I've always mused with the idea of creating a user-submitted-content based porn website.
The base code can be whipped out in a few days, and getting traffic for that kind of thing seems to be super easy. The goal would then be to make minor money through smart advertising (most porn websites today are usability hell, with every single white space covered in ads; i'm sure one could do some smart conversion optimizations there), and major money through acquisition when the brand is built.
I feel that this might be a "low hanging fruit" kind of venture because of the social stigma associated with it ("I'm CEO for a social cupcake sharing app" is so much more cooler than "I'm CEO for a porn site"), but I might just be naive about the whole thing.
I've been out of the loop for too long, but back in the day (when Tube sites were just starting up), it was getting harder and harder to make money. So many people were starting up, and Visa was cracking down hard on charge backs.
The biggest issue back in the day was Content licencing, which with today's whole DMCA crap, I would expect it to be far worse on a user-generated content site. If you licensed images for a specific domain and they appeared on another domain you owned, you would have legal representatives sending you emails (most of the time you would just do a deal with the owners and extend the license). This wasn't the result of the content being found by the owner, this was from organised firms that were hired just to scan images and videos looking for specific sets that they represented. When I hear about user-generated content sites these days, I think of one giant nightmare when it comes to content.
It's easy enough to throw something together and try to make some money from advertising, but to be successful in that industry boils down to 3 things. Traffic, Quality and Retention.
- You won't get subscribers without Traffic (fairly simple). If you think that you can get organic traffic off the bat, think twice. You'll need to set up some deals with guys who own key domains to have them funnel traffic through to you. (I don't know if this sort of market still exists, but I can't see that it would have died off)
- To convert the subscribers you need Quality or unique content (which the successful sites will usually do in-house or through companies that will work with them to produce unique content). If you're going to throw up a few galleries of cheap $5 content sets that everyone has seen before, you're not going to get the conversion.
- Retention, is a tricky one. Back in the day you used to count on the subscriber, doing a one off then forgetting stinging them with a re-bill or two, or three. Then when they got their bill they were too embarrassed to challenge they usually silently cancelled. As I said before, around the time I left, Visa was starting to really crack down on charge backs as subscribers had actually grown a pair and started wanting their money back. The only way to fight this is to offer what you advertise and more. You won't keep everyone happy, but you'll see a nicer charge-back rate.
For the record, I was a coder, I wasn't the guy behind the camera, or even the guy that designed the sites. I dealt with the systems, and kept them running. It's not a glamorous title to throw around at dinner parties, but it does bring up some interesting conversations when you start talking about the things that you seen in the industry.
For the record, he's talking about user-generated content so even if users upload unlicenced materials he's covered by DMCA protections.
He won't have to worry about licencing content, since he won't knowingly use copyrighted content beyond what freebies are offered to CPA partners.
I think everything you're saying makes sense for a Paysite, but he's not a paysite---just an affiliate and traffic producer which is a bit more downstream.
As for dealing with the major players to have traffic funnelled through him, he won't be able to do that initially because (a) traffic trades require that you have traffic to trade and (b) you're going to want to have your traffic stream through organic links and SEM since you likely can't afford to pay for traffic for a non-paysite: the ROI just isn't there in advertising.
As megaupload shows, it doesn't even matter if you are protected from DMCA safe harbor. If a prosecutor thinks you are not, they will destroy your business without recourse.
It very much does matter if you're protected by the "safe harbor" provision of the DMCA. The problem is that Kim Schmitz and his team did things, including paying contributors to upload copyrighted material, that forfeited their protections. Prosecutors didn't make this stuff up; the requirements for claiming service provider protections are right there in the law. The prosecution has Schmitz and associates in their own words conspiring to break the law; they left it all in plaintext email.
This is one of the most virulent misconceptions about copyright law on HN. The DMCA does not say that you are protected as long as you honor takedown notices. In addition to honoring them, you must not have any specific knowledge of infringing use of your service that you fail to act on. If any idiot can hit the front page of your site and see that it's used mostly for piracy, law enforcement will take an interest in you once you get big. If, during discovery, they find email messages showing you conspiring to keep copyrighted material on your site, they'll charge you criminally.
That is for a court to establish in what we call due process.
