Will Yahoo! Suffer Without Adult Content?
May 7, 2001 -- Can Yahoo! strip itself of porn without paying the price?
That's the question being posed by Internet observers as the Web's leading portal continues to distance itself from adult content.
In April, Yahoo! announced it would stop selling adult videos and DVDs as part of its e-commerce efforts. Last week, The Associated Press reported that the portal has made its adult-themed clubs and chats more difficult to track down on the site.
On the surface, such moves, while helping to ward off criticism from family values groups, might seem detrimental to the financial health of Yahoo!, which has suffered through lagging revenues, a falling stock price and an executive shakeup in recent months.
That's because, since the Internet became a commercial entity in the mid-1990s, a popular assumption has been that online pornography was the one form of content that users could be reliably counted on to pay for. And as Yahoo! evolves into a site where an increasing amount of the content has a price tag — real-time stock quotes will cost you $9.95 a month now — porn would seem to be a lucrative part of that strategy.
Online Porn Biz: Smaller than People Think?
But some industry observers believe estimates of the cash to be raked in by selling sex online may be overrated.
David Card, a vice president and senior analyst at Jupiter Media Metrix, says it is difficult to track online adult video sales of the kind Yahoo! just cancelled. But he places the total revenue of the online subscription site industry — nude pictures, X-rated videos and the like — at $185 million per year.
"It's not the billions and billions that people are waving around," says Card.
Tom Rhinelander, an analyst at Forrester Research in Boston, describes the financial picture of adult content providers as "murky." As he notes, no Internet-only adult companies are publicly held, making financial information harder to come by — although Rhinelander believes the leading on-line adult content providers are profitable operations.
According to Media Metrix research, about 15 million to 20 million Internet users surf their way to porn sites on a monthly basis. But while the top-ranked adult sites — including Danni's Hard Drive, and the online versions of Playboy and Penthouse — are very popular, they don't generate the same kind of traffic as the Web's most popular sites.
"They have millions of users a month, but they don't have tens of millions," says Card, noting that Media Metrix does not publicly release the figures for adult sites.
By contrast, AOL received 69.4 million unique visitors from the United States in March of this year, with Microsoft Network sites attracting 61.4 million and Yahoo! coming in third with 58.8 million.
Chat Rooms Another Lure
Of course, charting revenues and traffic from the brand-name adult sites is not the only way to measure the popularity of adult content on the Web. Countless fan sites offering nude pictures of models and actresses, professional and amateur, exist as well.
And millions of people have been lured to AOL and Yahoo! by the prospect of flirting with or meeting people they encounter in adult-oriented chat rooms or dating clubs.
As Card notes, pornography "is always an early adopter" to new technologies, and the Internet has offered people a new, private way of accessing smut. Indeed, one could argue the Web is only the latest technology in recent years whose popularity has been buoyed by adults-only uses, following a tradition that includes the VCR (for X-rated movies) and Polaroid cameras.
For its part, Yahoo! has not publicly acknowledged making any changes to the status of its adult-content clubs — many of which have names like "Blondie's Love Hut," "Bored Wives and Husbands," and "White Guys Who Love Latin Women" — and does not provide estimates of the percentage of their visitors who join adult clubs or participate in dating services.
"Our community sites are certainly very important to us, and we expect them to remain that way," says Yahoo! Spokesman Jackson Holtz.
Growth May Be Limited
Yahoo! has also shrugged off the closing down of its adult video sales by indicating that it expects adult commerce to grow no more quickly than general e-commerce.
And Card says the future growth of online porn may be limited precisely because the first people to use the Internet heavily — young adult males — are also the core audience for pornographers. The demographics of those beginning to use the Web at this point are less appealing to porn providers.
"We don't think revenue is going to get much over $300 million in the next five years," says Card, who doubts that Yahoo!'s revenue from adult services has approached $10 million a year.
That means Yahoo! may not only have given its site a more wholesome image by cleaning it up, but won't feel a pinch in the pocketbook, either. While online porn is profitable, its practitioners are not necessarily awash in cash.
"I believe you can make money at it," adds Card. "But this is not an industry where you're going to have $100 million businesses any time soon."