Penthouse Buys Adult FriendFinder - Time To Make Some Real Money
Penthouse Media Group Inc., publisher of the well-known men’s publication, Penthouse Magazine, has acquired Various, Inc. which owns the leading adult meeting site, Adult FriendFinder, for $500 million in cash and securities.
Was this a good deal for Penthouse? Without knowing exactly what Various, Inc’s profits are - its projected 2007 revenues are $340 million - nor Penthouse’s expected return on investment (ROI) and timeframe for achieving that ROI… ONE simple calculation reveals that the FriendFinder network presents an extraordinary opportunity.
Here are the key statistics from Penthouse’s press release…
– The FriendFinder network has around 260 million free members. Pretty impressive, huh?
– The paid members number 1.2 million. Not bad…
For simplicity’s sake, let’s assume that each of the paid members is also a free member. What that means is that Various has been able to convert a whopping… 0.46% of free members into paid members! If we consider paid members to be additional to free members, the conversion rate is even lower.
So if the average conversion rate of 0.46% translates into $340 million in revenues overall… what would increasing that conversion rate to 1% mean? I don’t have enough data to know, but you can be sure that it would have a MASSIVE impact on profits.
Make no mistake. Various, Inc. appears to be a highly successful company. But with just a 0.46% conversion rate, it has been leaving a lot of money on the table. If Penthouse does nothing more than focus on increasing conversion rates across all the Various, Inc. media properties… it will have made a very good acquisition indeed.
Of course, whether Penthouse has that intention or capability, is a completely different story…
Tags: adult friendfinder, friendfinder network, inc., penthouse, various