Industry Insiders Say Adult Market Consolidating
 

Industry Insiders Say Adult Market Consolidating

By Jeff Berg
Friday, November 19, 2004

SANTA MONICA, Calif. ? Amid bouts of raucous laughter and good-natured insider ribbing, six of the top players in the adult Internet community gathered in the Marquee Ballroom at the DoubleTree Guest Suites Santa Monica to discuss the state of the adult industry and the direction that it?s heading it.
Helmed by GoFuckYourself.com?s Lensman, owner of Adult.com and organizer of Webmaster Access, the standing-room-only panel discussion touched on topics ranging from the consolidating nature of the current market to the possible disappearance of affiliate programs with the next ten years.

Members of this year?s panel included NationalNet President Tony Morgan, Ron Cadwell, CEO and president of CCBill, LA Mike, owner of SilverCash, Legendary Lars, and Chris Mallick of Epoch.

The general consensus of the panel was that big players in the adult industry are now spending more money on a few key websites and attempting to consolidate their resources.

?We?re not experiencing anywhere near the same growth as in ?98 or ?99,? said Cadwell. ?It is definitely a consolidating market.?

LA Mike agreed with Cadwell.

?We used to be coming out with 20 or 30 new sites a year,? said LA Mike. ?Now we?re spending $80,000 on a single site. It?s definitely a lot tougher.?

Legendary Lars was quick to point out, though, that things were different for some of the smaller adult websites out there.

?Big sites are consolidating,? said Lars. ?On the low end, though, a lot of people are coming out with niche, single-model sites.?

NationalNet?s Tony Morgan attributed the consolidating trend to a growing stagnation among adult websites.

?The industry is kind of stale,? said Morgan. ?It?s all paysites with member areas and affiliate programs.?

According to Morgan, the industry is currently in stasis, awaiting the advent of the next big business strategy.

Somewhat surprisingly, one of the next ?big things? raised during the panel discussion was a possible gravitation away from affiliate programs.

?In four to six years, people are going to see that affiliate programs are not profitable anymore,? said Morgan. ?Large programs are going to circumvent the affiliates in order to get traffic. They are going to drop the middle man between the big programs and the surfer.?

This movement away from affiliate-type business models was attributed primarily to decreasing profit margins between affiliate payouts and retained memberships.

?Surfers are so educated now,? said LA Mike. ?They all know how to sign up and cancel. Retention used to be at 80-plus percent. Now you?re doing good with 30 or 40 percent.?

Cadwell agreed with LA Mike, suggesting that the older mentalities didn?t fit with the new, more experienced adult web surfers.

?People get hung up on ?how many joins did I get today,?? said Cadwell. ?The real question is how many did you keep.?

The subject of proposed changes to 2257 regulations was also raised during the discussion, with panel members agreeing that it would probably mean webmasters would be creating more original content for their sites instead of purchasing it from others.

Panel members were quick to point out, though, that while the new laws may be create some initial problems for the adult industry, they probably shouldn?t be a cause for mass hysteria.

Beleaguered payment processor iBill also brought up during the discussion, with both Mallick and Cadwell suggesting possible reasons for some of the problems that iBill experienced and what it meant for the industry as a whole.

?They just didn?t get it,? said Mallick. ?We were at the same bank. We didn?t sit around for nine or ten months to get a new bank. They just didn?t get one because they didn?t know how to manage their risk.?

Cadwell suggested that the some of the problems might have stemmed from the numerous hands that iBill has passed through over the past few years.

The panel ended its discussion with possible advice that new webmasters with around $10,000 should do to get started in the business.

?Put it on black,? joked Morgan. ?You?ll have a much better chance of making your money back.?

On a more serious note, Morgan said that having a good idea and running with it will probably continue to be the best bet.

?If you have a good idea and have the money to get it started, you?ll make a fortune,? Morgan sad.

Cadwell?s advice to new webmasters was to not overextend themselves and to try to focus solely on one or two websites.

?Some of the biggest jumps we made weren?t reaching 50 or 60 sites,? agreed LA Mike. ?It was five or six big ones.?

?Find your one thing you do well and beat the hell out of it,? said Lars, who pointed out that when he first started he was working 80-hour weeks and not making very much money. Lars also suggested that one of the best ways to make money in the industry today was to find ways to maximize other people?s profit margins.

Mallick?s advice was more traditional, but hearkens back to the idea that the industry is becoming more and more legitimized.

