Does PPS really work?
 

I posted my analysis on another thread...just wanted to start a new thread since that started to shift off of the original topic.

So the question and the discussion is, Does PPS really work?

See for yourself and lets discuss.

JasonandAlex.com Program Analysis

very nice.. I can't wait to see the replies and responses both for and against these numbers...

Hey I just looked at the stock bonus program and its kinda cool, nice idea.

You own a program so you must know but 40% trial conversion is high for most programs. 33% is closer in my experience.

Also is your math off? 100 trials a day at 3.95 = $339.70 is that minus processor fees or something?

Nothing fro chargbacks and refunds? Also where is the upsales and mailing revenue? Nothing for email collecting on the tour? dropped cookies or bookmarkers returning? type ins? 50% of your sales are non affiliate so double the revenue right?

Yeah,

What this proves, yet again, is that programs cannot afford to give out such large pps amounts. Unless they either are using it as a loss leader to get more affiliates and then will reduce the payout later or they shave and the actual pps amount is closer to the $20.

Not to be offensive but that spreadsheet is very poorly done. It doesn't include a number of apparent issues with running a program. The biggest and most obvious is the lack of processing fees, chargebacks, refunds, and overhead expenses.

Also, you didn't account for other additional revenue associated with running a program, including www sales, other non referred sales, members upgrades, emailing opportunities, etc...

PPS works!! :) Its all about numbers and running an ACCURATE spreadsheet and hitting all your controllables.

typically what percentage of surfers keep a pre check cross sell these days?

the god speaks

i've heard that's like $25%, but cross sales are slowly dying I think...

knowing nothing about pps.. i would assume it can work.. but it would be a gamble.. i mean, u pay 35bux off the start and u "hope" to squeeze more from the surfer..

Don't really know what spreadsheet you are looking at. Look again, its there. Read it before you blindly defend it. You just proved my point in why PPS users will remain PPS users until they realize they would rather hear the truth of the matter.

Yes they are. The prechecked crosssales will continue to as well.

All things being the same Marc, post a business platform spreadsheet here that defends it. I'd love to see it.

Yes that is minus processing fees. It states it on my sheet : ))

Upsales and mailings...I left those out intentionally.....That is quite a bit of upsells and mailing dollars you need to make for someone who pays 35.00 PS....LOL

Let me see your spreadsheet Marc : ))

It is a lot of additional revenue needed for even the 30.00 PS program just to break even.

40.00 PS.....forget it.

Don't forget this is with 40% trial conversions and 60% of members rebilling month after month. I don't care how good of a salesman you are, there is no way it can be done.....numbers never lie and never will.

Trial $2.95
Recurring $39.95
Ratio 30%
Avg Months 3
Gross $38.91
Proc. Fee $5.84 (15%)
Refunds $3.89 (10%)
Net $29.18

Doesn't work w/o member upsells, exits, emails, etc.. that's where all the $ is made, obviously. A good site can net about $10 per join before administrative expenses imo..

:bowdown :bowdown

hahahahahaha. This is the same Alex who was going to come out with a PPS model but could never figure it out. Now he is fishing for help.

Funny, that should tell you something. It can't be figured out. Not for those $40 per sign up programs. We never said we would come out with a PPS program within our program. We know we can't get it to work for anything over $20, or if the price of subscription or the rebill was to raise with economy or inflation, yeah, then we could pay more proportionally, but now we are just talking about rev-share then, aren't we?

Think of it this way:

Would we pay $20 PPS? Hell yes. Would that cause us to indirectly SCREW the affiliate? HELL YES.. Why you ask? We pay the same (almost) for the rev share, but now we are going to keep all of his rebills? Makes sense if we wanted to, of if the affiliate requested it, and we would be happy to set that up for you if you asked.

On a final note, I think you have Alex confused with someone else. This Alex has much different thought on PPS.

So Marc De and the others who have made 100's of millions must be living in a fog and you know best.

Good thread and a long time coming.

First you get me confused with another Alex....next you are trying to bait me about my assumptions of what other companies are doing.

There are the numbers. Make your own educated guess. I'm just trying to be informative. Nothing more, nothing less.

Go fishing somewhere else : ))

I won't post my spreadsheet, sorry :) But I'll do some quick math for ya... down and dirty 3rd grade stuff here to show!

