Porn, a dying or thriving industry?

May day rosesImage by Kounelli via Flickr

I’m going to write a post about pornography today. It’s a difficult thing to write about because its hard to not regress to being childish about pornography; its not something you talk about in polite company, and its an easy thing to snigger about.

However in the US it’s a $15billion industry and has perfected two systems without which the web would be a different place today (online subscriptions and online streaming).

A couple of weeks ago I read an article about youporn (sfw Wikipedia link). This is one of the top 40 most trafficked sites online, and their annual revenue is around $1.5 MM, with 15 million + monthly visitors. That is some atrocious monetization, less than a cent per user per month and with costs attached to it.(and if you look at the proportion that it is of the $15billion you realize that as a smut peddler this is not where you want your business to be going)

Youporn is part of porn 2.0 phenomena, which like web 2.0 means that there is the danger of huge audiences without a clear monetizing strategy. The content is ripped from licensed content (sound familiar?) and amateur content that people post. Associated with the industry there is a host of issues; mostly rights for copyrighted work and age accreditation for amateur content. Which means that in addition to the huge hosting fees you also need a large staff to monitor and take down content.

It doesn’t seem like an easy way to make money (on a related note I once interviewed someone who ran paid ad search ads for a porn site, and said he could only do the keyword research and writing ad copy in the afternoon, as it turned his stomach a little in the morning). The rest of the industry is up in arms about these cowboys devaluing their product, pirating it and removing all their revenues from DVD sales and online subscriptions. (DVD sales are falling the fastest). They’re trying to create premium content (one of the latest movies a rip-off of Pirates of the Caribbean cost $3MM, and apparently made this back). However like the music industry there is a lot of head in the sand behavior about how to best approach this. If content creation and distribution is democratized, then what are the studios offering that you can’t get elsewhere. It’s a
conumdrum that the internet is causing with the movie studios, music industry, newspapers and numerous other industries.

So what are my conclusions and recommendations for the industry? I think they like the music industry are doing things to differentiate their content from that that is available online; one person’s box set with 180g vinyl is another person’s hi-def big budget porn epic with DVD extra’s. One thing that porn doesn’t have which music does it the touring revenues which seem to be supplanting the content sales (Coldplay are charging eur110 for their cheapest tickets for their concerts at a a Dutch football stadium, and they’re playing four nights. That’s a lot of handbags for Gwyneth). I’m not sure how this could be done without breaking a lot of decency laws, but we know that there is a core of under-fans who will pay for the extras; watching movies being made, tours, autograph etc (as this is a family blog I won’t speculate further). Similarly I’m interested if they led the way in the past if the porn industry will crack the monetization question within web 2.0 (which is apparently freemium, but we’ll see)
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Required reading-April edition

Brightness from my magic river...!!!Image by Denis Collette…!!! via Flickr

I have read a couple of interesting posts recently;
brendanmc
1) How to make freemium work, learn from the experts
2) Lessons on monetization from tencent
3) the acquisition channel you weren’t aware of, passed links

Read these, they’ll make you cleverer (or get you to ask some good questions)Related articles by Zemanta

Defending your budget

Revenue and Expenses to GDP 1993-2007Image via Wikipedia

In these bumpy economic conditions one of the first things that happens is that budgets get re-examined. If you’re making revenue and profit this can also happen, so the best thing to do is be prepared. I’ll outline a couple of strategies that you can use, firstly to safeguard your budget;
1) Try this ; “in order to safeguard revenues we have to ensure that we have a decent amount of prospects flowing through the funnels, by decreasing spend we will impact revenues
2) Look at spend; how does spend vs revenue compare YoY. If you’re spending similar this can be justified.
3) A downturn is the best time to win. Whilst others are covering their ass and consolidating you have more opportunity to get out there and scoop up all the customers.

Then the day comes when your protestations don’t work any longer, and you’re forced into a cost-cutting exercise. These five steps will help you do this more effectively;
1) Where aren’t you making much money (geographic area, product line, marketing program). Chop this areas first.
2) Ensure that you have watertight ROI calculations to back up your argument (this is obvious, but still crucial when you’re talking revenue)
3) How has your media costs changed (for us search is flay YoY and display costs have decreased), this will give you a cushion
4) Go back to your budget (tips for creating your budget are here) and look at your testing areas, your big spend. Look at how to prune this from your trial budget and areas which don’t directly contribute to the bottom line.

