profitability
Who is the trailblazer in e-commerce? Don’t look to Bill Gates, says Polly Sprenger, but to a stripper …
One of the simplest truisms summarising the human condition is “sex sells”. But, “sex drives innovation”? That’s an idea without such a popular following, but no less true.
>From the early days of photography to the latest innovations in real-time, one-to-one videoconferencing, most followers of Internet development will agree that sex played a huge role in the advance of new communication technology. But it wasn’t just the technology that porn geeks took to quickly: it was also the business models. The mainstream is still stumbling along, figuring out what will and won’t work in the online economy. Porn sellers know.
The rising numbers of Web entrepreneurs think they are doing everything for the first time. Their talk is scattered with phrases like “first-mover advantage”. But what few people care to recognise is that most of these business models and indeed the technologies fuelling the new economy were discovered and perfected by the first “first-movers” of them all, the online smut vendors.
“Pornographers have been the first to exploit any new publishing technology that comes along: photography, film, photolitho printing, videotape and videodisc,” says David Hebditch, co-author of Porn Gold. “Any country’s attempt to interdict cross- border flows of porn would be defeated by advances in communication technology, especially data transmission.”
Internet industry research firm Forrester Research says the online porn industry will reach $366-million by 2001, though other estimates suggest it is already worth $1- billion. One reason the smut industry has had such an interest in developing new technologies is that there are so many controls on acquiring these materials elsewhere. Buying a book in the offline world is relatively stress-free. But acquiring pornography requires visits to unsavoury venues.
Giving buyers a respite from that offers huge advantages. “It’s something that attracts a broad audience but despite the content having very broad appeal, it’s hard to acquire,” says Jakob Nielsen, a Web usability expert in Silicon Valley. “You usually have to go to some sleazy porn store. That is very much a paradox.”
The paradox has turned porn into a hugely lucrative online venture, and has helped smut vendors hone an online expertise coveted in the mainstream industry. Technologies only just being put into popular use have been perfected by porn Webmasters.
In the 1980s, the Internet was frequented by three types of people: government officials, university scholars and porn seekers. The three were not necessarily mutually exclusive.
Today’s thriving online pornography industry has its roots in the bulletin board systems (BBS) that evolved separately from the Internet in the 1980s. They gave way to Usenet newsgroups and free file transfer protocol (FTP). Users talked about things they had on BBSs and in the newsgroups, then traded the files online.
“The earliest porn sites on the Net were FTP sites run for free from college campuses, especially MIT for some reason,” said one early Web watcher. “All the free sites shut down under escalating traffic load in 1993/94. Of course they were all rampant copyright violations, and lots of people stopped carrying the newsgroups because of the huge amounts of bandwidth and storage space they required.”
Gradually, the sex industry came to see the Internet as a new potential market, especially with the illegal trade of in- copyright pictures on the free FTP sites.
One of those early entrepreneurs was Danni Ashe. Her introduction to the Web came while trying to promote herself as a stripper and dancer. “After getting on Usenet and discovering how many of my pictures were being traded around, I made an introductory post to Alt.Sex basically saying hello and that I could be reached through my fan club address.
“I’ll never forget the stern reply I got from Elf Sternberg, the moderator of Alt.Sex, saying my ‘commercial postings’ wouldn’t be tolerated.”
In 1993 and 1994, the Web was becoming popularised thanks to the efforts of Tim Berners- Lee at the Cern laboratory in Switzerland and the Mosaic Team at the University of Illinois in the United States. The porn vendors were among the first to begin taking advantage of this new Internet medium combining visuals, text and file transfer capabilities.
The distinction between the early free sites and the quickly evolving pay sites is murky, but by 1995, sites like Amateur Hardcore and Sizzle were set up, first steps in what would become porn empires for those Webmasters. Sizzle became a publicly traded company in 1997 and is now worth some $400-million.
When there were just a few sites online, the sex sites quickly became focal points for early Web surfers. “Adult sites [saw] massive amounts of traffic early on, [and] a subsequent need to service that many people,” says Mark Tiarra, CEO of Tiarra, which offers site design services for adult Webmasters. The early sex sites needed to respond quickly to massive use because when a server went down and lost traffic that meant lost revenue.
Although not necessarily credited with inventing these technologies, adult Webmasters were the first to figure out how to put them to profitable use. “Adult Webmasters have pioneered the implementation of several important developments,” says Nielsen. “We had many of the ideas several years ago in various visioneering projects I was involved with at Bell Communications Research in the early 1990s and Sun Microsystems in 1994 and 1995. Even so, there is a difference between having an idea and putting it out there and making it pay.”
As the businesses became more sophisticated, the online porn industry had an accelerated course in the pitfalls of making money on the Web. Overloaded servers, difficulties with video streaming technology, credit card processing – all the problems that Web businesses struggle with today were handled in short order by the adult Webmasters.
“The adult market continually pushed the envelope of streaming technology because of the huge profits seen in high-quality streams,” says Tiarra. “We always laugh when we hear about how a mainstream company has a server overload because they didn’t plan for the traffic levels. Some of us see traffic like that every day, and the non- adult companies smart enough to learn from that wisdom don’t end up with down servers because of a traffic spike.”
