Every couple of months I find it useful to do a wholesale survey of all emerging technologies and business models in the promotion, selling, and distribution of online porn. I learned in the Internet boom 90s that porn always leads the charge on distribution channels, pricing strategies and product structuring for content.

Good examples of past pornnovations that have made it to the broader markets include freemium pricing where the blue site will ask for a card number just before you see the goods. Freemium is now a common model for content ranging from job postings to childrens’ cartoons. Pornographers also were able to leverage the file-sharing networks to their advantage by overwhelming the networks with legitimate files from content providers and loading them up with advertisements for their sites. This flew in the face of the command and control legal battles that got the RIAA and MPAA skewered in the press. While these distribution strategies blazed trails, the product end of the skin business was busy beating us all to the Long Tail. The mainstreaming of fetish porn is the perfect example of leveraging a zero marginal cost customization platform. The same naked people, same cameras, slightly different activity, slightly different website and (drum roll) higher perceived value. You must admit that these guys are doing something right if kink.com is making the Times with bound up women getting spanked in color. Amazingly while pushing the long tail of porn into the distribution stream, porn has simultaneously become more of an everyday resource by de-sleazing the branding and discretely bringing itself into the home of the average Joe.

Taking their cue from a rich history of innovation and invention, the current crop of skin businesses have grabbed on to the Web’s 2.0 behaviors and capabilities in ways that non-porn companies could learn from. Take a look at how user generated content is being leveraged in porn. By creating a platform for home hobbyists, startups like YuVuTu (very NSFW) have grabbed a piece of the most profitable segment for professional porn production: the amateur segment. Without the costs of paying talent, this segment is a close parallel to the horror films that are being produced on shoestring budgets in the more traditional entertainment space. YuVuTu has taken this concept and blown it to shreds by allowing anyone to post in a YouTube-like environment with tagging and a host of social networking capabilities through blog embeds and user connections. Steve Jacobs, the founder of YuVuTu, feels like he has hit upon a space left open by the legitimate players such as Veoh and YouTube when they decided to eliminate porn from their sites.

The true innovation of YuVuTu (and it’s competitors, PornoTube, Xtube, GooTube) is that they built their services in partnership with the professional content providers who were concerned about piracy. By building in monetized content as well as free, they were able to build their databases of content more quickly and without obstruction from the incumbents. The porn industry has historically stayed profitable by sharing customers and traffic which is anathema to most traditional businesses, content and otherwise. So while the entertainment industry debates the business value of Google’s acquiring YouTube, the guys in the Valley are tangibly driving value. Mr. Jacobs also attests to having learned the lesson of the last generation of X-rated sites and taking the elimination of underage content extremely seriously.

As communication and content platforms evolve, pornography, which is how sex becomes content follows. The fact that smart and strategic business people are driving the industry shows how far the industry has come from the brown bag magazine delivery days. The industry has shown aplomb in handling regulatory issues, customer acquisition strategies as well as network economies. Now that we are more likely to find a Harvard degree hanging on the walls of porn management, I am looking forward to my next survey. Seriously.

Garanti Bank in Turkey has an interesting card program that is “Tailor made for each card holder”. Consumers can specify amongst a batch of parameters including rate and fee to customize their card product. From their site:

During the application process on the web, applicants can manipulate over ten parameters such as the reward rate and type, interest rate, card fee, and campaign type to create their preferred combination. Customers who want a simple approach can choose to select one of the four ready made packages…

Considering the rate vs. fee vs. rewards conundrum that haunts acquisition managers on a daily basis, seems like a logical approach to allow individuals to trade off values in each to their liking. It will be quite interesting to see how you can actually get people to take a higher rate or fee. Seems like a great test ground. Garanti also allows people to upload a photo for the card design or to choose from a menu of colors.
I cannot seem to shake the feeling that this is the NextCard folks resurfacing after that debacle here in the States. I have yet to find evidence that they are driving it. The card design is a bit derivative.