?It used to be that [with a] camera, a girlfriend and dial-up, you were a webmaster, but things are different now,? said Mallick.

?Be serious about your business, because this is a real business,? Mallick concluded.

Definitely. This person Im working with spent 60k on one site.

Very interesting article, those people definately know what they're talking about.

It's all an investment. The cookie cutter bs is over so affiliate programs must put real content in their members areas.

Cross Sells are over, TGP/MGP's are killing us, XP2 blocks popup, ISP's are good at stopping Spam, Surfer is becoming smarter and beating us at our own 3 day trials, 2257 and the goverment is after us. - Jay

Hmm... from what I am reading it sounds like a lot of those people dont really understand whats going on in this industry. Telling people not to invest $10,000? I guess they just dont want competition because $10,000 can be turned into a million in revenue in two years easily.

So whats the problem?

well i must disagree....some of those in that article are the biggest in this industry and VERY knowledgable...

And your statement " ....$10,000 can be turned into a million in revenue in two years easily. " ......NOT anymore buddy...especially "easily"??? how do you figure this? What business would that be in? Or if adult what type of business model?

I agree, 10k is just a drop in the bucket. However, this industry always evolves and I see the conventional elements of the industry needing to consolidate, but when one door closes, another always opens.

I don't get it, this business should be like any other business.....all about risk, return and managing costs

So affiliates are an endangered species?

not necessarily, I think its more like "affiliates becoming employees" some kind of exclusive relationship

agreed.

Ummm... are you serious? I started 6 months ago with almost $0 and will have quarter million dollars revenues minimum first year. Mostly profit. Next year should equal $1 million. And you are telling me its not possible anymore?

If I had started with $10k I'd probably have hit $1 million already.

what's your main biz? paysite?

Nope, sending traffic to sponsors.

http://www.myaacstats.com/

if you work hard enough.

$20 can be turned into $2m if you are smart in one year.

The possibilities are endless :Graucho

Exactly. Smart people can do anything with anything as long as physics doesnt prohibit it :)

?People get hung up on ?how many joins did I get today,?? said Cadwell. ?The real question is how many did you keep.?

"?Find your one thing you do well and beat the hell out of it,? said Lars, who pointed out that when he first started he was working 80-hour weeks and not making very much money. Lars also suggested that one of the best ways to make money in the industry today was to find ways to maximize other people?s profit margins."

-----------------------------------

well said... :glugglug

No, you "get it" alright - this business is "all about risk, return and managing costs " - but these are foreign concepts to the "big pimpin' mofo's" living in their momma's basement and pretending to be porn kings to impress their friends...

to put my :2 cents:

Interesting article.

I agree that in 5-6 years affiliate programs will die out.

everybody loves sex, porn websites will be a thing of the past but the new thing will be stuff like adult friend finder and live cam feeds.

Doubtful. Hell most mainstream sites are just now starting affiiates programs. Even Wal-mart has an affiliate program.

Problem is 3 fold,

A) Paying $35 to affiliates for a $5 three day trial. Can anyone here name a mainstream site that pays affiliates MORE than what a sell is worth?

B) recurring billing( as in re-billing a cusotmer because he cancelled on day 3 of his 3 day trial because your terms say you have to do it within 24 hours ). And sponsors wonder why people charge back.

And rebilling in gerneral. Let face it if someone wants to rebill that should be HIS choice. Hoping he forgets and then hoping he doesn't charge it back is bad business.

C) Too high prices. Who in their right mind will continually pay $30-40 for a porn membership? People can't afford that. PPV model will probally be the future.

I disagree about the rebilling, get AOL to stop then we will all take notice, and PPV you can EASILY blow through 40 bucks in a weekend, its about value

sites will still need traffic.. if there are webmasters who are willing to provide it then there will be webmasters who'll buy it.

I totally agree and been agreeing with this since early last year . Things MUST change

do you think in a year or two many sponsors will drop trials

I think its funny if people think of me as an industry leader LOL..

The concept for dying affiliate programs was more along the lines of the fact that sponsors are also building fre sites more and more. Capturing traffic and recircling it more and more. I am sure there will always be affiliate programs, just that things will change and evolve over the next few years. The web is getting more exciting every day and the opportunities to make money are even greater than before.

I was thinking that I will never open a retail store locally ever now that the web is available to market to the whole world. Why would you limit yourself to your local town when ya can sel to everyone on the planet with money to spend ?

In the 10 years I have been doing this every year my income has gone up except for 1 year where it was flat.

