Adult Web Sites: Virtual Sex, Real Profits
Napster's Trademark, Address Draw Adult-Entertainment Bid
By Randy Barrett
Parents
fear it. Politicians rail against it. Mainstream Webrepreneurs envy it. The
truth is, the Internet pornography industry is arguably the most active and
lucrative area of digital commerce in cyberspace. While most corporate home
pages tabulate monthly hits in the thousands, top adult sites regularly garner
more than 1 million hits per day. That puts them well ahead, in fact, of such
corporate sites as General Electric Co. (www.ge.com) or Boeing Co. (www.boeing.com).
But there is one big difference -- porn-site visitors are more
likely to spend money on the spot.
"I would bet that between 80 percent and 90 percent of all
[e-commerce] on the Internet is conducted at adult sites," said Tony, the owner
of a site called Planet Hornywood.com. He asked that his last name not be used.
There are no official market numbers on the industry from
Internet research houses, such as International Data Corp. or Zona Research Inc.
However, extensive interviews with adult site owners yield a picture of a highly
charged market of approximately 10,000 sites generating about $1 billion in
revenue per year, most through electronic credit card transactions.
What is clear is that some adult site owners have bigger plans.
Many push the boundaries of image, video and transaction technologies, and a few
hope to use their profits to establish mainstream high-tech companies. In the
meantime, they're in a unique position to test their business plans in the
heavily populated cybersex marketplace.
Tony's Miami-based shop is in many ways typical: a two-person
operation with minimal overhead. He gets his content from stock photographers
and CD-ROMs, runs on a Unix box with a Linux operating system and uses a T3 line
to keep pictures flowing quickly. In this business, speed is everything.
"You're not going to get anyone to pay for a site with slow
access," said Tony, whose home page gets 250,000 hits per day.
Adult sites typically offer photographs, videos, real-time
video sex or a combination of all three. Not all make money. An unknown
percentage are hobby sites that break even at best. But for those that are
established, site owners say profits are excellent, ranging between 60 percent
and 80 percent of revenue.
Operators say adult sites
that get 10,000 hits per day usually gross about $3,000 per month. Midsize sites
attracting 50,000 hits daily bring in roughly $20,000 in revenue monthly. Large
sites, with multimillion daily hits, can bring in more than $1 million per
month.
But the market is getting more competitive by the minute in an
industry that has evolved rapidly in the past 18 months. The field is split
between pay sites (usually charging a $10 to $15 monthly membership fee) and
free sites, supported by banner ads from the former.
"E-commerce in this area of the Web has changed rapidly," said
Mario Carmona, president of XPics Publishing Inc. (www.xpics.com) in Los
Angeles. "A year ago there were almost no economics in free sites."
That changed in early 1996, when Intertain Inc. and Amateur
Hardcore -- two well-financed pay sites -- arrived, sold passwords and started
promoting with banner ads on adult pages scattered around the Web. Suddenly,
running a free sex site became lucrative.
XPics raised its banner ad rates from $1,500 per month to
$4,500 in only three months. Carmona stopped flat-rate pricing and moved to the
now ubiquitous two cents per click-through scheme. With 250,000 visits per day
at his free sites, he said, the click-through pricing pays nicely. Playing both
sides of the equation, XPics also runs a pay site that receives 100,000
individual visits per day.
Many free sites don't carry any lewd content at all. They are
simply links to hundreds of other adult pages around the Net. But where eyeballs
congregate, the pay-site banner ads follow for destinations like the San
Francisco-based Hardcore Channel and SmutWeb. Persian Kitty (www.persiankitty.com)
is a leading example, and many more, such as The Adult Top 1,000
(wss4.websidestory.com/wc/top10. adult.html), have followed suit. Link site
owners say revenue of $1 million per year is not unheard of.
"I've had advertisers beating down my doors since March of
1996," said one link site owner. "I had no idea how much money there was out
there."
The source, who wished not to be identified, is a stay-at-home
mom. Her site has 24 advertisers, gets an average of 500,000 hits per day and
runs on four Pentium 133 PCs and an equal number of T1 lines. Her overhead is
about 20 percent of revenue.
The aversion to being publicly identified is widespread because
of varying state laws. In 1994, Robert and Carleen Thomas of Milpitas, Calif.,
were arrested, indicted and convicted on 11 counts of transporting obscene
material over interstate phone lines to Tennessee with their $99 a year bulletin
board.
Last week, police in Fort Worth, Texas, arrested two men --
described as a former postal service manager and a construction worker -- who
allegedly helped operate a site called Webb World NetPics that charged $11.95 a
month for access to 150,000 pornographic images, some of children as young as
12. The men face charges of promotion of obscene material and possession of
child pornography.