But what happened instead was that a prosecutor found they were not protected under safe harbor. With the stroke of a pen, that turned the business into a criminal racket. Overly general mafia and drug war laws then allow the prosecutor to confiscate property and freeze funds, killing the business.
Of course a judge still has to sign off, but there are no provisions for the accused to defend themself or even be informed of the process.
I can't make enough sense out of this comment to fully reply to it. The DoJ obtained enough probable cause evidence to support discovery of Mega's emails. The emails showed the owners and operators of the company conspiring, in black and white plaintext email, to further the use of MegaUpload as a vehicle for making money via piracy. The DoJ initiated a prosecution, which is now working its way through the court.
If you don't believe commercial piracy on an industrial scale should be criminalized, then naturally you'd believe that there aren't enough due process constraints on the DoJ to pursue those cases. But if you accept the fact that creating hugely profitable high-volume piracy applications is a crime under US law, it's hard to see the "due process" problem here.
"The DoJ initiated a prosecution, which is now working its way through the court."
No. The DOJ destroyed the Mega business, and froze Kim Dotcom's assets, and the prosecution will take years to work its way through the courts. Worse yet, they hoodwinked our officials here in New Zealand to come along for the ride. It's a day of shame, not one to defend.
How is what you're talking about here substantially different from any other criminal investigation? They were suspected of committing a crime, investigators got permission and looked into it, they found enough evidence to support a case, so they got a warrant, made arrests and collected evidence. That sounds pretty normal. Where does due process break down? It's not like the investigators tell you they're wiretapping your phone and give you a chance to argue against it when you're suspected of embezzlement.
It's a bad example to use because the prosecutor claims to have Skype chat logs of Megaupload assisting in the upload of illegal material as well as uploading their own illegal material.
This would instantly remove their DMCA safe harbor protections as it relies on Megaupload not being aware of illegal material on their platform. Further it also requires that Megaupload have no financial gain directly attributable to the illegal material.
So basically if the Skype logs are real and the prosecutor can prove this then Megaupload was rightly indicted and should be prosecuted without the protection of DMCA safe harbor.
As a final note, though, I do note necessarily believe they should have the power to take down the business until after they've proven the illegal activity. Just in case anybody got away with that impression.
If governments and by extension, courts gets pushed enough, laws about safe harbor means nothing. Laws in general means little in this case.
The pirate bay case in Sweden is the best example of this. The by law required impartial police investigator was hired by one of the parties the day after he finished his work. A several order higher paying job. the exact day after he finished his report on the pirate bay. When the police was asked about it, they said it was "common" practice. Later during the trial, the lawyers requested the investigator as witness (to ask about all this), and the investigator refused to return to Sweden when the court agree to the request. This however had no impact whatsoever on the judgment.
The court judgment is also hilarious funny to read, as it include some golden nuggets of complete unknown laws, not written in the actually law books (reason being, work towards a law counts too in Europe, not just what is written). For example, if you produce a service, you might get hanged for it even if you produce it with perfect fine intentions. What counts is the primary usage of said service, so if you produce a tool, and the prosecutor claims that the primary usage of that tool is crime, you can go down for it as facilitator of crime (generic). Its facts like this, that really would have me worried if I created a program like nmap. Hopefully, prosecutors won't realize this law actually exist.
I'm not sure what the pirate bay has to do with Megaupload. I'm not arguing anything in general here, I'm just saying in the specific case of Megaupload there really wasn't foul play outside of procedural errors, if the claims of the prosecutor are true then Megaupload were indeed breaking the law and the DMCA safe harbor protection meant nothing. The Pirate Bay is entirely unrelated.
If your service is protected solely on the concept of safe harbor, that will then only work if you can stay small and unnoticed by the state. As soon your service name pops up in politics, laws like safe harbor will no longer protect you.
The pirate bay case is an example of a website, which though safe harbor would protect them in regard to user-uploaded content. They where wrong in that regard.
Reddit is protected by the DMCA safe harbor rules. Reddit is bigger than MegaUpload. By your logic, the state should long ago have destroyed Reddit.
The reason they haven't is that you're wrong. The DMCA doesn't stop working when you get big. It stops working when you take steps to ensure that infringing content is featured on your site.
