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The Rising Tide of Technology

The Rising Tide of Technology

January 2, 2008
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" At its core the online adult industry is as much about the rising tide of technology as it is about the carnal heat of onscreen performers. "

As 2007 neared the finish line there was a tendency among webmasters to look closely at their bottom line, even to the exclusion of some other facts and trends that may directly impact next year's balance sheet significantly.

For that reason, XBIZ is taking a moment to highlight some very important changes that have already started to impact our industry and may become dominant reasons as to why some companies succeed next year while others miss out.

TECH ADVANCEMENTS
At its core the online adult industry is as much about the rising tide of technology as it is about the carnal heat of onscreen performers. In the U.S. two major advancements took root in the consumer tech segment during 2007 and both are guaranteed to grow even more rapidly as we move forward: the advent of Verizon FIOS and the introduction of the iPhone.

Verizon FIOS is a direct fiber-optic connection for commercial and residential clients that provides 20mbs download speeds and can also provide bundled telephone and TV services as well. On Sept. 27, 2006, a Verizon press release was posted on the company's website stating that the company intended to invest $18 billion in net capital over a six-year period from 2004 through 2010 to deploy the largest fiber-optic network for consumers. Verizon went on to say that it believes the FIOS service will become profitable by 2010 because it will attract up to 7 million FIOS Internet customers within the U.S. during its initial deployment.

This year, at the NXTComm trade show in Chicago in June, Verizon CEO Ian Seidenberg announced that the company's FIOS service had already signed its 1 millionth fiber-optic Internet customer well ahead of company projections. The radical growth of this new subscriber base shows that surfers are quickly becoming aware that for less than $125 per month, they can purchase a 20mbs connection along with unlimited telephone calling and a robust package of TV programming included as well. The longstanding lure of paying $9.95 per month for dialup, $60-$100 a month for phone bills and another $80-$150 a month for cable TV channels is fading into oblivion.

Some online adult program owners already are making moves to attract the broadband audience as their connections grow faster and their sizes grows larger — even at the risk of distancing themselves from dialup users and late adopters. As one example, RoyalVault.com began launching its entire network of truly innovative sites in 2007 and offers members video downloads in formats as large as 1440x1080. Granted, the chance that someone on dialup will sit around downloading 250-350MB files is admittedly small. However, ask yourself how many FIOS customers (who can download any of those movies in just three minutes) will choose to go to a competing site that offers small, blurry, pixilated 320x240 videos instead?

Flash streaming is another area significantly affected by increased surfer bandwidth. Streaming has long been seen as a method of protecting content from piracy, but superior bandwidth now makes large-format Flash streaming possible for many surfers. Clear images, true fast-forward and rewind capability along with the immediacy of watching films online without devoting any hard drive space to them are all things evolving surfers may embrace.

Major adult companies like RedLightRevenue.com came to the online market in 2007 with their flagship site ClubRedLight already Flash-enhanced for the evolving surfer. The site allows members to stream the entire catalog of Red Light District DVDs in any one of three Flash formats including small, medium and full screen. Members also are offered the option of downloading clips if they prefer. So far the retention statistics according to RedLightRevenue are already showing that their combination of top-quality content and top-tier technology is appreciated by a growing segment of the surfer population.

The other major consumer tech advancement in the U.S. has been the introduction of the iPhone. The belief that mobile formats are an important new revenue stream for the adult online industry is one that has ebbed and flowed for a few years now but Apple may have finally broke the levee holding back the mobile market tide. The iPhone allows surfers to view the Internet in its native form without much change to the display specifications. While the iPhone is far from perfect and it currently lacks some significant features like Flash support and instant-messaging functionality, clearly it is going to be a leading force in what a surfer demands of their phone and PDA manufacturers in the future. The light at the profitable end of the U.S. mobile mass-media tunnel may finally be in sight.

Outside the U.S. there have also been major developments. The continued expansion of civic WIMAX networks now allows coverage of an increasingly large population with true wireless broadband. Citizens of South Korea for example can now go outside anywhere in their country and connect their laptops or mobile devices to municipal wireless broadband free of charge. The rest of the world may only be a year or two away from also being able to unplug the copper from their computers once and for all.