Yet, if adult site ownership conjures images of uncouth,
depraved middle-aged men, think again. Many cyberporn shops are owned and
operated by business-minded women. For example, Danni's Hard Drive (www.dani.com)
in L.A. is a leading site operated by Danni Ashe -- a former magazine
model-stripper -- and nine full-time staffers, mostly women. Her site receives 3
million hits per day and boasts 13,000 members who pay $9.95 per month.
Including online video sales, Ashe expects her site to gross about $2 million
this year.
While many women are involved, the content of most online porn
palaces is marketed toward heterosexual males.
"Men are more visual than women," Ashe said.
They also appear to be consistent customers. Pay site owners
across the board report that membership turnover is relatively low -- usually 10
to 20 percent per month.
For all the traffic -- and profits -- the adult site market
boom is nearing its zenith, many in the industry said. The lure of easy money
and low overhead has caused a surge in new sites.
"It's difficult at this point to break into the pay site
market," said Carmona, who said free sites are easier to start and still
lucrative.
Sex has a natural ability to sell itself, and consequently
adult site Webmasters have become expert at large-volume electronic
transactions. Some process credit cards themselves, through secure (and
sometimes nonsecure) servers. Often, credit card processing is outsourced to
third parties, such as Valley Internet Services LLP in Sacramento, Calif. The
company is not adult-oriented, but makes 80 percent of its income from the
industry.
"It's growing like crazy. We get three to four thousand
transactions a day from adult sites," said Valley Internet President Chris Ochs.
Ochs designed his service around the high demands of adult site
merchants. The company has software written for recurrent billing and offers
merchants a Web page by which they can delete and update their membership files
online. Valley Internet also issues detailed transaction reports on dollar
volume, transaction numbers and type of card used.
"They want to keep an eye on their business," said Ochs, who
also markets many of the services to mainstream Net merchants.
The standard system uses a script to link a merchant's page
directly to Valley Internet servers. The company funnels the processing to bank
centers over dedicated leased lines and then back to the Web page. The dedicated
line trims transaction time to four seconds from 10, Ochs said.
Like adult-site viewers, adult-site companies tend to be
dependable customers. Valley Internet charges roughly $1 per transaction, and
Ochs said the 25 adult sites he handles sell about $400,000 per month combined,
with the top three carrying 95 percent of the volume.
Valley Internet also handles transaction processing for
mainstream accounts, such as Amway Corp. and PGP Inc. However, "They just don't
do the volume of the adult sites," Ochs said.
Porn site Webmasters are on the cutting edge of Internet
technology and proudly remind anyone who will listen that they have been the
pioneers in every new media technology, from dial-in bulletin boards to VCRs to
full-streaming video.
"We in the adult area get to try everything first," said
Carmona, who argues that the adult industry has been responsible for building
large chunks of the existing Internet infrastructure. "The adult Web has poured
millions of dollars into it."
That money buys more than just T3 phone lines running at 45
megabits per second. XPics has its own research and development department and
will soon field an advanced credit card transaction system of its own.
Video streaming is the newest hot technology at many sex sites,
but slow modems at the user end reduce the impact to three or four frames per
second.
"The reality is, it's not television," said Marcus Arm of NTL,
a Massachusetts-based video sex service bureau that hires models, owns the
machinery and resells its content through independent adult sites.
Video sex has been available on the Net for more than a year,
but most sites still require the viewer to download special software to partake.
That's changing as a few leading sites now offer "no download"
streaming video. The technology used is called "server push," a combination of
advanced JPEG compression, stream management and multiplexing that allows up to
10 simultaneous viewers to see a model directly from their browsers.
Online Technologies, of East Setauket, N.Y., runs nearly 100
adult sites, including its flagship membership bulletin board called
Lifestyle.com. The company developed its own OS/2-based software that allows
Lifestyle.com to run on a single Pentium 150 PC with 126 ports open. It
currently handles 500 simultaneous sessions using a combination of modem and
telnet connections and has the capacity to scale up to 9,000 ports on a single
PC.
"It's probably the most powerful piece of BBS software ever
invented," said Online Technologies President Marc Kraft, who prefers using a
pseudonym.
Current BBS software from industry leaders eSoft Inc. and
Galacticomm Inc. can handle only 96 and 256 ports respectively.
Multimedia Direct LLC, a New York-based video sex company, is
also looking to move software to the commercial market. The company has
perfected credit card transaction code that makes in-depth daily statistics
available to merchant customers on the Web. The company also has its own "microcash"
system, which lets members pay once with a credit card and use the credit at any
of the company's seven sites, including its flagship Decadence.com. Officials
said they plan to spin the technology off this year.