Good luck with the process

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6 tips for using Google Insight

Search-Engine-MarketingImage by Danard Vincente via Flickr Google Insights for search has just been released, offering a whole wealth of data that previously was not available. For your SEO and PPC campaigns there are a lot of words that can be targeted based on this. However if you are looking at this from an industry perspective and want to gauge yourself and how you rank it is also extremely valuable. Having played around with it a little recently these are some skews I would advise;
1) Look at your category
It may be difficult to find the exact niche that you inhabit, but drill down to as close to it as you can. What is the trend in terms of searches, is it seasonal, is their growth in the category, what are the top keywords. Then look how much share you get proportionally of the big terms, this is illuminating because it gives you an idea of the size of the opportunity, can you optimize your page better, should you bid more on this area.

2) look at your brand
how have the searches for your brand been performing (as marketing person you hope that your brand becomes even better known). Can you tie in bigger peaks in spend with promotions that you undertook. Can you see what is working to get your name out, and what isn’t. Are there cycles on how people look (time of the year/month/week), is there some way that you can optimize based on this (this ties into how you manage your campaigns and the information you have about customer behaviour- day/week parting, bidding more round payday etc)

3) Look at different geographies
Start off on worldwide for all your searches and then split them into different countries. Look at these and see if you have some large market share in an unknown geo (that’s the joy of having an online business, no borders). Is your site big in Norway, why is your site big in Norway, should you start adding localized payment systems and structures? This can isolate areas where you should focus, similarly it may outline areas that you’re underperforming.(as this is based on IP address I wouldn’t take the extremely local/city perspective too seriously)

4) major searches
look at what the core search terms are around your brand and in your category. Are you bidding on them, maybe if you drill further into this they will give you some interesting phenomena. E.g. marketing in other languages you may not know what the up-to-date slang terms are and these may be reflected in the upcoming terms.

5) segment over time
this I think is one of the more interesting functions. You can find out how things developed with your brand/category/search term. How the geographic makeup changes over time, and what happens with related terms. If you have made specific promotions around a time, how did people react to it, did they search for you for terms related to it. Where do you experience the most organic growth, also look at your share of the search, how does this change over time. Looking at the matrix of marketing spend, competition and time and try to figure out how it fits together.

6) competitors popular search terms
are a mine of information. What is their positioning, what are the major terms that people are searching for around their brand, what should you be bidding on, what are the major traffic drivers from a seo perspective. See what share they have of the top terms. In most industries/categories there are a few key terms which drive the majority of the traffic (good old 80/20 rule). We call these the k10 (for our top 10 keywords). Who owns the largest share of these and how does it change.

These are a couple of things that you can do with Google Insight that should give some more beef to understanding your market and where you sit within itRelated articles by Zemanta

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Zappo’s

I am a fan of zappo’s
Not of their shoes (they don’t ship to Europe), but of the way they sell their product and run their company. I was looking around for some shoes online (I have a sneaker fixation) and got to the zappo’s site, what I found was; numerous photos from different angles, clear description, nicely laid out page. I asked them if they’d ship to me but the nice lady in their customer service department explained that they were only focussed on the us, unfortunately didn’t ship to europe, but had i tried site x. And that’s the key to what they do, they’re a customer service company (their tag line is “powered by service”)

I’ve kept up-to-date with them anecdotally since then, there was a marketing Sherpa interview with them that highlighted that they don’t believe in marketing, but they do believe in delivering a WOW ™ experience. Jim Sterne talked about buying shoes from them (in a web analytics newsletter!) and seth godin highlighted a story that someone blogged about the customer service they offer. A woman had bought shoes for her terminally ill mother, and she had passed away without wearing them. She got an automatic mail asking her if she was happy with them; zappos has free shipping, 15 days evaluation, and free return shipping. She explained her situation, and zappo’s apologized for bugging her at this time, and then sent dhl to come and pick up the package. They then sent a condolence bunch of flowers the next day. This is the human touch that is lacking in many operations these days, zappos has no kpi’s on talk time or restrictions on what is done to keep the customer happy, but the focus is to keep the customer happy (you’ll see in one of the graphs in the presentation the significant revenues they make from return customers, so this pays off)

They get it; the customer experience is key; and its not for some bullshit reason that they then plan to pr what they do. In this case someone had a blog and talked about it, but there must be many such occurrences which remain undocumented (or spread to a couple of close friends).

