In an era when most dot-coms were acting like little kids, Yahoo always seemed a little more mature like the cool teenager everyone wanted to know.
So I guess we’ll have to blame an attack of hormones for the site’s recent flirtation with pornography, an episode that threatened to tarnish the most powerful brand name the Net ever invented.
News leaked out a little over a week ago that Yahoo had opened an online store stocked with hardcore DVDs and videotapes. The notion seemed about as likely as Bob Barker cutting a rap album, but it turned out to be true for a few days, at least.
Yahoo has struggled to make a buck just like every other content-oriented site during these recent dot-com doldrums. The company’s revenues last quarter were down 22 percent from the same period last year, and its net losses were $11 million. When those numbers were released, the company also announced it would lay off 12 percent of its employees.
But none of this should have been cause for alarm. Yahoo’s drop in banner advertising revenue is understandable at a time when newspapers and other established content vendors are suffering similar losses. Meanwhile, the site is attracting record numbers of visitors. Yahoo reported that 67 million registered users logged onto its sites in March, an increase of 60 percent from the previous year.
Money in the bank
Yahoo also has about $1.7 billion in the bank, which should be enough to weather the current market slowdown. So the company should be a sound bet to return to profitability when the economy picks up again so long as it doesn’t do anything stupid in the meantime.
Which brings us back to pornography. Yahoo has always collected considerable revenue from porn sites that pay to make sure their banner ads appear when users search for sexually oriented content. The site also has offered some pornographic videos for sale in back corners of its e-commerce shops.
As ad revenue dried up in other areas of its site, I’d be willing to bet that Yahoo’s limited red-light district remained profitable. So when someone had the bright idea of expanding this part of the business, executives who hoped to avoid sending another batch of disappointing numbers to Wall Street didn’t say no.
Yahoo’s store opened earlier this month with an inventory of thousands of hardcore videos and DVDs that catered to straights, gays and just about anybody in between. A search engine allowed thrifty consumers to find the best price on these movies at affiliated porn sellers. And the company was selling space in online storefronts where vendors could hawk sex toys and other such products. Suddenly, the caterwauling “yahoooooo” heard in the company’s radio and TV ads took on a decidedly different tone.
Hurting the brand
When news of the service broke in the Los Angeles Times, the market reacted like a mother who’d walked in on her favorite son thumbing through a copy of Hustler. Analysts generally allowed that the new business could make some money , or buckets of it. But they also worried that it would drag down the Net’s most valuable brand name.
Yahoo reacted quickly to the inevitable complaints, pulling its new store offline only days after it debuted. It also pledged to stop selling ad banners to porn sites, cutting off what was likely a significant source of revenue in hopes of purifying its image among shocked customers. It’s OK, mom they threw it all away. Honest.
The episode proves the paradox of the Internet porn business. Any reputable site that expands into the sex trade could count on collecting windfall profits from millions of people who are afraid to share their credit card number with lesser-known vendors. But that same company would quickly lose its reputation, risking the possibility that its brand name would someday carry exactly as much cache as the neighborhood strip club.
The Internet has broken down a lot of social barriers, but it hasn’t bridged the chasm that separates the sex trade from mainstream business. We prefer to keep the hot side hot and the cool side cool, thanks all the same. Yahoo and other commercial Web sites should realize they need to pick a side , and stay there.
To contact syndicated columnist Joe Salkowski, you can e-mail him at [email protected] or write to him c/o Tribune Media Services Inc., 435 N. Michigan Ave., Suite 1400, Chicago, IL 60611.
