math...


they are over 300 million short of their SHORT TERM LIABILITIES

that's 90 days or less

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Paul Markham

This is the most important post so far. Well said.

I would imagine who the money is owed to is important. Because it looks like the loan will not be paid, so what happens then?

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JTWilson

AFF isn't going anywhere. At least not any time soon.

OK, so Penthouse owes a lot of money and their long term debt has become short term debt. That is all any of us know. None of us know the terms of their loans. Hell, perhaps it is in the terms of their loan that they must file for an IPO if they default. Maybe if the IPO fails, the terms get renegotiated. Seems possible. Who knows? None of us.

Do you really think this is going to kill AFF? You think that FFN will run out of money and then just delete everything and 404 their sites? LOL. Do you think that the banks are going to just let their $400MM disappear into thin air? FFN has assets. Those assets are AFF, cams.com, and Penthouse. What they hell do you think is backing those loans?

Just like a mortgage, the loan is backed by an asset. If you can't pay your mortgage, the bank takes your house and tries to recoup their money. This doesn't mean that the assets are worth the loan amount, but they certainly have some value. In fact, their S1 says that AFF made a profit to the tune of $17MM in the first 9 months. After Q4 it might be as high as $22MM.

Worst case, the note holders take over the company, hire new management, run the company themselves, and maybe eventually sell it off. We know that no one in adult can afford AFF and certainly not in this climate, so I'd plan on seeing it around for quite some time.

KillerK

People seem to forget, Lars and Andrew didn't sell 100% of AFF to Penthouse, they sold a portion of the company.

pamon

funny... Penthouse was losing $$ left and right and bought iBill and tanked that. Then borrowed a crap load of $$ to buy AFF and now is tanking that.

stat on penthouse per wiki... An April 2002 New York Times article quoted Guccione as saying that Penthouse grossed $3.5 billion to $4 billion over the 30-year life of the company, with a net income of almost half a billion dollars

so guccione leaves the company in 03 and the company runs itself into debt and into forseeable BK.

With the turmoil in the markets and credit markets, there is "NO" way this IPO gets done. Auditors and SOXS auditors would have a field day going through the books.

let AFF burn..

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Paul Markham

Banks running a porn company, makes that script idea by ADG even juicier.

My take on this whole thing is that it proves traffic is not king, selling the traffic something is. And what ever you're selling it had better be worth the price and worth buying again if you want to stay in business. Selling somebody a faulty, low value and poor product makes them reluctant to buy again. No matter how many people you send to see that product.

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JTWilson

WTF are you talking about? They are selling plenty. Last time I checked, AFF had nearly 1MM users paying $19 a month, which equates to roughly $180MM in the first 9 months, with operating income of $17MM (dragged down by Penthouse's losses.) That interest and other expenses stems from Penthouse and most likely from that $414MM of debt. If Andrew and Lars didn't sell, guess how much of that $414MM of debt they would have.

Also, you can talk all you want about selling customers good products, but guess what. These are adult websites. This isn't Comcast or Sprint. It's a monthly, subscription based, adult website. Could you maybe give me a list of other adult entities that net $20-30MM a year?

You, and many others, need to start reading. If you did, you'd see that all those numbers don't include solely AFF.

JuiceMonkey

Why don't they triple it? Looks like they won't have to pay out anyways...

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Paul Markham

Where did you learn your business skills?

It's not just about how much you're selling, it's what the profits are after the sales that's important.

OK Penthouse funded the acquisition by taking out a loan, it happens in the business world. The idea is to take the company, then the profits from the company will repay the initial loan, usually increased profits. This did not happen so all the sales were not enough, or cost too much or the guys at the top skimmed off the profits. What ever is the reason it did not work.

So a top site selling a less than good product is good for you because this is porn. About as fucked up a theory as I've heard. Unless you can totally lock the customer into buying you will lose him with that approach.

Look around you and see what happens in the real world. Sponsors spending more and more on traffic to get less and less on sales. Because the buyer is a repeat buyer and he's not taking it any more.

And if you seriously think a free Tube site should be an alternative to a paysite you're screwed. If we can't give the customer more for his $30 than what a Tube site gives him we are in the wrong. And if the customer only needs something that costs 2 cents to satisfy him, why are you charging him $30 in the first place?

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Paul Markham

That's a risk affiliates take when they go for those mega pay outs in todays market. A lot of people think porn and the Internet are "get rich quick" businesses. Reality is a bitch. LOL

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Kron

celebrate?

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JTWilson

The profits after the sales for AFF look to be in the $20MM+ range, so I don't see what you're getting at. Sure, their margins aren't the best. Yours are probably much better. But let's think which is better. Making $2M with 90% margins, or making $20MM with 10% margins?

