The Quick and Dirty on Adult E-Commerce

By taking advantage of sophisticated video and e-commerce technology, adult-oriented businesses leapt onto the Net far ahead of their tamer counterparts and established a mammoth base of repeat customers.

In fact, Forrester Research found in 1998 that online sales of adult material accounted for eight percent of all e-commerce. While the firm no longer tracks the adult industry, anecdotal evidence suggests that sales remain as strong as ever.

Customers Keep Coming Back

Porn sites are among the few content providers that are able to profit from charging visitors — early on, other types of services that tried to make users pay ended up abandoning the practice. According to research firm Datamonitor, adult content makes up 69 percent of the $1.4 billion (US$) market for paid online services in the U.S. and Western Europe.

“In a realm where users have traditionally been unwilling to pay for content, they have year on year bought subscriptions to adult content, and at times paid for one-off content products such as adult movies,” Datamonitor said in a May 1999 report.

Porn sites can get away with charging for subscriptions in part because their material never gets old, said Chris Buerger, manager of Datamonitor’s Internet Strategic Planning Program. “You have your archive of pictures, videos or whatever, and you never have to change it; you just have to add to it,” he said.

Another reason is “the old adage that sex sells,” says Danni Ashe, the former dancer who runs Danni’s Hard Drive, a high profile adult site. Started in 1995, the site offers some free “teaser” photos, but charges subscription fees for additional material.

According to Ashe, 27,000 members pay $19.95 per month for access to video, a news column called “The Associated Breast,” and more. The site claims three million unique visitors each month. By comparison, Amazon.com had 12 million unique visitors in January, while eBay had 9 million, according to Nielsen//NetRatings.

Strong Claims, Few Figures

Revenue for Danni’s in 1999 was $5.2 million, and the site is on track to bring in $7 million this year. However, Danni’s is somewhat unique because it does not receive any income from banner ads or other advertising. Ashe told the E-Commerce Times that even without advertising revenues, the site has been profitable every month since it began, although she did not disclose the exact figures.

“Adult content on the Web is still one of the consistently highest rated applications and services over the Internet,” said Andrew Edmond, founder and chief executive of Flying Crocodile, a company that tracks and analyzes statistics on adult sites. “Other major, major companies to this day come up and interview companies like ours about how best to target users and get them to spend money,” he said.

Edmond’s Web site, SexTracker, was fourth among the top 10 Web advertisers for the month of December 1999, ranking just below Amazon.com in a Nielsen//NetRatings survey. The company offers its services free to Webmasters of adult sites.

“We’re a wonderful segment for the market to study,” said Edmond. He added that he is “kind of waiting” to see how some of the hot new e-commerce companies fare. “We see people post a lot of losses,” he said.

Exceptional Customer Service

How is it that adult sites are able to do so well while so many mainstream sites struggle for profits? The success is due, in part, to superior monitoring and filtering of traffic, Edmond told the E-Commerce Times. Adult sites, he says, do a better job of “demographic profiling,” and target ads specifically to users.

“The Amazons and Yahoos of the world literally bleed their traffic into the gutter,” he said. One of every 200 visitors to an adult site ends up spending money, whereas in the non-adult world the figure is more like one in 10,000, he said.

Edmond and others in the e-porn world say they know their users better than the big mainstream companies. He noted that if a user wants to see pictures of a specific nature, that person will be directed to sites and ads that target his or her preference, rather than being exposed to a host of material to sift through or ignore. “Adult sites take the work out of the user’s hands,” he remarked.

“The adult segment of online commerce is a fundamental component to many successful online e-commerce endeavors,” says Edmond. “No other market has shown and proven its willingness to deliver to consumers, using envelope-pushing technical and marketing solutions to provide the content and products they seek in a cost-effective manner.”

Indeed, companies that want to test out new Internet advertising technologies often do so on adult sites, because of their high traffic volume, said Buerger. “A lot of them don’t talk about it, but they do use them to test,” he said.

Adult Sites Privately Held

The fact that adult-oriented sites do not have to answer to shareholders also gives the companies more freedom, said Edmond. “All the major companies on the adult Internet are 100 percent private,” he said. “We have to be fully funded. We have to have earnings; we have to remain profitable.”

“We’ve never really had the benefit — or the curse, depending on your point of view — of VC money or IPO money,” added Ashe. “We’ve kind of been forced to go out and build a business that makes sense.”

To increase the e-commerce potential for adult sites, Ashe says she is waiting for a payment alternative to credit cards. “They’re really not designed for small payments, or non face-to-face payments,” she said. Companies have to charge about $8 to make a credit card transaction worthwhile, so “you have to have something people are willing to pay $10 or $20 for.”

Profits Exaggerated?

Malcolm Maclachlan, media e-commerce analyst at International Data Corp. (IDC), takes issue with some e-porn merchants’ claims of financial success, saying that many are exaggerated. “There’s so much free porn available online, no one would really even need to pay for it,” he said. “Lots of porn sites would love to go public, but they can’t get reputable investment bankers to help them out.”

“The main advantage porn sites have is unquenchable demand,” Maclachlan said. “Users will put up with things ‘normal’ Web surfers would not — endless pop-up windows, sites that refuse to close, that sort of thing.”