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What Can We Learn From the "Adult Entertainment" Industry?

Ramblings by Michael Dortch
Copyright (c) July 1997 by Michael Dortch. All Rights Reserved (as if you'd wanna steal this stuff anyway!).

I'll admit upfront that I and some at Ambrosia Software had trepidations about this entire topic. However, the Wall Street Journal, of all august media outlets, ran a story on the topic I've chosen just a few weeks ago, giving the topic a respectability undreamed of by me or Ambrosia beforehand. Also, the recent Supreme Court decision ruling the Communications Decency Act unconstitutional gives this area new currency, if not appropriateness. So here we go; remember to (t)read lightly and carefully.

As I see it, there are two areas in which people are making oodles of money online. One is company-to-company electronic commerce, by which large companies are doing business with their partners online instead of via phone, fax the Postal Service. These companies are making money online by saving lots of costs and time, and by getting to market with new products more quickly. But to most of us, they just ain't that interesting.

It's the other area of revenue generation I wish to discuss here today. That's the so-called "adult entertainment" industry. Now, I'm not interested here in your views (or mine, for that matter) about pornography, etc. -- although I will say there was lots of pornography and lots of magazines hidden by dads and discovered by kids before the Internet ever became accessible to anyone. But the real interest is this: by any and all reasonable inferences or available data, there's not one major adult Web site that's not making lots of money.

So what makes these entrepreneurs more successful than the whiners out there losing their shirts or barely breaking even in the "mainstream" business world? Well, there's the obvious -- sexual content's more interesting than just about anything else out there. But that's not the only explanation. Here are some others I think are fairly compelling for any of us trying to make the Web a better place to do business.

The online entrepreneurs in the adult entertainment business do almost everything right online. The sites I've visited and/or read reviews of while researching this area are all fast, easy to navigate and well-presented. (And they're scrupulous about inviting those under 18 to depart forthwith, supporting and endorsing filtering solutions like NetNanny and SurfWatch and otherwise presenting every appropriate image of propriety and discouragement of underage visitors.) They're very generous with free access for prospective paying customers. And they are state-of-the-art where handling of graphics and sound are concerned, something many mainstream business sites eschew entirely or handle incredibly badly.

Security? Not a problem. They never even ASK for your charge-card information online, unless you really, really want to buy some related merchandise (about which more below). Instead, when it's time for you to pay for your all-access "backstage" password, you can do it via e-mail, fax or a pay-per-call phone number, as secure as any mainstream catalog operation with which I'm familiar. Forget digital cash and all that confusion -- let your customers pay the ways they're used to paying for other things, and you and they can get on with your lives.

But the thing the adult-entertainment purveyors do best online is what the Wall Street Journal and others call "upselling." This is what happens, for example, when you go to a concert and buy a CD, poster and/or T-shirt -- or when you view a clip of a movie at a Web site, then decide to buy your own copy.

Quite simply, upselling is where the real money is. (Concert promoters often cite studies indicating that concert-goers spend three to four times the price of a single ticket on T-shirts and other goodies once they're at the show.) Upselling is also the happy result when a Web site provides lots of free samples and incentives to visitors who are not yet paying customers, by the way. If you ain't convinced, visit sites like NetRageous (www.netrageous.com), and read the advice of seasoned online marketers. Almost all of them recommend variations of this strategy, but except for gaming companies, the adult entertainment biz is better at this than any other online business segment I've seen.

Estimates of the revenues being churned by adult entertainment online now range upwards of a few billion dollars annually. This while, with the exception of high-tech companies doing business with other high-tech companies and/or technologically savvy consumers, conventional wisdom whines that no one's figured out how to make money online.

What's keeping the "straight" business world from using the adult-entertainment industry as inspiration for revising its tired, ineffective business models for the online world? Oh, the usual -- nearly-fossilized business practices, combined with a streak of conservatism (tinged with a bit of old-fashioned Puritan guilt and an ultra-modern fear of litigation) wider than the Information Superhighway. Never mind that home video sales, home video rental, pay-per-call information services (like American Express' 900-WEATHER), VCRs and their progeny, low-cost high-quality PC-based videoconferencing and some of the niftiest technologies for delivering images and sounds online all -- repeating, ALL -- owe their earliest significant sales and market development, if not their very existence, to the big, bad, adult-entertainment industry.

What's it all mean? Well, in the final analysis, it has nothing to do with adult entertainment, a term I like about as much as "neo-Conservative," "government assistance" or "miltary music." It has everything to do with something companies like Ambrosia seem to understand, and a lot of older companies trying to do business online seem not to get at all. It's not about doing business online -- it's about doing good, sensible business. Which means finding out what customers want, figuring out ways to get it to them, doing so, asking them if it was what they want and what they might want next, and repeating the cycle.

Adult entertainment doesn't just make money online because it's sexually-oriented or titillating. Adult entertainment makes money online because its best entrepreneurs focus more on customers and what they want than, and less on gnashing their teeth because a new delivery and marketing mechanism appears. It's just the Internet, for Goddess' sake ...

Ed Note -- Michael Dortch has been reading, writing, talking and thinking about computers, networks and their places in The Real World for more than 20 years. He is currently a Senior Research Analyst with The Robert Frances Group, a provider of high-technology market research to corporate clients. The views expressed herein are solely his own. You may comment upon said views by dropping him an e-mail at medortch@aol.com (or just "medortch" if you're on America Online).

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