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Wouldn't it make more sense to spend half of the money on traffic and half on content so you actually have a chance of recurring members?
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Absolutely. All the counter-points you make are good ones. But when you pose the question as a 'one or the other', I would still choose traffic. Perhaps I am approaching this from a different perspective. Im not viewing it as an existing affiliate program with existing webmasters, other sites, etc. Im viewing it from a purely 'start from scratch' view.