For a bulletin board full of nerds, we sure are happy to insult each other's intelligence about what MegaUpload was. What kind of an idiot do you have to be to not understand what made MegaUpload popular? Are you really willing to write a comment in public under your real name saying that MegaUpload was a good piece of software? That sentiment doesn't make you feel embarrassed as an engineer? It was a crappy piracy site; it was popular solely because it was an effective way to upload and download pirated movies and TV shows. If it had been a Dropbox competitor, we'd all be making fun of it, instead of pretending like its founders are technology martyrs.
That may be, I have made no comment regarding that, all I've said is that the Megaupload case is NOT an example of that happening. The Pirate Bay case may very well be, but again, I responded to someone using Megaupload as an example of Government not caring about safe harbor, not TPB.
Indeed, the only real protection the "legit" porn industry has is to wave the 2257 around and try to use the thread of child pornography to get other sites shut down.
True, I wasn't sure how DMCA would work with Tube sites since they were awfully heavy handed back in the day when tracking down unlicensed content. -- I've been out for too long, it's all behind me these days. It was fun, met some nice, really smart guys.
The main thing that changed in the industry is that now these adult video streaming sites basically serve you the content for free, and like television that's paid for by the advertisers, it's paid for through affiliate fees. These are mainly affiliates for the online gambling companies who don't have access to other advertising channels, and a bit of adult dating. The issue is that conversion from this type of content to gambling doesn't make perfect sense, so it's often a better idea to produce content that are a natural fit to gambling instead.
I question how much of the "user submitted porn" is actually user submitted. Flickr, YouTube, etc i buy that all the content is submitted by users. Porn sites, it seems far more likely that the content is mostly uploaded by paid staff. It's hard for me to believe that there are people who see a porn they like and think "wow, I should submit this to youporn". If you're going to build a porn site, the biggest part of the job is probably seeding it with content.
> seems far more likely that the content is mostly uploaded by paid staff.
That's true, but the paid staff is on the end of the content producers in exchange for having their advertisement placed next to the videos.
Also, Manwin actually charges content producers a 'content rate' in order to use their tube-sites for traffic generation. In the beginning, most tubes had unauthorized full videos which would draw in a user base, but were succeptible to DMCA take down. Now with their premier place in the marktplace, Manwin seeds their tubes with either their own content or requires content partners to produce 1 full video per X weeks in order to remain a featured partner.
As for clips... those are freebies given out to affiliates, I have a hard time believing that everyone doesn't use bots to upload that to the Tube-sites.
The major tube sites from the looks of things are primarily dominated by other sites trying to fight for traffic via branded videos, or by cutting a deal with the owner to have branded pages that not only showcase their uploaded content, but a few banners here and there to try and push half satisfied viewers to the core content hub.
I'd guess that the tube site is getting some sort of service fee for allowing the sites to have a "premium" service, as well as some sort of kick back depending on the conversion rate from leads generated by the content (why the premium videos are generally listed higher).
If you think that 1) the videos are legit and that guy just happened to stumble across those two girls in the woods, then you're also going to also believe that 2) most of the content is amateur. - It's a sad truth that the industry preys on the weak minded.
I'd say that a fair amount is self-uploaded (via content bought from providers, or produced specifically for the site), but a majority is uploaded from other content houses to try to promote themselves. Think Free to air TV... average crap shows, filled with 80% advertising.
I don't think that people who buy adult content are weak minded.
I think that they view "amateur" sites as a 'fantasy' portrayal of reality like television. Yes, TV shows and adult sites don't try to break the 4th wall but that's to be expected in a drama.
If you think about it, there's no real difference between the code base for a user submitted porn-site and a user submiitted site for videos and pictures. The only change is the template used on the frontend, and the nature of what you allow to be uploaded.
So a user-submitted content site can be created with a turn-key script that can be had for less than $1000.
Now, in my experience with ad-based content.... advertising rates vary by a pretty sharp degree from month to month if you go through a 3rd party agency. You can make 6 months at X rate, then see a sudden unexpected 30% decline on the same traffic. Couple that with the fact that adult-based ads pay less. For example, Facebook makes $1.00 Desktop CPC, but adult ads regularly sell for $0.01 CPC---1% of mainstream!
