Source: Interactive Week
By: Randy Barrett
E-commerce times are tough, and the $1 billion online adult site industry is no exception.
Operators of large and small porn sites report that the days of easy customer acquisition and steady revenue growth are over.
"My [traffic] conversion rates are not what they used to be," said Brad Gosse, president of Adult Money Maker, operator of about 10,000 sites.
It used to be that one in 100 visitors to Gosse’s pay sites bought a membership. Now, that figure is one in 400. As a result, his revenue – which he wouldn’t disclose – is flat.
The economic downturn, a massive saturation of free adult content on the Web and new, stricter rules on credit-card fraud have combined to cause tectonic changes in the industry.
Traditionally, the business has depended on small, free sex sites to feed traffic to the larger pay sites. The larger sites usually pay on a per-click-through or new-member-converted rate. That model made many Webmasters at small adult-oriented sites very rich.
But tighter wallets are changing the dynamic. "Lots of people are canceling memberships, saying they’ve lost a job or are stacked up with credit-card debt," said John Distasio, owner of Cyberfoxes.
Surfers are also now cognizant of the huge availability of free pictures and video clips. "People don’t buy like they used to. They used to be very impulsive," Distasio said. "Anybody who wants to get into the business now will probably fail."
Celebrated porn entrepreneur Danni Ashe of Danni’s Hard Drive reports her membership numbers are down – though that is often a seasonal trend. The saturation problem, she admitted, isn’t helping matters.
"There are now too many adult sites, and the average viewer has become overwhelmed by the never-ending banners and pop-up windows intended to keep them moving around," Ashe said.
As a result, the traffic that does flow through free sites doesn’t tend to buy memberships from the pay-side operators. Pay sites are feeling the pinch, and the thousands of smaller feeder sites aren’t making the referral money they used to. Many predict small operators will soon start deserting the business in droves.
"This may be the year Webmasters will make the decision whether they’ll stay in the business or not," said Lee Noga, an executive at Cybererotica, one of the industry’s biggest players.
Last month, Cybererotica cut the amount it pays to referring Webmasters by 10 percent – a first. Officials at Cybererotica said the move was meant to strengthen the company amid changing market dynamics.
Some Webmasters saw it as one more sign of trouble: "I think we’re sitting in a shake[out]," Adult Money Maker’s Gosse said.