Following on from the customer experience being key is that you need the right people on board in order to deliver that customer experience. Which is another innovative thing that they do. Everyone that works at zappos (irrespective of what they will do at the company) has to do a minimum of a week (and 4 weeks for customer service) working on the front line, packing boxes and understanding the nuts and bolts of how the company works. After the first week of this training everyone is offered $1,000 plus their pay-to-date to LEAVE the company; the thinking behind this being that if there isn’t an immediate culture fit, then the person can leave and both zappos and the employee are better off (this $1,000 has increased from $100 to $500 to $1,000, and could be looking at increasing).

Hearing this was pretty groundbreaking to me, and I started to do some online sleuthing into them. I read their ceo & coo blog, watched some movies, and contacted them to get some of their presentations.

So now I know more about zappo’s, and I’m even more impressed; I have an invitation to go and visit them for a tour the next time I’m in las vegas, they’re sending me their culture book (I’ll update you when I get it), and I am a firm believer in their value system and way of running their business.

2008; $1billion revenue, selling shoes & accessories;
2015; Amazon substitute?

music- my way

My promised post about my music consumption online is finally ready.
The times/places of music listening determine the formats that I listen to;
On my way to the train I listen to my mp3 player, and on the train I listen to either my mp3 player or tracks on my computer.
At home I listen to records.
In the car I listen to CD’s.

In terms of music I have a browsing method of finding music that I like. Surprisingly enough for these days I actually do buy music, after years of only downloading I started buying vinyl about 2 or 3 years ago. One of the cool things with vinyl (aside from great big pictures, and the act of putting a record on) is that it now comes with a free download coupon inside the vinyl, so you can get the digital version too. the wierd thing is that as yet I haven’t used one of them.

The process I go through in terms of discovery and acquisition goes something like this;
1. consistently browsing pitchfork and the mp3 blogs that I read (on my iGoogle page).
2. If I hear something that I like (or that I have downloaded from an mp3 blog) or read about something with a high score/from an artist I really like, I see if it is on Rhapsody.
3. If its on Rhapsody I put it on my mp3 player and listen to it a while, until I decide if I want to buy it. If it isn’t on Rhapsody and I still like the track that I’ve heard I’ll go to Myspace and try to hear some more, or I’ll go to the Hypemachine and see if it on any other blogs and try to download more.
4. if it’s a band that I’ve heard, I want to buy an album of but I’m not sure of which one, I’ll go to amazon and look at the reviews and see which one I think is best.
5. Once I’ve been through this process and I have an idea of what I want to purchase, I look on ebay for older stuff, and if its new releases I tend to buy from the us (cheaper with the $ value, and cheaper anyway), my personal favourite being insound.

This is a fairly constant process of iteration, so I can be on top of the “next big thing”, because as with all hobbies/passions there is a joy in outgeeking your peers. I always enjoy telling my friends about new bands/factoids, or making a mixtape for them. One service that may make this process a lot more cohesive for me is something like Last.fm (a friend of mine works for them, and is a true evangelist). The problem is that I don’t use iTunes (except for making mix cd’s); vinyl isn’t digital, Rhapsody doesn’t get indexed and a random collection of mp3’s are not expansive enough to collate. So my music listening remains unclassified without a central point to manage it digitally. This is not the end of the world for me, I enjoy the process that I go through, but I can understand how a pandora or last.fm would allow you through the wisdom of crowds to find music that you like more effectively.

