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Adult Innovations

Adult Innovations

April 16, 2008
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" XBIZ presents examples of adult marketing prowess "

The online adult entertainment industry is perceived to be a leader in technological and marketing innovation, but what exactly are these innovations?

To help answer this question, XBIZ World Magazine presents the following roundup of significant examples of adult marketing prowess:

Whether you love them, hate them or attempt to block them, there's no question that pop-up consoles have produced millions of dollars in revenue for the adult Internet industry over the years. As with any promotional technology, pop-ups have been used sensibly by some and abused immensely by others. As the use of pop-up consoles spread to websites in virtually every Internet market sector, the overly aggressive use of consoles eventually triggered the creation of a cottage industry in its own right; pop-up blocker software. The widespread distribution of blocking software quickly and substantially reduced revenue from pop-ups, exit consoles in particular. Determined to circumvent the blockers, some adult companies set about creating code that defeats the blocking software, leading to a cat and mouse game that continues to this day. From simple exit consoles to time-delayed pop-unders, the adult sector of the web has blazed the pop-up trail — for better and for worse.

The adult industry is certainly not alone in having dumped mountains of email, solicited and otherwise, into the email boxes of surfers around the globe — anyone who has received dozens of daily offers for fake Rolex watches, bogus college diplomas or herbal Viagra can attest to that. That said, the fact that the most significant American anti-spam legislation has pornography right there in its name (the "Controlling the Assault of Non-Solicited Pornography and Marketing" or CAN-SPAM Act) speaks to the fact that adult content has played a major role in mass email marketing over the years. A crackdown by the Federal Trade Commission in 2005, including the charging of seven adult Internet companies with violating CAN-SPAM, sent shockwaves through the industry, and took the notion of being prosecuted for spamming from a theoretical threat to a very real concern. Technology also has played a role in reducing the efficacy of email marketing, as spam filters and email authentication services have reduced the reach of legitimate email marketers and spammers alike.

Where would pay-per-signup programs be without cross sales? They'd likely be paying out at a lower per-sale rate, for one. An innovation that gave paysites the ability to squeeze additional revenue out of a single signup, cross sales have been employed with varying degrees of aggressiveness for years now, and remain a major source of income for many paysite owners. The peak of cross sale audacity came prior to VISA's revising of its rules to require that merchants maintain less than a 2 percent chargeback rate, a point at which many programs dialed back on their purchase of pre-checked cross sales, which were doubtlessly among the highest risk for chargeback among all adult site purchases. Some processors will only allow unchecked/opt-in cross sales, while others restrict the ability to pre-check on a client-by-client basis. Pre-checked cross sales have not died off completely, however, and a number of major affiliate programs continue to put the onus on the consumer to mind the old adage "let the buyer beware."

Who'd have thought that "MILF hunting" would become part of the mainstream lexicon? With the number of times that MILFHunter.com (the flagship site of the reality site trend-setting affiliate program NastyDollars) has been referenced by the Daily Show and others within the mainstream entertainment sector, clearly the site has vaulted into a sphere of brand recognition that is rare in the adult space. There was nothing particularly revolutionary about the sites' content; at the end of the day, they were essentially 'gonzo' porn sites. What set the sites apart from the rest of the porn site pack was the manner in which the content was presented; the notion that the action was tracking the real exploits of sex-obsessed men roving about seeking new conquests each week appeared to strike a chord with a consuming public that was hungry for something different from the porn norm. Following the success of MILFHunter.com, BangBus.com and a wave of sites with similar themes that followed, the reality site trend hit full speed, and for months it seemed you couldn't turn around without another new reality site hitting the adult web. That trend appears to have slowed down a bit, but the existing reality sites, and the DVD lines that have sprung from them, are still going strong.

Not even unsolicited bulk mailing rivals adware for sheer controversy, in part because the line that differentiates 'legitimate' adware from 'spyware' or 'malware' is drawn in different places by different people, and — as is the case with any communication technology — there is tremendous potential for all manner of uses, good, bad and ugly. On the plus side, the technology can be used to serve advertising that is highly relevant to the end user, and tailored to precisely the item or service that they are seeking at that moment. On the flip side, adware can be (and has been) used to steal commissions from affiliates, facilitate identity theft and other nefarious purposes. Still, adware has had an undeniable impact on the industry, and continues to distributed by entities in forms ranging from very well-known (like Zango) to here-today-gone tomorrow exploits blasted out via drive-by downloads. Some Internet industry analysts, consumer advocates and attorneys are pushing the U.S. Congress to enact stricter legislation regulating the use of "contextual advertising" — the industry's more palatable and PR-friendly term for adware — and 2008 may well see action from lawmakers on that front.

"If at first you don't succeed…." Cascading billing — the process of passing a purchaser declined by one billing processor to additional, "backup" processors in the hopes that one of them will process the transaction that was declined by the primary processor — exemplifies the old cliché about "try, try again" like nothing else in the adult space. Prior to the introduction of cascading billing, most companies simply lived with the fact that a customer declined by their processor was an opportunity lost, or perhaps would encourage such users to try other means, like purchasing a password through a 1-900 phone billing service. Once cascading became a viable option, paysites found themselves increasing their bottom line by as much as 15-25 percent. While not everyone has adopted cascading billing, one would be hard-pressed to find a major affiliate program that does not make use of the technique. While companies differ as to which IPSP they use as a primary or secondary processor, virtually every major program agrees that to not cascade is to leave money on the table.

