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How the porn industry has driven internet innovation

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This article also appeared in Finweek Magazine in their 28-Nov-2013 issue and online

It may not be everyone’s favourite industry, but like it or not, the sex trade has driven many of the major innovations we see on the Internet today. The explosion of the Internet, the swiftness of broadband adoption and the penetration of 3G: all must be credited to the porn industry. You can thank porn for not only for the omnipresence of the internet, but also for many of the technologies that we accept as the norm: streaming video, online payment systems and live video chat on the plus side, to spyware and spam on the minus side. Finweek explores the internet firsts that were driven by the sex trade.

Although they don’t make for polite dinner table conversation, the statistics of the porn industry are worth talking about. Every 39 minutes sees a new porn video being produced in the US. The word “sex” is the number one search term typed into search engines worldwide. Over 28,000 Internet users view online porn every second. 43% of internet users are looking at online porn, while 34% of internet users are exposed to sexual material even though they never opted in to see this. According to a 2013 estimate, there are almost 25 million porn sites globally, and 12% of all websites are porn-related.

How much is the sex industry worth? It is very difficult to get accurate numbers as very few porn companies are publicly listed and there are no standard definitions of what constitutes an “adult” service.  This means that estimates of the magnitude of the industry are outdated and vary widely. In the words of the Free Speech Coalition, a non-profit organisation representing the US adult entertainment industry: “Various gross income totals for the industry have been estimated by a variety of mainstream news sources, but exact, reliable figures are simply not available.” Tom Rhinelander, a Forrester research director, says their researchers have given up trying to put a value on the sex industry. One figure estimated US annual revenue in 2011 to lie somewhere between $5 billion and $15 billion. According to the website TopTenReviews, revenue from the worldwide porn market exceeded $97 billion in 2006, with the US segment contributing $13.3 billion. This meant the US internet pornography’s revenue in 2006 was greater than the revenues of the NFL (National Football League), Major League Baseball and NBA (National Basketball Association) sports franchises added together! In 2006, the countries with the highest revenues from porn were China, South Korea, Japan, United States and Australia. (Data on the South African porn industry didn’t seem to be available).  In 2007, global porn revenue was estimated at $20 billion, with half coming from the U.S. alone. The Free Speech Coalition estimated that both global and U.S. porn revenues had halved between 2007 and 2011, due to the proliferation of free porn online. Nevertheless, the industry is still a massive money-spinner. In 2012, CNBC claimed that US porn generated approximately $14 billion in revenue per year.

Whatever the latest, accurate revenue figures for the sex trade may be, one thing is certain – they’re big.

Its sizeable economics aside, the porn industry has revolutionised the Internet as we know it. How? Not by inventing new technologies, but by perfecting them. Here are 12 ways the sex business has changed the online space for better and for worse:

On the positive side:

1. The explosion of the Internet
The late 1970s and early 1980s saw the birth of the first home computers. This paved the way for the first online adult porn services to be offered in the late 1980s and early 1990s. From then on, the web grew exponentially, leading to the dot.com boom. This was driven largely by widespread worldwide demand for porn and erotica. In the words of Lewis Perdue, author of Eroticabiz: How Sex Shaped the Internet:  “Without business and technical pioneers in the online sex business, the World Wide Web would never have grown so big so quickly”.

2. Online payment systems
The next time you buy at an online retailer like Groupon or Bidorbuy, say thank you to Richard Gordon for the ease and security of e-commerce. “Who is Richard Gordon?”, you may be asking? According to the New York Times, during the 1990s Gordon set up Electronic Card Systems, which revolutionised credit card payments for many websites of questionable repute. Gordon built his fortune through commissions on sales on many of these sites. One of these was ClubLove, which released the Pamela Anderson-Tommy Lee sex tape. Based on stats from Forrester Research, internet users spent roughly $1.3 bill on online porn in 1999. That amounted to 8% of all online commerce that year, more money than people were spending online on books or flights. At that time, the porn industry was the leading online industry.

