opinion

Traffic: Finding Tomorrow's Money Today

Q. Boyer

In a challenging and unsure market like the one that the online adult entertainment sector has become, companies must find opportunities for growth wherever they arise. Just as they do for mainstream businesses and entrepreneurs, emerging markets represent a potential means for adult businesses to generate growth, and a possible salve against the impact of ubiquitous free content and profligate digital piracy.

One reason why adult entrepreneurs can be confident that penetrating emerging markets will soon become more practical is that there is a massive effort underway on the part of extremely well-capitalized mainstream tech and communications companies to build and support new infrastructure around the world. Google, for example, has committed to a plan that will bring online over one billion new users in the years ahead, with a particular focus on the development of mobile networks.

In many cases, the emerging markets being targeted by Google will essentially leapfrog into the wireless market, as the countries that comprise them currently lack significant wired-web infrastructure.

In many cases, the emerging markets being targeted by Google will essentially leapfrog into the wireless market, as the countries that comprise them currently lack significant wired-web infrastructure. In regions like sub-Saharan Africa and rural areas of Southeast Asia where wired connections are currently scarce, Google will be providing wireless access to populations that have had almost no exposure to the Internet, historically.

Naturally, not all emerging markets present a realistic opportunity to generate revenue through adult entertainment. Among the fastest growing markets in the world are several where cultural mores and legal restrictions render it nearly impossible to sell or otherwise legally distribute pornography, including Turkey, Malaysia, Morocco and China. While each of these countries has thriving black and gray markets for adult entertainment within its borders (as do most nations where porn is illegal — even the likes of Saudi Arabia and Iran) and among those intrepid enough to circumvent the state’s online content filtration measures, successfully billing residents of those countries for adult entertainment-related purchases is virtually impossible, not to mention entirely illegal from the point of view of their individual governments.

In some cases, part of the issue is that payment methods that dominate in Western nations have actually lost ground to indigenous and domestic competitors operating within some of the world’s largest emerging markets.

“There are a number of bright spots in emerging markets, but plenty of headaches from a payments perspective, as well,” Clark Chambers, director of business development for 2000Charge told XBIZ. “Recent eye openers include China, whose growth drove Visa off the charts as the most used debit card, replacing it with Union Pay. Union Pay has total dominance in China, with 3.53 billion cards in circulation — and they did this in only 10 years.”

Another factor in emerging markets is that traditional payment forms simply don’t include credit or debit cards, meaning that card companies and transaction processors have to overcome consumer hesitance concerning their products’ basic nature. Chambers said that some companies are betting that they can overcome those obstacles through substantial investment, essentially buying market penetration in a gamble that wining market share will pay dividends down the road.

“Another massive emerging market on the radar is India, where its 1.2 billion people make an enticing target for retailers, but the dominant payment form has remained cash,” Chambers observed. “Several payment providers are spending heavily to gain a foothold for their payment methods there.”

Among the emerging markets where billing issues don’t present a significant obstacle are certain former Soviet republics, like Poland, Hungary and the Czech Republic. In the Czech Republic, for example, market analysts project a GDP growth of over 21 percent by 2017, while in Hungary, GDP growth is anticipated to exceed 15 percent over the same period. But it is Poland, in particular, that presents an attractive target for adult companies, according to Chambers.

“Poland holds a lot of promise for e-commerce transactions,” Chambers said, noting that the country has experienced 20 percent growth each of the past three years. “There’s also a 68 percent Internet-penetration in Poland, with half of those users shopping online and using established payment methods such as Przelewy24.”

Another form of emerging market, one that is often overlooked in the understandable excitement over massive markets like China and India, is the growth of market sub-sectors and individual demographic groups within markets that are already well-established. Shifting immigration patterns and high birth rates can result in an explosion of a particular demographic — like the growing Arab diaspora in the U.K. and EU, for example — and can be described as an emerging market of sorts, albeit a very different kind than the opening up of a previously “denied” market like China.

Since these growing sub-markets exist within geographies that companies have already penetrated, and where they have already established some measure of brand recognition, tapping into these can be somewhat easier than exploring true emerging markets, some of which have cultures and social norms that make them resistant to adult entertainment, or even openly hostile to it.

One such sub-market is the rapidly growing Hispanic youth demographic within the U.S. Along with rapid population growth and increasing Internet penetration in countries like Mexico and Brazil, the growth of the American Hispanic population is driving demand for Spanish and Portuguese language services and websites. Along these lines, looking at the demand for adult website translations into specific languages is another means of evaluating emerging markets and their relative value to adult businesses.

“For the past year, TranslationsXXX’s most in-demand languages have been Spanish for Latin American markets, Portuguese and Brazilian Portuguese,” Colin M., vice president of business development for TranslationsXXX told XBIZ. “We have also seen a large increase in the demand for Japanese text as well as many Eastern European languages such as Polish, Russian and Slovenian. The majority of our clients’ largest consumer group is still the U.S., so we are also seeing a large push to translate content to target the almost 50 million Spanish speakers in the U.S.”

While predicting trends is always tricky, and particularly uncertain with respect to emerging markets, Chambers said that based on the moves of major internationals like Google and a variety of telecom firms, there are “two solid bets in the markets emerging from under-banked status” — prepaid cards and mobile.

“Pre-paid is an option that has instant value to a previously cash-only customer, so it’s an easy value-add,” Chambers noted. “Additionally, there’s much to be said about the mobile payments and likely penetrations of mobile transactions in emerging markets, especially within the third-world. The statistic that’s most striking is that there are 100 countries in the world where there are more cell phones than people. Many of these countries are emerging markets, like Russia, India and Brazil. Africa is yielding some success in its stronger marketplaces, as well. The mobile platform M Pesa, which started in Nairobi, accounted for nearly $22 billion in transactions, or about 60 percent of Kenya’s gross domestic product, in 2013.”

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