The Industry that drives Digital Innovation Acceleration

In this episode I talk about how we have a not so surprising industry to thank for the acceleration of many innovations we take for granted today. And I share the advice I once gave to one of the biggest players in the space.

Excerpt from the Guardian:

1980s, the internet was frequented by four types of people: government officials, university students, tech geeks like me and adult content seekers. According the Guardian the online adult industry has its roots in the bulletin board systems (BBS) that evolved separately from the internet in the 1980s. They gave way to Usenet newsgroups and free FTP (file transfer protocol, a format for exchanging files over the internet). Users talked about things they had on BBSs and in the newsgroups, then traded the files online.

“The earliest adult content sites on the net were FTP sites run for free from college campuses, especially MIT for some reason,” said one early watcher of the web who asked to remain anonymous. “All the free sites shut down under escalating traffic load in 93-94. Of course they were all rampant copyright violations, and lots of people stopped carrying the newsgroups because of the huge amounts of bandwidth and storage space they required.”

The early sex sites needed to respond quickly to massive use because when a server went down and lost traffic that meant lost revenue. Although not necessarily credited with inventing these technologies, adult webmasters were the first to figure out how to put them to profitable use. As the businesses became more sophisticated, the online adult content industry had an accelerated course in the pitfalls of making money on the web. Overloaded servers, difficulties with video streaming technology, credit card processing – all the problems that web businesses struggle with today were handled in short order by the adult webmasters.

Technical challenges like video streaming and keeping a server live in a tide of traffic weren’t the only innovations early adult webmasters had. They were also quickly learning how to stimulate traffic and profitability. Two other developments in use today, pay-per-click banner ads and real-time credit card processing, the heart of many content sites, were developed by these early webmasters.

So I had been watching and living through this and always made a point of watching the gambling and adult industry because what they do always foreshadows what will happen in the mainstream. You want to be innovative and have an edge in business and marketing just watch those two industries and you’ll always be ahead of the game…. anyway imagine my shock one year when I was approached by one of the multi billion dollar players in that industry for a CMO role … they used a recruiting firm and the company had a respectable parent company name that I wasn’t at first able to connect the dots about yet…

Anyway so the recruiter set me up with the CIO and CEO of this beast of a company … this was 2011 and the Adult industry was facing a zillion existential threats … this is an industry that search engines had stopped allowing paid search, the organic search had restrictions, the social media channels didnt allow advertising, the tube streaming sites were taking the industries original content and streaming it for free and the industry couldn’t do take-downs for copyright infringement fast enough, you cannot get apps in the app store so they were the first to figure out how do things like bypass the app store and stream on devices like the ipad literally the day after it launched…any way … I ended up having a great conversation with them and I told them that I couldnt work for them but I would be open to doing some work essentially brainstorm on a blueprint for a survival… I wont share all the ideas but one was I remember telling them that the actors were the key …. seeing them as partners and their following as part of the GTM … it was similar to what I had learned at Points.com … people get obsessed with collecting certain points… and become loyal to X program… so we marketed Points.com through the program… in the same way the production houses needed to rethink how they worked with the actors…. social media was key… Instagram had launched the year before and though the industry couldn’t advertise …on social media you could scale reach without advertising…. so before the Instagram Model and influencer marketing as we know it to day…. anyway …. thats story of how I almost worked with the porn industry… I got an offer from Micrsoft for the 3rd time and decided to take that instead…..

According to Complex Magazine here are the THE 10 WAYS THE ADULT INDUSTRY MOVED TECHNOLOGY FORWARD:

1. VHS VS. BETAMAX WAR – Adult content was only available on cassette during the 70s, with porn films making up over 50 percent of videotape sales in the US, 80 percent in Germany and Great Britain. Debbie Does Dallas was even the best-selling VHS tape in 1978. Fast-forward to the late 90s, porn continued to change the media format landscape by accounting for nearly 90 percent of the DVD-video market share.
2. ASCII Porn Stepping Stone For Digital Imaging – when the World Wide Web was nonexistent, ASCII porn was regarded as the “world’s first Internet pornography.” The character-encoded format became popular due to its high compatibility with most computers, simple rendering, and transferability via network protocols and email. ASCII art would go on to inspire advancements in graphic design and computer imaging.
3. Broadened The Cable TV Market – Before companies like Time Warner racked up subscriptions solely on the basis on carrying XXX-rated channels like Playboy and the Spice Network, there was Manhattan Public Access Cable—a provider in the 70s that managed to increase subscriptions from 100,000 to 300,000 after airing two seasons of an adult program titled “The Ugly George Hour of Truth, Sex and Violence”. In 1999, DirecTV sources disclosed the revenue of customers who brought adult movies, estimating up to 150 million spent by 8 million subscribers.
4. Ushered in High-Speed Connectivity – Penthouse magazine was ahead of the curb in the ’90s when it began distributing 2400-baud modems to its readers so they could have faster access to the company’s XXX bulletin boards. In October 2000, the New York Times reported that nearly 20 percent of AT&T’s broadband costumers were watching “real, live all-American sex” online and paying $10 per film
5. Live Chat/Video Conferencing – Forget Skype, Tango, or iChat. Back in the day, adult sites were the only places you could engage in any form of real-time interaction. Porn domains allowed users to view a live feed of a person and engage in communication through a web cam.
6. Online Payment Systems – every major online retailer owe some gratitude to Richard Gordon, the founder of Electronic Card Systems. In the mid-90s, Gordon’s credit card transactions system introduced online payments and provided services to top porn sites including the same outlet that published the Pamela Anderson and Tommy Lee sex tape: ClubLove. Statistics gathered by Forrester Research indicate nearly $1.3 billion was spent on Internet porn in 1999, with the industry generating close to $2.8 billion in revenues by 2006.
7. Streaming Pioneers – Patchen Barss, author of The Erotic Engine, claims Dutch porn company Red Light District created the first “workable Internet-based video streaming system” in 1994, setting the mold for CNN’s online service one year later and YouTube a decade after. Digital porn queen and founder of Danni’s Hard Drive, Danni Ashe, said, “The adult entertainment industry was the first to use streaming JPEG push video, which was a video that worked (…) in the browser and didn’t require a plug-in.”
8. DRM – Once digital piracy developed into a pandemic, porn companies started investing in digital-rights management software to protect content. Developers Playa Solutions built a program that would bring up a payment screen to view videos or inform users that they could gain access to clips by watching ads.

The last is innovation is my favorite marketing tactic that is near and dear to my heart because it is the first type of marketing I did in the 90’s my 1st gig for a technology company was building and affiliate program.

As legend has it, Jeff Bezos, CEO and founder of Amazon.com, chatted with a woman at a cocktail party about how she wanted to sell books about divorce on her web site. After that exchange, Bezos pondered the idea and thought about having the woman link her site to Amazon.com and receive a commission on the book sales. This was the impetus for creating the “first on the Web” Amazon.com Associates Program.

In February 2000, Amazon.com announced that it had been granted a patent (6,029,141) on all the essential components of an affiliate program. The patent application was submitted in June 1997, which was before most affiliate programs but not before PC Flowers & Gifts.com (October 1994), AutoWeb.com (October 1995), Kbkids.com/BrainPlay.com (January 1996), EPage (April 1996), and a handful of others.