Because of that, I can see why sites will have 8 or 10 ads per page in order to get enough margin to cover unexpected rate losses.
I do think you are 100% right about one thing. Smart conversion optimization would be a huge boon in the adult market. Currently, none of the major CPA firms take adult content so its a green-field market. The schelp factor is that you'd have to work with 100s of independent accounts, all with minimum payout floors, but its doable with the right team and lots of traffic.
Creating your own porn site looks much easier then it is. You'll need a lot of traffic before you earn some bucks, and all competition is fighting for the traffic. But it's a fun thing to do!
If you want to start out, I suggest to get yourself a domain name and use http://www.smutnode.com to setup a tube site in minutes.
If I were to do it, I'd just run a porn site and a non porn site with the same code base. Then I could make money from porn while talking about the non porn side of the technology at parties or whatever.
Also, I think there was a bit of a land grab in porn before; it has really consolidated to a few big players, with margins otherwise in decline. Manwin/youporn is one of those big players, from the article.
The other bad thing about porn is that even if you have high revenues (and earnings), companies often sell for something like 1x earnings, which is crap.
In the mid 2005s, the 'tube' sites emerged serving theoretically user-generated content in the vein of Youtube. In reality, very few actually focused on ameteur material, and most just had full videos or clips from paysites.
The ones with full videos were considered to be 'illegal' tubes but the adult market doesn't have an organization with the clout or lawyers equivalent of the RIAA so most of the content stayed up.
The tube sites made their money through advertising and through CPA affiliate programs for paysite networks. Paysites had a love-hate relationship with the tubes. On the one hand, they got traffic conversions. On the other hand, the tubes would use content without authorization which hurt the conversion ratios, and made the paysite content as a whole less valuable to surfers in the know.
Manwin was originally a paysite network, but unlike their competition they embraced the idea of tubes. They launched paid-content websites (under the Brazzers brand) while founding their own tube network (KeezMovies, PornHub).
That vertical integration gave them higher margins than the compeition---they owned both the traffic generators and the eventual paysites needed for conversions. As they became more successful, they went on a buying spree and through various mergers and name changes emerged with over 10 paysite networks under their brand as either wholly owned entities or content partners (e..g Playboy), and 8 of top ten tube sites.
As for margins....
I believe there was a margins slump from 2007 onwards due to the slump in the advertising market as a whole. But mainstream adprices are creeping upwards, so adult-side margins should also be improving.
> companies often sell for something like 1x earnings
AFAIK all deals are closed behind the scenes, and mostly between private parties. So the information on the sale price is not good.
I'm not so sure about that. I just worked on a website that contained some video (for a children's show TV format), and we did some calculations on what hosting the video would cost.
With 50 Mb/video, you can do 20 video's for 1 Gb of traffic. Which, at AWS cost 12 cents. Let's say you'd pay half that at a cheaper CDN, 6 cents. You would, just for transporting the video, need to make 6/20=0.3 cents/page. That's $3 CPM, which seems high. And this is only for transporting the video, not the other infrastructure needed. Not so sure that's a winning business-model.
To be fair, we also looked into setting up our own servers, some places have a few TB traffic with a $50 VPS, but than you need a lot more sysadmin work.
AWS is the most expensive "CDN" that I've ever seen in my life. Their prices rival Akamai and their service certainly doesn't.
With volume, you can get CDN pricing to 1 cent/page. The adult market, if nothing else, is a place where even mid-range sites can have massive volume and cut special deals.
Most major ad networks do not allow adult content on the pages where they advertise. This means that you lose both access to quality ads (that bring the user experience you desire) and you lose the higher CPM/CPC of better networks. This means that monetization is the difficult aspect, and "usability hell" is brought by oversaturation with ads to compensate.
Actually that is an oppertunity for those who are good at convincing people to go to the sites that normally don't advertise on porn and show them the advantages (cheaper rates).
I understand that you don't want a brand like ms. Fields cockies next to a gangbang, but that is soley for ads that promote brand adwareness -- those that directly sell products could properly advertise on porn sites with little risk. I doubt anybody will discount bingocardcreator because Patio11 got a great deal on ads.