100 sign ups
$4.95 trial
$39.95 monthly
$1.00 x sell
$39.95 monthly x sell
25% x sell opts

100 sign ups * $4.95 = $495
25 x sell opts * $1.00 = $25
35% trials convert = 35 * $39.95 = $1398.25
35% x sell convert = 8 * $39.95 = $319.60
Membership Income in 3 days = $2237.85 gross
Processing Fees, Refunds, C/Bs, Revokes = 20% = $1790.28 net

Payout $35 * 100 = $3500

Additional Income (mailing, upsells, www sales, consoles) of 20% = $700 net
Total Income in 3 days = $2490.28

That leaves a $1009.72 defecit from 3 days of activity, after averaging out 10 months of additional recurring income from those 100 members will far outweigh that $1010 defecit and retrun a gross profit. This is where volume comes in order to handle overhead and product costs which should not be very significant.

If I made minor mathematical errors, please forgive me, I didn't review the post! This again is VERY simple and the spreadsheet that ARS operates off is very in depth and detailed but you can see how you set up your minimum performance variables on controllables.

Not saying I know best. I'm saying I'm smart enough to know what works. It's simple math. I'm glad they 100's of millions of dollars. It shows they have the capacity to think and create things. It is a very nice characteristic to have.

Just prove me wrong, thats all I was asking. And please, stop with the whole "oh yeah, he has a really nice shiney car and big house". Show me in some sort of mathmatical spreadsheet. Break it all down. Or don't.

Cheers

Alex, this was a previous reply from you from another thread about volume. If you dont understand this, you will not understand PPS at all. You say, its still $5 net per sale, no matter how many sales per day. Do you know fix and variable costs? Do you think BMW would make money if they sell 1000 cars a year? No, they have to sell some amount to only break even and then they start making profit. Its the same with PPS, you have some fix costs, like employees, content, offices, etc. You need some number of sales to break even, after that you make profit. 100 sales above break even sales means $500 net(if we assume, you make $5 net per sale). From those $500 you dont pay any fix costs, they are paid already, so only variable costs. But they are not that high. If you make 1000 sales above the break even sales are, you make $5000 net, etc...Every biz is about volume, because only fix costs are the real problem.

and you forgot that out of 100 sales, there wont be 100 trials, but maybe 80 trials and 80 full month or even longer. So the profit after 3 days would be higher than $2500

Thanks for posting. It shows class. So here are some more questions. I won't argue or disect your math, cause for the sake of the matter, we will call a spade a spade for now. You are at a $1,000 deficit right there, and you plan on making that up where? Rebills? Better have a ton of them, way more than 35%. bandwidth, hosting, galleries, marketing material, banking fees, rent, computer software and hardware, office supplies, bookkeeping, tax preperations, legal work, 2257 compliance, SALARIES, designers, postage, telephone bills, gas and electric, internet provider, marketing, trade shows, travel, programmers, must I go on? Oh yeah, ONE more, TAXES. You are saying you cover all that and MORE with some rebills.....please.

PS....all of the above you consider to be "INSIGNIFICANT". Wow, now I am even more curious. Wonder Why.

andrej - you are absolutely correct! The spreadsheet that I use accounts for many many other factors that I haven't proposed here, like checks retain longer, break even points based upon other variable and fixed expenses, etc... I feel one of the reasons ARS has been successful is this very spreadsheet which gives out business a guideline to operate from. Besides having the spreadsheet, we execute very well! :) If that wasn't the case I would quickly post it for everyones review.

Maybes and what ifs don't work with mathmatics : ))

Geesh there are so many I forgot these.....Content Costs, Editing, Encoding, Productions supplies and Equipment....

I'm asking for someone to show me. Please don't confuse that with having someone "tell me" how the model they think could work.

On that note, not trying to pick a fight with anyone, just want to have an open discussion on it.

READ the spread sheet it is GREEN for $35 PPS after a few months. So suck it up to generate volume and in a year you are making huge bank. Did I read it wrong or is that the simple truth?

iBanker take a peak and see for yourself.

iBanker - your point are EASILY refuted.

Yes rebills are the answer. See you generated NET from the processors $1700 in change from the trial to fulls (which are approx 35% of initial trials) The good news is that members average 1+ month overall retention... that means that there are over 65% of rebills to go (I'm not sure you understand that but I'll lay it out).

If you get 25% x sells @ $1 trial, if you have $4.95 trial and if both the regular initial and x sell opt ins average 1 month memberships you have

25% of $41 ($39.95 * 1.0 month average + initial $1.00) or $10.25
$45 ($4.95 initial trial + 1.0 month average * $39.95)
Total member value = $55.25
20% processing, refunds, c/bs, revokes = 80% of $55.25 = $44.20

If you payout $35 per trial you're profiting $9.20 PLUS your additional income of $7.00 per member or $16.20.

