FranciscoandRonJeremy

One of my more interesting entrepreneurial adventures was a foray into porn. When I explored the business, what I found was an industry with tons of hype but where profits were actually hard to come by and mostly flowed to a handful of breakout stars and established companies. It was a lot like the Internet space is now.

Recently, I was telling some friends about my time in the industry, and it occurred to me that the similarities between porn and Internet startups run so deep that there are some great lessons to be learned from examining the porn business.

First, a bit of history. The modern porn industry and its massive growth is really a story about distribution technology. Before the introduction of the VCR, porn was a shady, niche industry that produced a relatively small number of films watched by perverts in adult theaters. When the VCR made it possible for everyone to watch porn in the privacy of their own home, the industry exploded.

Of course the second distribution technology that enabled the porn industry was the Internet. Here’s where the business lessons of porn and the consumer Web parallel each other. Almost all Internet startups are application layer services or content that rely on the web for distribution.

When you think about it, Vivid Entertainment and Y-Combinator are in the exact same business of coming up with new consumer facing products that keep people engaged online. In this respect, the startup space is identical to the porn industry and the trends and lessons we can learn from porn are directly applicable to internet startups.

Consider the growth hacking movement that is so in vogue these days in the startup space. To hear its advocates talk about it, you might think it’s a new breakthrough, but as anyone who’s ever been trapped in an endless cycle of porn pop up windows can tell you, the porn industry has been using shady user acquisition and growth hacking tricks since the ‘90s. For both porn and internet startups, it’s all about getting eyeballs and users.

The current challenge faced by both porn companies and Web startups is how to differentiate themselves. Since there’s only so much you can do, the answer for both industries has been to pursue increasingly small and bizarre niches. In porn, this takes the form of pushing the limits of obscenity with such things as bukkake videos. In the world of Internet startups, the same pursuit results in companies dedicated to mailing men’s underwear and similar ridiculousness. Since the big players have locked up all the major markets, the only option is to chase the fringes.

But the Internet startup space is now reaching Rule 34 (which states that porn exists for every conceivable topic). We have at least one, and in most cases multiple startups for every possible idea. In this environment, even fringe markets have competition. And cannibalization makes it increasingly harder to find profits. This has already happened in the porn industry, and is picking up steam in the consumer internet sector. Case in point, we already have several companies competing in the underwear delivery space.

Another parallel is the fact that both industries require no formal qualifications. It’s obvious why this is the case in the porn industry, while the Internet startup space has championed the “no college” mantra and made things so cheap to start that anyone can give it a shot. The result of this, just like in porn, is a flood of people jumping into the industry and increasing competition.

Perhaps the biggest lesson from the porn industry can be found in the cliche of the wide-eyed girl showing up at the bus station and being sucked into the world of porn. Having met some of these girls, I can tell you this story is real and very common. But if you think about it, isn’t this narrative eerily similar to all the would-be internet entrepreneurs showing up in San Francisco looking for fame and fortune?

Finally, here’s one last parallel that should scare the hell out of you. Despite the hype, the average porn performer lasts 18 months and makes very little money. Sounds a lot like the average startup, doesn’t it?