Throughout the history of the adult Internet, the mantra of advertising and marketing experts has been "target your traffic." While that axiom largely refers to properly targeting consumers in terms of their desired form of content or niche, the advent of IP geo-targeting ushered in an age of tailoring advertising messages to include the location of the user. While far from perfect, geo-targeting has been an especially big boon for dating websites, as it enables the advertiser to provide information specific to the location of its prospective customers. Entirely different ads can be served based on a surfer's location, greatly increasing the relevance of the ad's message, and where dating sites once were limited to generic marketing messages ("Thousands of girls from your area"), geo-targeting enabled the advertiser to insert the actual location (or close to it) of the consumer in the message in automated fashion. Geo-targeting is not without its problems — the potential for accidental false or misleading advertising being an obvious one — but on balance, it has given companies a potent tool for customizing their ad message in an unobtrusive and low-cost fashion.

As the so-called "Web 2.0" phenomenon has unfolded, one of the aspects that has been touted is "interactivity" — but interactivity is nothing new to the adult Internet. By 1997, live feeds and chat were already generating a significant amount of revenue for early entrants into the market, including a then-small company, VideoSecrets, which would go on to become one of the adult industry's most prominent brands. More than any other development, the expansion of the live feed and live chat markets gave the web something that the offline adult industry couldn't offer; the ability to interface directly and in real-time with the model the customer was viewing. From humble beginnings the live feed market has exploded, as networks of cam girls working from their homes have joined the studio-housed productions in creating a massive market for interactive adult entertainment. Relatively impervious to piracy due to being live and real-time, the market for live feeds and chat may become an increasingly attractive sector for adult companies in search of ways to offset declining revenues from hard product sales.

Depending on their perspective, adult paysite owners and producers of adult content might see thumbnail gallery posts (TGP) and movie gallery posts (MGP) as advertising godsends, or as the beginning of the end of their profitability. Those inclined to the former view will argue that TGPs and MGPs have been a reliable source for joins dating back to the late 1990s. On the flip side of the coin, many content producers blame the early TGPs and MGPs for establishing a trend of giving web surfers far too much content for free. Regardless of whether one thinks they are a boon or a bane, TGPs and MGPs have served as the point of entry into the online adult space for countless newbie webmasters over the years, and have spawned a market for software tools and services for mass-submission of galleries across the massive universe of TGP/MGP sites. While the "death of TGP" has been predicted for years, some of the market's earliest pioneers remain highly-trafficked by surfers, well-stocked by submitters and coveted as traffic sources for many affiliate programs.

When the adult Internet first began to generate revenue, the primary source of income was selling access to still images, almost exclusively on a subscription basis. At the time, online video amounted to postage stamp-sized feeds that ticked along at a handful of frames per second, and only after an excruciating amount of download and/or buffering time. At the time, the idea of charging on a per-view basis for access to video simply wasn't viable — but as things have a tendency to do on the Internet, that reality changed quickly. What started out as a market with very few players around the turn of the 21st century, the online PPV/VOD market has since blossomed into a space that nearly every adult company wants a taste of. While VOD market share remains dominated primarily by early entrants (like AEBN, Gamelink and HotMovies.com), recent years have seen an explosion of other companies offering their content on a PPV/VOD basis. While many choose to partner up with existing players in the space in "white label" fashion, others have chosen to devote significant time and revenue into the development of proprietary VOD solutions. As user-end bandwidth increases, enabling delivery of higher and higher quality of video, some anticipate that VOD/PPV platforms will increasingly become the purchase method of choice for consumers of online video, adult and mainstream alike.

In the early days of the adult Internet, pay-per-click was the name of the game in the affiliate space. As competition increased, so did payout rates, and affiliate program operators and webmasters soon found themselves worrying about click fraud — and rightfully so. Click shaving by unscrupulous programs, and fake clicks being generated by webmasters looking to exploit the model combined to take the shine off of pay-per-click programs, and both sides of the question began to explore other ways to buy and sell traffic. Enter the Pay-Per-Signup (PPS) program model, which more closely resembled traditional sales commission models, and gave site owners at least some degree of assurance that they were paying for real transactions and not just bot-generated traffic. Once established, fierce competition for the traffic and loyalties of major affiliates ensued, and payout rates began to climb. What began as modest $10 PPS rates in the late 1990s soon ballooned to rates exceeding $40 per sale — often paid on as commission on sales that amounted to only a dollar or two. The high-risk economics aren't the only source of trepidation with respect to PPS, of course; concerns over click-shaving have merely evolved into concerns over signup-shaving, and determined thieves have managed to exploit the per-signup model every bit as effectively as they did the per-click model. Be that as it may, the PPS model still reigns as the dominant affiliate model in the adult space, and its grip on the affiliate space does not appear to be slipping.

While by no means a comprehensive list of online adult entertainment industry innovations, the methods described here illustrate the creativity and resourcefulness that the business and its operators are known for.


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