Let's also not forget what we are talking about here. Sex dating sites are all misleading. There is bullshit going on with all of them. 10:1 male to female ratio with tons of bullshit pics and deceptive things. Of course retention isn't going to be the best. But here is where the trade-off lies. You can either become 100% legit and get WAY fewer initial joins with higher retention, or you can be like all the sex dating sites and do TONS of initial joins with lower retention. I'm pretty sure I'd take the latter, because I think the amount of initial joins is greater than the rebills would be with lower sales volume.

And yes, I'm totally OK with this because I think I'm making more money like this. I don't care if it's because of rebills, cross sales, high volume/low rebill, or whatever. Dollars and cents. That's all it is.

And why do you always bring up tubes? What do tubes have to do with this?

Antonio

AFF will still be up and running by the end of April 2009 (that's ~ 120 days from now), wanna bet on it?

Paul Markham

Is it any wonder we are having problems in this industry with people like this in it? Still going down the same old road that does not work and not seeing the road that does.

The consumer is not an infinite market. It's a restricted and with limits. When one get's pissed off buying something that did not live up to what he was told, he tries it again and when it still does not live up to what he was told he stops buying.

If you can't link the way this business has dealt with it's consumers and Tubes you're not thinking straight. The consumer is not there for you to do with as you please.

The profits don't pay the debts, so there are no profits.

Antonio maybe you're right. Someone might pick it up for a song, they might go Chapter 11 and wipe the debts, they might sell it to themselves for $1 and keep going the same route. I agree they will still be around. But how long will the consumer keep buying and what will be the shape of the future business is a big question. How long will they carry on supporting practices that don't make a profit or a very small one?

The future is going to be tough, companies that deliver can survive, companies that don't are going to find it tough. Because people will be looking closer and closer at what they buy.

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Johny Traffic

I'd just like to point out this small phrase.

For the americans amoungst you who are selling to europe and not registered for vat and paying it over on your european sales. You are going to have an interesting few years.

This is going to be huge over the next couple of years with yanks back paying vat they didn't pay over.

Oh and before you declare how EU countries can't enforce it, they can, they do, they are and they are going to target people selling into the EU without paying over the VAT, this is going to be the big target for EU tax collection agencies over the next few years.

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Nicky

I'd carry on as usual.

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gooddomains

open a tube site

Slappin Fish

Thank you.

I've been saying this in the last few threads but got tired of repeating myself.

Leverage Buyouts gone wrong can fuck up just about any company. Prepaid ads are a drop in the ocean compared to servicing that Penthouse debt.

TheDA

Exactly.

here it is again from the Various perspective

"Various neglected to collect taxes in the EU. The company says:

After our acquisition of Various, we became aware that Various and its subsidiaries had not collected VAT from subscribers in the European Union nor had Various remitted VAT to the tax jurisdictions requiring it. We have since registered with the tax authorities of the applicable jurisdictions and have begun collecting VAT from our subscribers in the European Union and remitting it as required. We have initiated discussions with most tax authorities in the European Union jurisdictions to attempt to resolve liabilities related to Various' past failure to collect and remit VAT, and have now resolved such prior liabilities in several jurisdictions on favorable terms, but there can be no assurance that we will resolve or reach a favorable resolution in every jurisdiction. If we are unable to reach a favorable resolution with a jurisdiction, the terms of such resolution could adversely affect our financial condition or results of operations."

camgirlshide

I don' promote any sponsors who allow illegal tube sites to display their ads/pay illegal tube sites.
I hope others do the same.
Furthermore, I hope any sponsor who sees an opportunity to get any currently running ad on an illegal tube site replaced with their own keeps this statement in mind.

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Gnus

I thought this statement was funny coming from a guy that promotes SexSearch in his sig. Sexsearch supported zango.

Gary

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Dirty D

I hope they do go public so I can short the stock big time.

Buy Naked Puts all day long

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br4sco

i stoped sending traffic there after i seen their stats script messing up on certin days and i noticed no more sales then after that as well .

MaDalton

thank you, i was going to quote that too cause no one mentioned that so far. and it's a serious issue that i would say 99% of all others here do not care about either.

but if anyone wants to do some math: VAT is about 20% in most european countries

lets say 30% of their subscribers are from europe - thats about 50 million $ per year, 20% are 10 million $ they should have paid. now go back 5 years and you have 50 million $ in tax debts

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SGx

all this vat thing is something i can't get

when a european company is selling to an american company, there s no vat, and vice verca

when a european customer buys from amazon us, then he has to pay VAT to get what he bought in his country post office (because of the customs)
but if the same customer buys a virtual service, then it would be to the selling company to pay that VAT ? why ? it should be the customer which should pay the vat, like when he is buying physical stuff...no ?

also, i m not sure it would go 5 years back, because vat stuff has been moving a lot lately, but it was not working that same way even 3 years ago

ThumbLord

nothing I guess will happen, lets see in 120 days from now shall we?

Manowar

i dont think anything will come of this

Hazlewood

there are bigger buyer in the business than aff my friend

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Hank_Heartland

Dude, you spent too much time at Penn State, haha...I said the same thing in 14 words or less

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