Technical challenges like video streaming and keeping a server live in a tide of traffic weren’t the only innovations early adult Webmasters had. They were also quickly learning how to stimulate traffic and profitability. Two other developments in use today, pay-per-click banner ads and real-time credit card processing, the heart of many content sites, were developed by these early Webmasters.
The business model of selling and sharing content is one echoed by many news sites today. For example, the Press Association resells its news to other sites like Excite UK; in much the same way, maintainers of porn libraries resell their images and video to other sites.
First Virtual, an online banking scheme that started in 1994, helped many e- commerce sites develop credit card processing. Many of its first customers were porn sites. “There were a handful of small pay sites cropping up by the fall [of 1994] mostly using the First Virtual payment system. They were followed in the spring by more big adult sites like Adult America, Cybererotica and Erotica Online which accepted credit cards,” Ashe says. “Sizzle was probably the first big commercial adult website and they were one of the first to use video.” Ashe says that a site called Virtual Dreams followed with the first proprietary dial up one-on-one videoconferencing software.
But the porn industry’s experts have stayed marginalised: although some in the field claim that huge numbers of professional Webmasters got their start in pornography, most would be hard-pressed to name examples. At a recent Internet industry conference, groups of attendees made note of the problems they were encountering that the porn industry had long since solved. But one attendee noted that no representatives from the adult industry was speaking, or even on a panel.
One of the most profitable companies – Internet Entertainment .Group, purveyors of Clublove.com -has been shut out of the lucrative American Net initial public offering market because of its attachment to porn. Others, like Ashe, report mainstream companies approaching them for advice or traffic deals, but backing out because of lurking puritanism that pervades even this most progressive of industries.
Sex site surfers teach traffic watchers. This winter, road traffic researchers might be tempted to give up counting cars in the rain and mud, and come inside to surf the Web. They could even keep their dirty raincoats on – it’s the sex sites that offer some of the best research opportunities.
Bernardo Huberman, a Web traffic researcher at Xerox’s Palo Alto Research Centre, presented his latest results to delegates at a highway traffic conference in Stuttgart last month.
“They are tantalised by what the Internet offers in terms of research possibilities,” he says. “I’m showing them just how easy it is to make measurements – we’ve now moved away from using simulation.” Patterns of Web surfing have many parallels with highway traffic, Huberman says. There are identical patterns of congestion and “solid block motion” where everyone is forced to advance at the same speed. The Internet offers a rich new research environment for traffic flow studies – hence the invitation to speak.
But it is actually the Internet service providers, not road users, who are likely to gain most from Huberman’s work. After analysing more than 500 000 visits to a major Web portal, Huberman and colleagues at Xerox have come up with some strategies for drawing consumers deeper into sites, and keeping them there: just what is needed if the providers are to sell their advertising spaces effectively.
The undisputed kings of this hill are the Internet sex sites. “The way they structure these sites is amazingly sophisticated,” Huberman says. Apparently, it’s hard not to be stimulated by them when you’re interested in website architecture. Huberman came across the power of Web sex while studying the surfing habits of Internet users. He was looking into the number of clicks a person would make before leaving a particular site.
“Typically, people click once or twice then get out,” he says. “But we noticed people were clicking on some sites 200 times. We discovered most of these were sex sites.” Further investigation revealed the masterful architecture, leading people deeper and deeper into the site.
They are among the few that make money on the Web, he points out, and they do so by following a strange rule book. When it comes to content, they don’t worry about differing too much from sites offering similar products. They even furnish their sites with links to their competitors. But the surfing patterns through these sites are the envy of everyone trying to do business on the Web. So much so, in fact, that the sex companies have been hounded for advice by the more modest service providers.
Thanks to his study, Huberman has developed a few tricks. The first involves learning how to remove links that might give the visitor what they want too soon. “If you look carefully, some people are willing to go through many more clicks than others,” he says. “You can structure the information in such a way that the user will spend more time there.” Put simply, that means slipping some users an “enhanced” version of the site that takes them longer to wade through before they find what they are looking for.
He admits that such tactics are likely to irritate those who would prefer to get in, get what they want and get out. But, he says, the Web is like a supermarket: people have to realise that marketing strategies are inevitable.
“Most people need milk, so the supermarkets put it at the back; then you have to walk through the whole store. It’s the same idea,” he says. Real world advertisers know that, once the user is satisfied, there is an immediate “seductive moment” when people are more receptive to the marketer’s message. This is where Huberman’s other strategy, Coupons, comes into play.
At these points the user is more willing to hang around inside the portal, so tempting links are vital. The provider can also charge advertisers a premium rate at these places.
Huberman does have something to offer consumers: a scheme to hide their intentions from unscrupulous retailers. When a lot of people access information about a particular digital camera, for example, the retailer takes note, infers a high demand and jacks up the price. He has developed cryptographic software that effectively downloads the whole of the surrounding site, and then extracts only the required information for the user to look at. After this, no one knows exactly which product the user was interested in.
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