Recently a colleague at Citigroup handed me a thick book that eerily reminded me of the VBScript and Core Java tomes I used to tote around in my web developer days. The Purplebook 2006 is the “definitive” annual list of best online shopping sites. Kind of a Zagat’s for the web.

Considering the speed of construction and velocity of the restaurant failure cycle, the Zagat’s paper model is unlikely to survive for restaurants in major cities. The web, with no construction costs and built on fluidity, should not be attempted. Please cross-apply everything in the blogoshere about the long tail, access to distribution, etc. Now frown in a “wow, that is a really stupid idea” face.

The purple site offers icons to indicate when sites offer high, medium or low shipping fees. How they do this in a book in a book when shipping is a variable cost based on distance is beyond me. The only really interesting thing they do is measure the usability of various sites on the same high, medium, low scale. Interesting but hardly useful, considering that such nuances of site usability are a subjective matter. Not to mention, if you can’t use a particular site, you just move to the next hit on Google.
$29.99 for access, no way to promote users views and static. Three strikes.

Prosper and Zopa have been making the rounds recently on the VC trail. Each one has closed about $20 Million in their latest institutional kitties. These are interesting businesses as they are the first real 2.0 executions in the finance vertical.

The finance space is one that is difficult to line up with 2.0 value sets because of the shared ownership aspects and the inherent aversion to transparency that anything financial seems to generate. The impact of handing over the creation rights and distribution to a media product is alot different than your retirement nest egg or college tuition. Institutions give you protection and austerity, right?

An interesting analogue would be to take a look at what is happening in bank branches these days. All those high teller counters, vaults and other cues of safe keeping are giving way to concierges, associates who chat with clients over coffee tables. The retail experience for banking is becoming a more collegial one as the assymetry between the banker and the banked is becoming less and less.

Another interesting trend to look at would be the spectacular emergence of online banking, the direct model in industry parlance. This allows banks to take deposits from people outside of their area of trade. Places where they have no branches at all. Which completely upends the previous model of banks as bastions of reliability and safe keeping. The direct model is really an extension of what was happening already with regional banks getting swallowed up by giant institutions. No longer do you need the First or Second Bank of Your Home Town or State. Live in New York? Bank with Washington Mutual. How about Bank of Internet?

So now Prosper and Zopa bring forth a model that actually just eliminates the bank all together. Technically linking those with funds to those with a need for credit. Great idea and it capitalizes perfectly with the new generation bank customers who love the collegial bank advisor and direct banking using supermarket ATMs to deposit funds or out-of-state bank with a cool brand.

Given all these counter-indicative trends, the shift in the consumer banking industry has been on going for some time now and the P2P and online only models are the shift that will take what was a corporate monotolith only policy and push it down into the shallow end of the Chris Anderson’s long tail curve. We should see a few more Prospers and Zopas launch as these two get some operating time under their belts and increase their volume of outstandings.

So now that the blogerati have settled down on Google Checkout’s launch frenzy, let me take a moment to comment on how they are going to finagle the banks out of being the de facto merchant processors of the web. Banks today don’t do the long tail. Even the ones that purport to be “affinity” focuses such as the former-MBNA portfolios are false advertising on the customization front. Our friends at Google on the other hand do the long tail very well. Adsense is the perfect long tail network and their democratic advertising through ad words drives 50% to 100% of the traffic to their small and medium business clients. Now throw in Google Checkout and you have a closed loop from segment identification to closing the sale. Fine nothing new here right? Well if Google Checkout is works well and Ad Words continues to do its thing, Google will likely never charge any of their advertisers for the transaction.

It is wins all around: business owners who advertise get free credit/debit processing on their site via a trusted consumer name like Google. Google gets transaction data to sophisticate its advertising model. Consumers get smart and legitimate way to buy things from sites that are not called Amazon.com. Now let’s watch them collapse Froogle (holy branding snafu) into the Google Base strategy and you have a complete and open business platform minus banks.