I doubt they're losing money. Porn affiliate links make big bucks. Don't ask me how (who pays for anything on the internet?) but they do.

I used to regularly speak with some people at a financial company that processes most of the payments from porn sites to their affiliates. After Neteller (the massive processor of financial transactions to/from gambling sites) withdrew from the US market due to the UIGEA, the company I knew took a good chunk of their business and was probably the industry's largest third party payment processor, easily handling 10-20% of all transactions. But when the lawsuits started flying at other gaming companies, they dropped that line of business instantly because they didn't want to lose their US porn affiliate processing business. It was considerably larger.

Much of the reason is that porn sites have high retention, high prices ($35-$40/mo is not uncommon) and pay their affiliates ridiculous rev share like 80% for the large ones. So an affiliate who refers a successful customer could easily make $20-$30/mo for a year or two off him. That's just a tremendous amount of cash.

Until I was told that, I believed gambling would rule the internet.

Agreed. The revenue share in gambling and porn sites is just phenomenal.

I used to send some traffic to a Bingo website, and I think you got £25 per signup, but then 50% of all future losses for the lifetime of that player. After only a couple of months that revenue share (%loss) was making up hundreds of £/month for doing nothing. I'm sure it's pretty similar for paid porn sites.

They'd have to be doing something seriously wrong to be losing money in that sector.

Yeah, I've done a LOT of poker affiliate marketing. There's tremendous money there.

Interestingly though gambling sites still only pay, at best, about half the rev share I've heard porn sites pay their top affiliates. I was one of a few poker sites' largest (generating them hundreds of thousands in rev monthly) and got somewhere between 35 and 40 percent typically. From what I heard from my friends in the financial industry, in porn you can get 85% if you're large enough.

It's baffling to me that a company that serves up web video can make serious profits even while giving 85% of their revenue away.

So you had monthly revenues in the tens of thousands? Why aren't you still doing this (or are you)?

I did and I am, but revenues dropped a lot after two events. One was Party Poker spinning their affiliates off of the network (long, boring story, but you can probably Google around about Eurobet or Empire Poker and find out more if you care to). I managed to rebuild almost back to where I was, which was no small task at all, but then the other happened, which was the UIGEA forcing Party Poker out of the American market.

Now my revenues and margins are considerably smaller than they were back then. I could maybe, with full time effort over a long period, have rebuilt, but I didn't bother because of the general instability of the industry. I'll pass the opportunity to get on a soap box about our government's stupidity here, but suffice it to say the Bush DoJ (and maybe Obama's too, not sure yet) made the business seem a less worthwhile investment than something not in such a legal minefield.

I was making fun of the analyst who claims to know YouTube is losing massive amounts of money but actually doesn't have any real facts.

I do bet YouPorn has trouble converting ads though since they give everything away and have huge foreign traffic (80+ percent is foreign). And as an Alexa top #100 site the expense does have to be massive.

There was a great article about YouPorn a while back that talked some numbers:

http://www.portfolio.com/culture-lifestyle/culture-inc/arts/...

They tried to sell to Vivid, but Vivid balked because of legalities (hard to comply with the law with user generated porn). Back then they were doing $120k a month in advertising.