3. Streaming content
Before CNN.com or YouTube popularised streaming video on the Internet, X-rated websites were showing videos of porn stars. In a 2001 interview with NPR, Danni Ashe, creator of seminal softcore site Danni’s Hard Drive, said: “The adult entertainment industry was the first to use streaming JPEG push video, which was video that worked…in the browser and didn’t require a plug-in. I think as an industry we tend to jump in a little bit faster and tweak the technology and try to get it to work faster.” Lewis Perdue, author of Eroticabiz, agreed. In his words: “Without programming pioneers trying to perfect video streaming software that would deliver [steamy] images to paying customers hooked up with a 28.8kbps dial-up modem, it is unlikely that CNN would be effectively delivering news clips of global breaking news.”

4. Live chat
Porn paved the way for video chat and its less-sexy alter-ego, internet-based videoconferencing for business. “Video chat is a huge area of interaction and profitability in the digital adult business,” says porn expert Mark Frieser. “Tons of women sell one-on-one chat at really exorbitant rates. That sort of video technology has definitely been pioneered by the adult industry.”

5. Faster broadband
In the early years of the web, the adult industry and its customers had an insatiable need for more and more broadband. In the 1990s, Penthouse magazine gave away 2400-baud modems branded with the Penthouse logo. This is according to Gerard Van Der Leun, former director of Penthouse.com. At the time these modems were the fastest way to use the magazine’s popular XXX bulletin boards. Although the proof is mostly anecdotal, notable experts such as Jonathan Coopersmith, an associate professor of history at Texas A&M, believe that “acquiring higher res porn images faster promoted broadband connections.” Research as early as 2003 by Nielsen/NetRatings revealed that online music sharing and pornography were the major factors driving broadband penetration in Europe.

6. Traffic optimisation
Well before blogs, or aggregation sites like Digg, or affiliate ad networks like Google Adsense came on the scene, steamy websites were attracting substantial site traffic by sharing links, customers and revenue between themselves. In the words of Ariel Ozick, chief of operations for Wired Rhino, a search marketing optimization company: “The porn folks have led the industry in traffic development and monetization. They developed the concept of top sites linking to generate traffic and were among the first to develop an affiliate revenue-sharing model.” Since the birth of the web, porn sites have been sharing customers, said Frieser. “.. in the 1990s, if you subscribed to an adult site and left after three months, you’d get an email offering access not only to that site but to three other networks for the same price. There was a lot of that going on.” Frieser added that this model is becoming popular again, partly because pay-to-view adult sites are losing their visitors to free online porn competitors.

7. 3G mobile porn
Pocket porn is the new emerging trend. In the same way that adult content helped drive ADSL internet connectivity, mobile porn will undoubtedly unlock demand for high-speed 3G on mobile, especially as smart phone penetration grows. Looking at over one million hits to Google’s mobile search sites, more than 20% of searches on mobile devices are for pornography. By 2015, it is predicted that mobile adult content and services will pass $2.8 billion, mobile adult subscriptions will reach almost $1 billion, and mobile adult video on tablets will triple worldwide.

But porn-related internet innovations are not all good. On the negative side:

8. Spam
The sex industry may not have invented spam, but it certainly perfected it. It also showed just how profitable a spam-driven business could be. In the late 1990s many daily come-ons for porn sites were commonplace for people with an email inbox. Based on Cyber Atlas stats, between 2001 and 2002, adult-related spam soared by 450%. By 2003, 20% of all spam messages promoted adult websites. Fast-track to 2008, when that number had shrivelled to a miniscule 2%, overtaken by spam for loans, pills, and other scams. This was according to computer security software’s Symantec’s State of Spam report.