(In fact people are known to be less rational when turned on, so it might make sense to put less "need to have products" closer to the porn).
Just like megaupload was a bandwidth monster, you would be surprised with the hardware and bandwidth requirements these sites have once they become popular ....its not a system you run on Amazon AWS ... And investment in network protection you need to defend against DDOS ...?
They are scripts for almost every successful model out there but the problem is reaching mass user adoption. For under $1000 you can have a site done, logo and all but if not enough people submit their videos...
The guy has to be making crazy bank. Wonder why he didnt just pay his taxes. When you are bringing in a likely 100m a year, what difference will another 10m make? I think the guys behind huge sites like this just have weird personality's that make them like to hack every system they can which obviously ends up in situations like this.
Breaking even on a small website is easy. Doing it on such a large scale, not so much. Never mind making a profit.
People have this unrealistic view of porn site owners, as being rolling in the dough. It's true for soeme, but they're a minority. Doing porn brings a lot of heat, not just because every tax man out there assumes you're cheating, but also because if anyone is geetting naked for you, you MUST be some kind evil human trafficer, and probably a child pornographer as well. It's a strange lil world. Sometimes I miss it.
taxes on 100m are not 10m more like 45m as the top tax rate in germany is 45%. The 100m a year is gross revenue also not net profit so he is probably pulling in a lot less after operating costs. People just get greedy and dont want to pay their taxes
Just one note: 45% is the top marginal tax rate. No one is actually taxed such that they lose 45% of their income through personal income taxes. The effective (average) tax rate will be much, much less.
EDIT: not to mention lower taxes due to deductions, capital gains, legal tax shelters.
At 100m you will have a good tax advisor who sets up a network of companies and foundations across Europe and gets your tax rate down to less than half of that rate. If not, get a different tax guy.
It depends, corporations pay on just profits, so income - expenses. The original poster was talking as if the 100m was pure profit, though. Also, I'm not German, but this is how the tax system works in Greece, the UK and many other countries.
Probably only briefly. The only thing that kept Martha Stewart from retaking the helm of her company was an agreement to settle a civil suit the terms of which included a 5 year ban.
Do the criminal penalties for tax evasion in Germany also entail such a ban? In the US, it is fines and imprisonment only.
> is produced in whole or in part with materials which have been mailed or shipped in interstate or foreign commerce, or is shipped or transported or is intended for shipment or transportation in interstate or foreign commerce
You don't ship anything made with materials -- the videos are all digital, so there is no shipping or transportation going on at all -- so what you are doing doesn't fall under that requirement.
I find your reaction fascinating. You find the topic of porn so disturbing that a mere (very dry) discussion of its business side ruins the entire experience of HN for you?
On a side note, you may be naif about hacker culture. On one hand, a lot of hackers consume porn (by virtue of the fact that a large percentage of the general population does). On the other, we tend to be curious about stuff, even stuff that is considered a "poor subject" by conventional social norms. We're not that big on conventional social norms...
Especially given that the article was released in a very renowned german newspaper in the "business and finances" section. There's no actual porn anywhere around.
> even stuff that is considered a "poor subject" by conventional social norms. We're not that big on conventional social norms
Hmm, if you want to avoid conventional social norms, then NOT talking about porn on the internet is the way to go, I would say. The world is awash with people talking about porn.
Yeah the Internet is full of porn, but where do you find meta discussion about porn sites? You know business opportunities, history and stuff life that.
My comment was not related to porn so much as to the obvious link-bait and predictable "0_o pron!" pile-on. Smells faintly of Reddit with a soft lingering bouquet reminiscent of DIGG of yore.
The base code can be whipped out in a few days, and getting traffic for that kind of thing seems to be super easy. The goal would then be to make minor money through smart advertising (most porn websites today are usability hell, with every single white space covered in ads; i'm sure one could do some smart conversion optimizations there), and major money through acquisition when the brand is built.
I feel that this might be a "low hanging fruit" kind of venture because of the social stigma associated with it ("I'm CEO for a social cupcake sharing app" is so much more cooler than "I'm CEO for a porn site"), but I might just be naive about the whole thing.