XPics' Carmona has similar designs for his proprietary
transaction software, which he chooses to say little about for competitive
reasons.
"We plan to switch our focus to the mainstream Web as soon as
it reaches critical mass," Carmona said. "There's only so much you can do in
[the adult] segment."
Kraft has gone a step further and is trying to clean up and
legitimize the Internet porn industry by establishing the Adult Chamber of
Commerce (www. adultchamber.com), which requires members to adhere to a code of
business ethics. First and foremost is keeping underage surfers out of adult
sites.
Profit margins on free, advertising-supported Web sites
providing erotic images have mushroomed in the past year. Here's a quick look at
the typical economics of such a site:
YourSexsite.com
Ever wonder whether your World Wide Web site is more popular
than the competition's? Blaise Barrelet can tell you.
For the past two months, the president of Websidestory Corp. in
San Diego has been perfecting his advanced counting technology on adult Web
sites. The result is the Adult Top 1,000, a free counting service that now
tracks 1,385 sites that attract an average of 7.5 million hits per day.
The goal, said Barrelet, was never to end up the ultimate
arbiter of adult site sexiness. Rather, the heavily traveled adult Web has been
the perfect testing ground for a much bigger idea: creating a Big Board for
company site popularity.
"We're like a stock exchange," Barrelet said. "We like the
technological challenge [of the adult Web]. We were counting 10 hits a day, now
we're counting 7 million."
In only a few weeks, the concept has caught fire far beyond the
flesh houses of the Net.
Websidestory is now running a free Top 1,000 World Sites page
(wss5.websidestory.com/wc/ world2.html), carrying leading site statistics from
the advertising, sports, entertainment and computer industries, just to name a
few. Real Estate Online can be found here, as well as the home page for the rock
band R.E.M.
The concept is deceptively simple. Websidestory offers its
service to any site owner. The setup is quick and easy -- a brief HyperText
Markup Language, or HTML, tag placed on a site that links into Websidestory's
main computer.
From there, the company can track and display such minutia as
number of hits per day, forecasts, unique visits and returns within one hour,
all instantaneously.
Best of all, the service is free to both site owners and
visitors. Barrelet plans to make his money through banner advertising on the
specific industry lists. He's not guessing. He has already had offers from
listed companies and currently runs Websidestory on sizable revenue from banners
on the Top Adult 1,000 site.
"We're waiting for more traffic and will start to offer ads
soon," Barrelet said.
Copyright (c) 1997 Interactive Enterprises, LLC. All rights
reserved.Reproduction in whole or in part in any form or medium without
expresswritten permission of Interactive Enterprises, LLC is prohibited.
InteractiveWeek and the Interactive Week logo are trademarks of Interactive
Enterprises,LLC.
 |
|
|
|
Napster's Trademark, Address Draw Adult-Entertainment Bid
Spanish Firm Offers $2.4 Million
In Stock for Web Site's Assets
By NICK WINGFIELD
Staff Reporter of THE WALL STREET
JOURNAL
|
|
Private Media Group Inc., a Spanish
adult-entertainment company, said it offered one
million shares of common stock worth $2.4 million to
acquire the trademark and Web address of now-defunct
Napster Inc. as part of a plan to offer an Internet
file-sharing service for adult movies.
Private Media, Barcelona, said it
plans to create a service that will allow users to
share free movie files, as well as premium movies
that users must pay to access.
Napster filed for Chapter 11
bankruptcy protection in June, and Friday a
bankruptcy judge in Wilmington, Del., is expected to
decide whether to convert the Napster case to a
Chapter 7 filing, in which a company's assets are
liquidated rather than sold as part of a going
concern. Last week, the court rejected a $9 million
bid for Napster's assets by Bertelsmann AG because
the judge felt the deal wasn't negotiated at arm's
length, as required by law.
Rick Chance, managing director of
Trenwith Securities Group LLC, an investment bank
marketing Napster's assets on behalf of the company's
unsecured creditors, said Private Media's offer was
below its $6 million minimum bid price. Mr. Chance
said Trenwith had received Private Media's bid, along
with bids from other parties. He declined to say
whether there were better offers than the one
received from Private Media.
Write to Nick Wingfield at
nick.wingfield@wsj.com1
Updated September 12, 2002
9:45 p.m. EDT
|
|
|
Copyright 2002 Dow Jones &
Company, Inc. All Rights Reserved
Printing, distribution, and use of this material is
governed by your Subscription agreement and Copyright
laws.
For information about subscribing go to http://www.wsj.com
|
March 3, 1997