9. Malware
In the past, porn sites were infamous for infecting visitors with nasty drive-by malware. How? Usually when visitors clicked thumbnail galleries or downloaded new “video codecs” containing Trojans. Drive-by infections still run wild on the web today, but unfortunately they’re no longer limited to the internet porn space.  The consequences can destroy lives. In 2004, Julie Amero was substituting for a seventh-grade language class at Kelly Middle School in Connecticut, USA. Learners accessed the teacher’s computer while the regular teacher, Matthew Napp, was out of the room. When Amero took over the class, the spyware-infected computer showed porn to her learners. Amero faced possible prosecution (and up to 40 years imprisonment). Lucky for her, computer security experts persuaded the judge that she was an innocent victim of spyware which had taken over the school’s computer and had launched a plethora of pop-up porn.

10. Pop-ups, pop-unders and mousetrapping
After opening a porn site, a visitor might find it hard to leave. Why? Because website applets took over the visitor’s browser, showing ads or opening new windows to replace each one that the visitor closed. Nasty stuff!

11. Browser hijacking
In the earliest cases of browser hijacking in the porn trade, slime lords would use spyware and adware to hijack a browser’s home page or change a visitor’s default search engine. In this way they redirected the unlucky surfer to fake “search engines” full of pay-per-click ads for porn sites. The owners of these webpages would get a few cents each time someone clicked on one of these hyperlinks. This could add up to tens of thousands of dollars in revenue each month.

12. Domain name hijacking
One of the most notorious examples of domain theft was that of sex.com and the legal drama it triggered. In 1994 angel investor Gary Kremen was the first person to register the sex.com domain. In 1996, Stephen Cohen had Network Solutions fraudulently transfer the domain into his name. He then ran a massively profitable porn business on Sex.com. In 2001 the domain was given back to its rightful owner, Gary Kremen, and Cohen was ordered to pay him $65 million. However Cohen fled to Mexico and moved the money offshore, only to be arrested in 2005. In 2006, Kremen sold sex.com in 2006 for roughly $15 million. It’s a wonder that a movie hasn’t yet been made about the sex.com saga!

Why do these innovations happen in the sex trade? Because porn is “an ecosystem in which participants are willing – indeed forced – to experiment, and where experimentation isn’t hobbled by common sense, good taste, or bureaucracy.” This is the view of Bruce Arnold, principal of Caslon Analytics, an Australian research and analysis company that focuses on regulatory issues, demographics, social trends, and technologies.

So where to from here for the sex trade and its road of internet innovation? Whether it be interactive motion-controlled porn, sexual avatars, biofeedback or 3D video, the porn industry looks set to perfect and expand the commercialisation of new technologies. This is the view of Patchen Barss, author of “The Erotic Engine: How Pornography has Powered Mass Communication from Gutenberg to Google.” In what other areas could porn revolutionise technology? Barss mentioned examples such as computer-controlled sex toys called “teledildonics,” internet cash transactions, virtual worlds and lobbying for anti-piracy legislation, to name a few.

An interesting case of a non-porn product tapping into porn-inspired technology can be seen in the strangest of places – eager parents getting ready for child birth. Nappy maker Huggies launched a “pregnancy belt” that uses haptic technology to let an expecting father experience the feeling of the baby kicking in the mother’s womb. Haptics is a tactile feedback technology that taps into the sense of touch by applying forces, vibrations, or movements to the user. Products like this belt are possible because porn pushed the technology in its early stages, Barss said. While computerising orgasms may sound like porn-inspired fantasy, driving technological adaptation and innovation is nothing new for the sex industry.

The adult entertainment industry has been at the frontier of many of the web’s most useful and most destructive tech innovations. Not because it invented them, but because it perfected them. BusinessInsider.com calls porn “the hidden engine behind innovation in tech”. To stand a stronger chance of commercial success, any new communications technology should perfect itself in the porn industry first.

Author: Colette Symanowitz

Managing Director of www.BeatingBullies.com and www.MBAconnect.net. Passionate about entrepreneurship, personal branding and networking. I also tweet under @mbaconnect_net and @Beating_Bullies

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