THS Articles

Adult Hosts: No Midlife Crisis

By Irwin Soonachan

Like many people, Phil Blancett found his path in life by accident. For Blancett, that path led him straight to the green field of an unclaimed, profit-rich business niche.

"It's the gray market," says Lydia Leong, principal analyst for Gartner. "It generates gigantic revenues and nobody wants to talk about it."

In 1994, he owned and operated a small ISP in California. He had a client running an adult BBS who needed hosting services. With a T1 connection and plenty of server space, Blancett agreed, and he subsequently took on a few more adult sites.

Not long thereafter, his business ran into a very serious problem: Dial-up customers were upset that their normally reliable connections were slow.

"I figured it out one day," Blancett recalls. "I was asking, 'How come everybody is complaining that we're slow?' One of my engineers, who remains with the company to this day, knew what the problem was. He walked over to the server where we had the adult sites, unplugged it, and voila, everything was fixed." (Editor's note: unplugging servers is usually not a good way to make a point.)

That's when Blancett came to an important realization: the online pornography industry was taking off, and hosting it had potential profit margins far greater than providing dial-up services.

Today, as president of XXXWebhosting (www.xxxwebhosting.com), Blancett's business is in an enviable position. A study released by content filtering company N2H2 estimates that there are 1.3 million adult sites on the web, while Adult Video News, the trade publication of the pornography industry, estimates that in 2003 adult websites generated $2 billion in revenue in the United States alone. Despite its lack of coverage from mainstream analyst groups, there is no question that pornography is one of the few profitable consumer markets on the web.

"It's the gray market," says Lydia Leong, principal analyst for Gartner. "It generates gigantic revenues and nobody wants to talk about it."

More importantly, while many small hosting companies -- and a few large ones -- were forced out of business or merged into larger competitors, the last few years has seen growth among vertically oriented adult web hosting providers. Why? Adult websites began seeking hosting providers who knew their space, and, providentially for Blancett and others, mainstream web hosting companies were happy to lose the business.

The adult website lifecycle
Mainstream hosting companies quickly learned that adult sites have a very different lifecycle from other websites, and weren't able to adjust their business models accordingly.

For starters, many adult sites are started by entrepreneurs who know content, but not technology, despite entering a technology-intensive space. Jen Kealoha, owner and operator of Jen's Ex (www.jensex.com), a popular adult website, had no more background than a degree in photography when she founded her website.

"I didn't know a ton about hosting when I first started my site," she says. "I did research to learn about the different features I would need and shopped around until I found a company that had everything I wanted at a good price."

She has since switched web hosting companies.

Tech novices running frequently updated websites mean one thing: lots of calls to customer service. Blancett's XXXWebhosting has live tech support staff - not an answering service - picking up the phones 24/7. But Blancett says that he also charges roughly $50 per month for what would normally be a $5 per month starter site from non-adult hosting providers.