So yes, $16.20 per member will cover hosting, content, employees, rent, etc... When I say insignificant, your overhead should be 10% or less of your income (and the higher the volume, the lower the %) Also, don't forget that you only pay TAXES on your PROFIT, not your gross revenue!

These numbers are PURELY hypothetical and in no way indicate how ARS performs. Each and every program's performance varies. This simple shows mathematically and REALISTICALLY that PPS programs do profit! :)

That includes NONE of our over head, and we have all of the overhead as outlines above, it adds to to WAY more than that. We are being audited right now at OUR request for our filing with the US Securities and Exchange Commission. Be happy to give you a link to all of them when they are finished in 2-3 weeks.

iBanker - just an FYI these numbers are VERY VERY realistic! This is not some pie in the sky what if's. In fact, its easy to perform ABOVE the assumed variables.

now this thread is what gfy should be about, not britney spears and would you hit it threads

Volume over time is what makes the PPS work... I get a check every month from a Revshare site that I quit promoting in 1999 and there is still 5 or 6 rebills every month for which I recieve $17.97 each... So for those 5 or 6 joins, I have recieved somewhere in the neighborhood of $1078.20+ and counting each over the last 5 or so years... I'm sure that the program owners would have loved to give me just $35 on those...

Now I realize their were many others that did not last that long, but the fact that most all of major successful programs operate under this model, I have to believe it is much more likely that the longterm rebills outweigh the shortterm cancels...

Some companies have a monthly rebilling list of 30k members plus.


There are many factors in this discussion which have been left out.

bigdog - EXACTLY! I wish there were more informative, intelligent threads like this on ALL the message boards. Its nice to be mentally stimulated from time to time :)

I agree but we all know that threads like this are a anomoly around here....LOL

Yeah, well pay that with the unmentioned sales. Even a total affiliate prgram would have type in sales. If you get enought traffic for a 100 trials you are going to have sales with out a referral code.

Lightspeed is a great program and they pay me $30.66 per sale according to my stats remote. That is a 60% split. But I get nothing on upsales, crosssales, pop ups (most have my code) or emails. $35 on a PPS is certainly doable for them as I assume they are making bank now. Would they do move volume at the $35 PPS model and reduce the load on fixed costs? Maybe. Not dogging lightspeed, just using them as an example of someone who is able to do a $35 PPS and still make bank.

EXACTLY Wizzo - imagine if you were doing, lets say, 100,000 members / mo for a couple years. Now imagine that 2% of those folks are still billing from 24 months ago. That is 2,000 * $39.95 or roughly $80,000 :) That is from 1 month initial sign ups, 2 years ago! There is absolutely NO DOUBT that PPS work, what separates the men from the boys are those that can EXECUTE :) Fortunately that is a small list...

I was waiting a very long time for such a thread.
Thanks for bringing it up.

also what about members that try to cancel, but you offer them a lower priced option on the cancel form and they take it

Then add a few upsales, email offers, and Xsales and I think we might be on to something.... :cool-smil

Then get some sales from people coming back after a month or 2 and wham you have the thread titled "Ferrari or Porsche?"

there are many factors that are not put into weight.....
one is of course the volume that is mentioned above... but another one is the signups that no webmaster gets a credit for...
the no ref, no cookie, no whatever, type in kind of surfer that signs up...

you guys should know that when a surfer sees a cool ad for a site that interests him, he does not nec. click on the ad to give you guys a credit...
type in the url and there you go... a signup that means 100% profit to the program... and I can tell you from my own experiences with my own sites... you get a lot of those signups!

Very good point Wizzo. We have been collecting on revshares like SEG's site sweetloads for close to 4 years now.

This spreadsheet isn't to indict anyone, it is merely an internal tool with variables I came up with that can make one think about the PPS model and what would it take to make it profitable. As you or anyone can see, in order to be profitable, you can determine where additional dollars need to come from and/or ask yourself as a program owner, how can I increase trial conversions and retention numbers.

I mentioned these twice but notice how the program owners never seem to give a number for those? This is not shaving, it is just life. People look and shop and come back.

Trax - that is in my calculations called additional income, I call it www sales. As to other non referred sales ARS runs from 99 to 100% referral rate on referred clicks! If you have a technically sound system you should be VERY close to 100% :) I say that with 100% honesty and truth - in fact, today we're running at 99.5% That is pretty damn impressive!