For me personaly wea re gaining so much traction and momentem that its like a steam roller gona be hard to slow it down.

it is likely that prioces will drop on monthly sunscriptions so a trial is not needed.


$5-10 sites with massive daily updated content and written articles. So big that only a few players will emerge as the true leaders of this industry.

This could be true, but scammers and spammers always find their way. i'm in on the content end of this biz every day, very few have the money or are still too greedy to spend anything on content. the tortoises is this biz will rule the day, already are, there are people who you will probably never meet making more than all but a small handful of affiliate programs still mining the 50 shitty paysites, 39.95/month model. i am surprised it's still around but cross sells and major spam operations plus other tricks of the trade still keep it alive.

Pay per view/download is definitely going to be bigger. I keep telling anybody in the movie business that they have the gold, don't whore it out for chump change.

$5-10 is too cheap. people will pay for quality porn, always have. no need to cut prices that severely, it's just playing into the surfers' hands. price isn't an issue when the product is good.

nice :) I know a few of those you speak of and some of them are affiliates of ours :)

Content will be king someday again.
but the industry has to wring itself out first

I'm a Soybean Industry Insider....

so if y'all want to know anything, hit me up.

If you folks think ANY of the top affiliate programs put more than $5k into their new paysites then i have an oceanfront property in Arizona to sell you :thumbsup

Regards,

Lee

umm have you checked pricing on reality sites and episodes ?

Cuzz its a lot more than that !

10 episodes @ $100 each + design.

Dont forget that many of these companies have their own studios too and therefore get the shoots at 'cost'.

Regards,

Lee

Affiliate programs have been around for a long time and an affiliate program to any site will never die....its marketing commissions for referrals...

all sites will have an affiliate program itself....and a big Affiliate Program is just 1 place to find ALL the sites an orginzation has...paying commissions for referrals has always made sense...and wont die...

Girls do hardcore shoots now for $100?


Regards,

detoxed

WOW. Thanks for letting us all know what a total idiot you are.

I think that the one thing that I see pushing the aff programs out is the pay outs being higher and higher. It does not make a lot of sense to pay out 30 40 or 50 dollard for a free or 2 or 3 dollar trial.

With your site lars it works a little different. Your content is changing by the second.


Not by the day. Therefore it is al lot easier for you to convert and retain the traffic.

:eek7

"Will buy your free sites and pay you to run them for me"

The girls would have to be paid less than that. What about stunt cock + camera guy + video editing?

All that for $100?

uhhh.....yeaaaaahh

Cost 'per shoot' for a paysite will be $100 or less.

Consider this.. many affiliate programs, whether you know about it or not, also use those EXACT same shoots and distribute them on DVD and VHS.

That yields a much higher profit margin ($60+ per DVD) to the affiliate programs than using the content inside a paysite.

The chances of the total cost of the paysite content used being more than $100 after you have taken into account the other methods of distribution is negligable.

Any decent affiliate program worth its salt knows that to remain profitable they need to take their exclusive content offline and into bricks and mortar stores, that is why they shoot exclusive content, not to have it inside a members area.. that aspect of exclusive shoots is secondary / tertiary to the primary role of having custom content... to sell it on DVD.

Regards,

Lee

Thanks for letting everyone know you have no common sense.

Do you really think an affiliate program will pay $5k+ on exclusive content JUST for a paysite?

I can guarantee you that anyone who has shot exclusive content hasnt primarily done so because they can use it inside a sites members area, they have done so because exclusive content sells offline on DVDs.

Any of that shoot that makes its way into a members area is viewed as an added bonus.

Regards,

Lee

um, wrong. lol this is some of the funniest shit i've ever read here.

Really?

Im amazed to see all the people posting in this thread that have no understanding of how affiliate programs work.. its all about cost management.

Go find yourself a clue..

http://www.smutdvds.com ;)

Regards,

Lee

i'm sorry, but affiliates will never go away, it's impossible. even if you try to make the big hitting affiliates employees, there will also be millions of entrepreneurs who want to do it on their own, for themselves.. :2 cents:

it's really about reducing overhead. There is no need to pay 145 an mbit , or even 75 when you can get it for 20. There is no need to pay a girl 2k for anal when you can get it for 500. Even in regards to customers. You need to always monitor your CB's and refunds, becuase if you're really low you can be a little more aggressive with them. But yea I would agree the gold rush is over. Now the people who make money are the ones who 1, have it, or 2, know what they are doing.
Duke