[mediamemo.allthingsd.com]- Here’s a question that’s been puzzling me and some other folks for the past few days: What does a money-losing porn and social-networking company do with a $95,000 car?

www.adultfyi.com/read.php?ID=32006

The answer: It gives it away.

Or at least, that’s what Adult FriendFinder was planning on doing with the Ferrari it bought from founder Andrew Conru. The car was supposed to be awarded to one of the company’s many “affiliates”–tens of thousands of Web sites that refer traffic to Adult FriendFinder for a fee–that won a 2006 “top growth” contest.

Thanks to MediaMemo reader Tommy New for (not so gently) pointing out the contest to me (don’t click on this link unless you’re up for rough language as you read about the online porn business). Another MediaMemo reader tells me that the reason that the company still owns the Ferrari, which was originally valued at $125,000, is that the Web site owner who won the contest took cash instead of the car.

I’m still waiting to hear back from Andrew Conru or Adult FriendFinders’ current management, which just registered the company for a $460 million IPO, to confirm this. But those answers make plenty of sense to me. Affiliates are a key part of the company’s business: It paid out $46.4 million to some 110,000 participants during the first nine months of 2008, according to the company’s prospecttus. That’s nearly 20 percent of its net revenue during that period.

Those payouts are crucial, because Adult FriendFinder’s subscribers, who make up the bulk of its revenues, are always on their way out: Monthly churn hovers around the 20 percent mark. Adult FriendFinder says affiliates help generate about 44 percent of Adult FriendFinder’s business.

Thus, contests and promotions to entice affiliates are standard operating practice at Adult FriendFinder. This month’s contest promises the winner $40,000 and a trip to Los Angeles to hang out with some Penthouse Pets.

So that’s one mystery resolved. Except I still don’t understand why Adult FriendFinder bought the Ferrari from its founder in the first place. I’ll let you know when the company returns my calls.