BIGGER, BETTER, CHEAPER
While the big news has come in the connectivity available to surfers, have you taken a look at hardware prices lately? In early October, Costco began selling 1 terabyte external Maxtor hard drives with FireWire support for $319; similarly the evolving surfer can now buy a quality 27-inch LCD monitor for less than $500 at a variety of online shopping sites.

You may be reading this information and muttering, 'A $500 monitor? The surfers I know probably have less than $20 to their name!' However, the information is still relevant because the prices on surfer gear continue to drop at a dramatic rate. Also, surfers willing to shop on eBay or CraigsList for used open-box items can get them at even larger discounts.

The important point is the notion that the bulk of your customers are sitting in their basements using a 14-inch Amber-vision CRT monitor, a 60GB hard drive or a dialup connection just doesn't ring true anymore. Also, isn't it logical to think that the surfer with greater disposable income to use on hardware also has deeper pockets to afford things like site memberships?

Clement of VideosZ.com has long been a proponent of the belief that surfers are no longer the cavemen you see doing Geico commercials. Recently he agreed to assist me with my research for this article by posting a simple, voluntary, nonscientific poll in the member’s area of his website. Members who had each purchased access to VideosZ were asked what kind of connection they were using to access the website so that VideosZ could better serve them. Each member was allowed to reply only once and each was a paying customer who had bought the VideoZ monthly service. Lying would have been counterproductive for any dialup member because it would mean he was advocating "less dialup friendly" content if he falsely claimed to have a broadband connection. The results may surprise you.

With more than 1,500 members responding, only ONE percent stated they were currently using a dialup connection. To put that in perspective, more than 4 percent stated they are already using a FIOS connection and the rest of the replies were fairly evenly split among DSL and cable modem users. Those kinds of statistics cannot be relied upon by themselves but they do support the idea that creating your next members area to be optimized for a surfer using a dialup connection is something worth reconsidering.

When asked if he was surprised by the results of the survey, Clement of VideosZ said, "In the five-plus years I have been managing VideosZ, the speed of change has increased every year. It isn't that so many users are moving away from dialup this year that matters to me, what matters is that next year the exodus will build as a progression and happen even faster. Trends in this business always seem to gain momentum once the market begins a transition like this one."

Following that reasoning, should your own websites really be optimized for an 800x600 resolution on a 17-inch CRT monitor at this point? Webmasters don't want to walk too far out on a limb and risk alienating any part of the surfer population but being the last to evolve can have similarly dire consequences. What is the likely reaction of an avid surfer who buys one or two adult paysite memberships each month when he comes upon your tour and sees that you promise a product he feels is behind the times?

THE NAUGHTY APPLE
Some webmasters may already be aware of the impact that the iPhone is likely to have on the mobile market but Apple also is impacting the future of adult online companies in another way that is perhaps even more significant. With a computer surfer market-share now nearing 20 percent within the U.S., providing content for Mac users has been a sore point for some webmasters because .wmv files and design format compatibility issues were problematic for many of them. On April 5, 2006 Apple released new software called Bootcamp for public beta. Bootcamp is currently a standalone program but Apple has recently announced that in 2008 the company will include Bootcamp in its OS Leopard software bundle.

Bootcamp allows Apple users to startup their computers using either Apple OSX or a Windows-emulated environment instead. Put simply, Apples are now able to digest Windows PC content better than ever before and it will be an included function on all new Macs starting in the next few months. That means a significant segment of surfers who were unable to utilize certain file types can now do so as easily as their Microsoft counterparts.

CHANGING ATTITUDES
Coupling the available user data and the increasing length of time that the adult online industry has existed, it is wise to consider the fact that most surfers are repeat customers at this point. The consumer you are trying to entice to purchase your product is likely to have been a member of several other sites in months prior to finding yours. Surfers also are likely to have more information about your site and your competitor's sites as the review site market segment becomes more prevalent.

Nobody is suggesting you throw away a business model that has been successful for your company in the past. However, failing to look forward and embrace an evolving customer base has been the key element in the decline of huge players in related industries like Xerox and Polaroid. As we all look back on 2007, we should also be looking forward to 2008 and beyond while continually challenging our antiquated beliefs about the evolving surfer.

» This article originally appeared in the December, 2007 issue of XBIZ World Magazine.


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