I wanted to also take a look at the major channels that I consume, see what I liked and disliked about them, and what could be done to improve the service;

pitchfork
pitchfork is the premier indie music website. It has a monthly readership of 1.5MM unique users, and has included a section which gives trial mp3’s, videos and streaming tracks It has recently launched a tv channel (pitchfork.tv).
Strengths
I like it for telling me which albums are coming out (even though their reviews are often a little florid), I really like the q & a with artists and music “gossip” (which includes upcoming gigs). Good seo on review pages means that they often come up top when searching for albums (I was in a record store last week, and could search it in on my blackberry)
Weaknesses
Snarky editorial tone may not appeal. Navigation is very flat, it all happens on the homepage which is then indexed according to age, it doesn’t go into different channels. They could do a lot more with their advertising, I saw them pushing Adsense ads, when they could be doing great things with the demographic they reach (its impossible to find this demographic on tv these days)
Opportunities
I am surprised that they haven’t tried to launch some kind of community around the site, I think that they inspire a committed kind of music nerd, and as soon as there is more of a reason to come back to the site (even if its just to see how someone has commented on your initial comments) it brings more traffic and ad revenues. as yet I haven’t got involved in their new pitchfork.tv offering, but it seems a little backwards to me, more of a “push strategy” when they have content available for a certain period of time, rather than having an ability to search through it. Its early days yet.

Myspace
i don’t go to myspace very often. I use it if there is a link to a Myspace exclusive, free tracks to download from someone’s myspace or to check up on gig dates or maybe explore who someone is in a little more detail (if there isn’t a lot of pr about, also the blog posts could be interesting)
strengths
good showcase of a single act, listen to tracks, watch videos and find out more about their band aside from just hearing the songs
weaknesses
I’m probably not the first one to say that myspace is extremely chaotic. The design is cluttered and there are too many distracting elements
Opportunities
Myspace is well known for their music coverage, but they could do a little more to leverage it (especially considering their reach); a Myspace music widget that streams all my favourite choices, some form of recommendation; “you like this, you might like this”. To me it seems like the product hasn’t developed very far since being acquired by news corp, that doesn’t mean that it isn’t good, just that it hasn’t moved.

Music/mp3 blogs
I read a number of music blogs on a fairly regular basis. Some of them concentrate on a specific genre, some only on cover versions; most are imbued with the writer’s personality and tastes. The average post talks about a specific track or album and gives you one track to download and listen to. These are often pre release, or new releases and mostly illegal. As they are hobbyists there is a degree of enthusiasm, and non professionalism/lack of editing which I find refreshing. Some blogs have grown significantly over the last while, so they have essentially become part of the “establishment”. Stereogum has begun these projects where they get popular artists to cover classic albums (bjork-post, rem- new adventures in hifi) to provide full covered albums, gorilla vs bear puts on live shows, and music-for-robots makes compilation cds and clothing.
Strengths
There are so many of them, get pre-release tracks, you get an opinion
Weaknesses
Posting can be erratic, doesn’t fit with a
Opportunities
I’m not sure what the opportunities are for music blogging. I think that the fact that they are so small and not part of a larger organisation is part of their charm, people like AOL have tried to get involved, but it doesn’t have them same feel, i think the MP blogs are destined to be best as they are.

Rhapsody
I love Rhapsody. I think it’s the future of digital music consumption. You search for something and they have all the albums, nice clean design, a short review/info and a useful suggestion tool. Im not sure if the person-in-the-street is ready for using only a subscription program, I think ownership of a product is still important (but for the price, $10/month forever you could never accumulate enough music).
Strengths
Huge array of content, cheap cost/ song, ease of use
Weaknesses
Doesn’t appeal to the casual music consumer, non-ownership is scary.
Opportunity
Like I said earlier, I think rhapsody is the future of music consumption; its key usp I think is the ease of use and depth of content (I don’t have a sonos, but apparently that’s the way to go)

Anyway enough talking about music, here’s a muxtape of current favourites to keep you happy…

Google trialling CPA

This is an interesting development which can be interpreted from two major perspectives;
1) Google is bringing out their version of an affiliate program, so long Tradedoubler, Linkshare & Comission Junction
2) Google continues to refine their model to find out the best way to extra maximum revenue

I’m in the second camp, Google has experimented with CPM (and now actually offers it as an option on the content/AdSense network), mobile advertising (though granted not as well as Yahoo!) with video pre-roll ads and they acquired Adscape last week to find out about in-game advertising. Google’s revenue driver is advertising, and they need to be aware of what is going on in the market and continue to test different formats to find out what delivers them their best ROI.
I don’t think the impact will be felt by people who are already running with a decent PPC budget already, they’ll be working back to some CPA target anyway, so all the CPA portion of the deal will do is allow Google to manage it as opposed to doing it inhouse.