Learning From the Sinners

What if I told you there was an online industry in which most of the participants are profitable, adopt the latest technologies in effective business practices, and use some of the most successful marketing principles to drive traffic to their web operations?

What if I also told you that this industry, until recently, netted more revenue than any other industry on the web? What if I also said that almost every “respectable” businessperson looks down on this industry and its operations?

Of course I am talking about the online pornography industry. In this article, I won’t address the moral aspects of this controversial industry. Instead, I will examine its business practices and what other industries might be able to learn from them.

Business Models That Work

The underlying principle of any business — whether it be online or offline — is to build a business model that generates revenue while limiting expenses. In fact, this is one of the critical points to remember about the porn industry. You may not like the product it sells, but the fact is, the model used by the online pornography business is a proven commodity.

For a very long time, pornography has proven to be successful in the offline world. One of the biggest problems with many companies that have tried to build businesses in the online world is that they base their plans on a model that is completely unproven, and in some cases, disproven, in the offline world. Another principle to keep in mind when building an online business is this: If the same concept didn’t work offline, it probably won’t work online either.

Having a business model that works is only the first part of a successful business; it also has to be executed efficiently. When it comes to business-model execution, I’d like to first focus on what no online entrepreneur really wants to think about — failure.

Many Internet companies are failing right now. One of the main reasons they’re failing is that they have no control over costs. They spend money (usually VC money) like water without having any idea when they are going to turn a profit. They hire people just to hire them, yet have no plan for how these people are going to contribute to the business. Conversely, almost all of the online porn businesses have no VC money, and the owners always keep an eye on their p’s and q’s. They keep their staffs small and this, in turn, helps control costs.

And you don’t have to be an accountant to understand that if you increase revenues while keeping costs down, you will turn a profit. Turning a profit ensures that you stay in business, and good things almost always come to businesses that turn a profit.

Using Technology Effectively

The Internet is all about technology and using it effectively. And no one group has contributed more to refining Internet technologies than the porn industry. Developments in serving, communications delivery, e-commerce, and security each underwent a trial by fire within the porn industry.

In the case of some technologies, such as streaming video, pornography delivery was one of the only initial places for its application. Not only did online porn entrepreneurs utilize some of these technologies, but they also understood their limitations and their business ramifications.

There are presently many amazing technologies in the Internet community, but finding the correct mix of business realism and technical application is a lesson to be learned from the porn world.

Marketing Trailblazers

The essence of online marketing is to drive a particular audience to your web site so that you can extract revenue from them. The online porn industry masterfully accomplishes this.

Successful porn entrepreneurs have tried every approach to get people to give their credit card numbers and to visit their sites enough times to keep providing revenue. They have used cross-targeting, multiple interrelated web sites, and exit interstitials better than any other online segment. They understand how to get a target audience to their sites and how to get them to loosen their purse strings once they are there. Effective online marketing is about being creative, and the porn industry is not one to shy away from being creative.

It is also about getting results. The porn industry was one of the first industries to systematically monitor the success of its marketing efforts and make business decisions based on those results. In 1995 I spoke with a porn entrepreneur who explained how he tracked each one of his campaigns and how he knew what was working and what needed adjusting.

This type of tracking is commonplace now in the world of online marketing, but the straightforward business approach and focus on ROI is something that every businessperson should keep in mind.

Nothing Is Perfect

Although the online pornography industry has many helpful business practices for us to examine, it also has some bad business practices: things like spamming incessantly, having a billion exit interstitials on a site so it is impossible for someone to ever leave, and misleading people with “free” offers that still require payment via a credit card.

But running a lean, mean business that is focused on making a profit, utilizing creative marketing, and generating ROI is probably good for all entrepreneurs. You may not approve of the porn industry’s products or offerings, but that doesn’t mean you shouldn’t learn from its business practices.

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