Size Matters, But It Isn’t Everything

Stephen Yagielowicz

Most everybody wants to be the biggest kid on the block. Given the choice between owning a five-star restaurant or the hot-dog stand on the opposite street corner I suspect that most folks would opt for the more opulent alternative — and for many of those folks, it would be the wrong choice. You see, there are advantages and disadvantages to being a large company in any field, with the online adult entertainment arena no exception — and a marketplace where the big boys are increasingly squeezing the little guys out.

For larger online companies, the economies of scale allow for lower costs; such as cheaper bandwidth and content services acquired in bulk purchases. Other benefits can include superior access to capital and expertise; exclusive partnership, traffic and sales opportunities; much easier cross-promotional ventures and more; the list goes on and on.

There are advantages and disadvantages to being a large company in any field, with the online adult entertainment arena no exception.

The breadth and depth of staffing options available to larger organizations delivers a competitive advantage that smaller firms simply can’t match: from the range of skills and experience, to gains from departmental compartmentalization — and just having enough warm bodies so that folks can take a vacation now and again — are all benefits of size.

Larger companies can also afford better compensation packages, which are vital to attracting and retaining the best help available, even in today’s competitive job market.

High quality, experienced employees, allow larger operators to leverage new assets.

For example, a large paysite network growing through competitive site acquisitions, may be able to leverage its management expertise to increase the profitability of new sites added to its portfolio — increasing profits through superior operation and lower costs — making more money from a “used” site than did its original owners, based on knowledge.

Brand recognition is another area in which larger companies tend to have an edge over their smaller counterparts, but in the online adult arena, this benefit can be a mixed blessing if the prospective customer feels he’s already seen everything the company has to offer — or simply is not a fan of its distinctive shooting style, or production approach.

For example, many prospects seeking raw, hardcore porn, may eschew an offer for a site published by Playboy outright — no matter how extreme the website’s name, or the explicitness of the affiliate ad trying to sell it. Likewise, Hustler may not be the first name to come to mind when searching for a softcore non-nude site — regardless of how many such sites the company might offer in its portfolio.

If you’re known for one thing, becoming known for something else isn’t always easy; and that’s just the beginnings of the problems that success can bring to a company.

Being the biggest doesn’t necessarily mean being the best; and likewise, there are some significant drawbacks to growth that may increase along with the size of the firm.

For example, managerial isolation is a huge disadvantage for large businesses, where principals and decision makers are often far removed from the customers they are trying to satisfy; the staff and suppliers they rely upon; and the actual day-to-day operations that they seek to govern — a danger in as fast-moving a market as online adult entertainment.

For example, I love Naked Hosting, not because they have better prices or technology than many of their competitors, but because the company was built on outstanding, personal customer care; when morning, noon or night, the company owner was available by phone to resolve any problems. That level of owner-provided support may not always be the case today — as the company has grown substantially over the years — but that legacy of excellent customer care remains.

This of course is not a unique story in online adult, as many companies began with modest roots that included an owner tethered to a cell phone or ICQ chat 24/7; but when a paysite owner, for example, is able to field his own customer service calls, rather than toss them off to the billing company’s support staff, he gains a valuable level of customer feedback that he would never have received by simply listing an IPSP’s toll-free number on his site, or by relying on surveys and reports from his own in-house call center staff. This isolation also includes amongst staff members; where decision makers may have no contact with functionaries that could prove to be valuable resources for further growth.

Principal accessibility is the answer, but nearly impossible in a large corporation.

Having too many cooks in the kitchen is another problem faced by larger companies, where the needs of multiple stakeholders need to be placated — an often time-consuming process more attuned to interdepartmental politics, than towards obtaining actual results.

This can also lead to the same sluggish corporate responsiveness that allowed the web to flourish before AOL, AT&T and other media giants caught on to its importance for the future; letting legions of independent lone-wolf and “mom and pop” producers to develop “Web 1.0” — an evolution without which we’d still be living in AOL’s walled garden.

The smaller the number of decision makers, the more nimble the operation. The more sluggish the enterprise, the easier it is for an upstart to gain a foothold.

Smaller companies also have an easier time developing communities and the resulting visitor loyalty due to their ability to specialize; but growth is then limited by the size of the interested community. Getting bigger means a need for additional communities — and it is hard to serve each “as well” (when taken as a group), than by focusing on one targeted audience.

Consider the retail world: Wal-Mart sells jewelry, but a boy would be well advised to buy his girl an engagement ring from the local “best in town” jewelry shop instead; the quality and service, plus intangibles such as “perception,” will make all the difference — not the final price.

In the adult world, real amateur porn connoisseurs are unlikely to be satisfied by any network “amateur” site, no matter how well it’s done; as the size gets in the way of the personality; while the corporate ownership may reduce the model’s interest in promoting it or participating in its ongoing development; making size a disadvantage.

Big companies also have big expenses, which can be hard to maintain in tough times.

For example, finding enough traffic for one site can be difficult. Getting enough for a thousand sites or more can be monumentally challenging — despite the interconnectivity made possible via these scaled networks.

So where does this leave the little guy? The best hope for smaller operators today is to be the first to market with any new ideas before the big boys notice what you’re up to — and then hope they buy you out, rather than squeeze you out. Failing that, you will need to find and capitalize on their weaknesses, while leveraging your own strengths.