A Lust for Profits
Pornography is a huge and growing cyberspace draw. But will salacious Web sites be a hit on Wall Street?
The cartoonishly proportioned women of Bare Breasted Cat Fight are boinging across a computer screen. Perched atop a table littered with CD-ROMs like Naughty Housewives 3, the monitor enraptures passersby with images of seminude combatants tugging ponytails. But attention spans are short at AdultDex, an online adult-entertainment expo held amid the tacky chinoiserie of Las Vegas's Imperial Palace hotel. Quickly bored by erotic mayhem, some viewers drift off to booths extolling various Web-hosting services. Others pause to hear a sunglassed free-speech advocate shout with revival-worthy zeal, "If you knock out X, every other letter in the alphabet is endangered!" The rest shuffle over to Comdex, the world's largest computer trade show, being held a few hundred yards away at the city's mammoth convention center.
Vendors of explicit material were once welcome at the annual Comdex show. The owners of ultravixen.com set up shop just around the corner from Microsoft, for example. But Comdex ejected the adult community in 1995, fearful that merchants hawking Bra Bustin' Babes 2 would tarnish the event. The exiles went on to found AdultDex, now a refuge for techies eager to study the latest innovations and business models of what has been dubbed the Internet's "dirty little secret."
The nickname is a partial misnomer, for E-porn is anything but little and certainly no secret. Raunchy pictures were the bread and butter of the Internet's early days, and pornographers pioneered several technical wonders, from streaming video to shopping-cart software. Just a few years ago, Web pundits predicted that erotica would recede into the shadows once "legitimate" E-commerce blossomed. But with the dot-comming of America near complete, salacious fare remains a huge--and growing--cyberspace draw. According to Nielsen NetRatings, 17.5 million surfers visited porn sites from their homes in January, a 40 percent increase compared with four months earlier. The top E-Porn site--PornCity.net--boasted more unique visitors in January than ESPN.com, CDNOW, or barnesandnoble.com.
Flush with profits. By both online and offline standards, E-porn is also a massive moneymaker. While behemoths like Amazon.com and eToys struggle with losses running into eight figures, adult-entertainment companies like Voice Media and WebPower are flush with profits. "A large, mainstream E-commerce company needs to go out of its way to create demand, [to] explain why it is important," says Keith Condon, vice president of Atlas Multimedia, whose holdings include Live Porn.com. "We don't. We work on filling demand that's already there."
Overall, Web surfers spent $970 million on access to adult-content sites in 1998, according to the research firm Datamonitor, and that figure could rise to more than $3 billion by 2003. A Forrester Research report estimates that cyberporn sales--including videos and accessories ordered online--accounted for 8 percent of last year's $18 billion E-commerce pie. That's about the same as the amount spent online for books ($1.3 billion in 1999) and a good deal more than plane tickets (less than $800 million). With low advertising and labor costs, adult sites typically enjoy profit margins of 30 percent or more. Online brokerages, among the few Internet ventures to rival adult sites in popularity, are far less lucrative; the 1998 profit margin for Ameritrade, for example, was just 0.2 percent.
advertisement
