Tube8.com – a Study in Online Business

[UPDATE: 18/01/10 - If you've been watching Tube8 over recent weeks, you'll have noticed that the videos have been getting slower and over the last week or so the whole site seems to be down for hours at a time. This suggests that the fine-tuning of their business model (see below for details!) has gone amok. Put simply, if they can't fund the heavy bandwidth that their site must use, then they are probably fucked. Redtube and Pornhub will be licking their lips!]

Tube8.com is (in case somehow you’re unfamiliar with these things) a pornography website. Now I have no direct personal experience to speak of (*cough*) but it’s apparently quite a successful online business. Put basically, its a kind of YouTube of porn – registered users can upload video content which other users can then rate/comment on and so on. A search facility lets visitors find the video content they’re interested in.

Given that I work in online marketing, the way sites like this operate interests me on more than just the obvious level. So here are some tips and insights you might want to take away with you when you’re thinking about your online business, based on how I think a site like this goes about making money.

Find a niche

“Niches” are one of those things that marketing guys love to harp on about. There’s a reason for that. If you “want to sell books”, that isn’t a niche. You’re going to get squashed by WHSmith, Borders and Ottakers on the high street and creamed into nothing by the juggernaut that is Amazon in the online world. But that doesn’t mean you can’t sell books. You just have to find a sphere where the competition is weak or you can offer extra value.

For example, Amazon sell shitloads of everything – it’s just a torrent of numbers and cash these days. That means that they don’t really specialise in anything. To them, a book on the history of Jack The Ripper is the same as any other book. But Jack The Ripper is a niche interest. That means that if a site pulls together all the Jack the Ripper books in one place, adds some good editorial background and an expert review of each one then that site could find itself outselling Amazon in that niche.

Tube8 is a little bit more towards the Amazon model, in that you can find porn of almost any stripe on there, so they don’t ‘specialise’ as such. But where perhaps they outgun rivals like redtube.com is through the fact that they’ll show more extreme material. Those extremes are, in effect, niches. You like to watch people taking a dump on each other? Well Tube8 has it (search for “scat”. I’m told.) Likewise, piss, vomit, sado-masochism and so on.

Get some content

Without content, your website is nothing. You have to have a reason for people to stick around or else they’ll just go somewhere else. This is the rookie mistake that many, many online businesses make. They assume that anyone gives a shit about their business model, or that somehow their product is so compelling that shiny graphics alone will seal the deal.

No.

You have to get content. Whether you syndicate content from other places, hire content creators or empower your users to create content for you is up to you, but ultimately you’ll have to find a way to get it. Tube8.com have trodden the path of letting their users fill the site. Anyone with a porn clip can upload it for other visitors to look at. I’ve written about why the porn companies allow this to happen before, but it does mean that Tube8 is full to the brim of porn of varying degrees of quality but is ultimately ‘free’ for both users and the site owners themselves (notwithstanding hosting/bandwidth issues).

It’s this content that keeps people on the site and therefore generates the chance for the company to sell advertising space.

Establish a community

Putting together an online community is the holy grail of online business. If you can get a core group of people who come to your site day in day out then that is a regular, steady group of people to put advertising in front of. And people being people, they’ll recommend the communities they hang around in to other people – so your community of 50 will steadily become a community of 100. Then 200. And before you know it you have a regular audience in the many thousands. All them united in a common interest (in this case: wanking). Now you don’t need to be a Brain of Britain to know that if you have a few thousand people coming to your specialist interest website every day that there are probably things you can sell them.

In order for there to be a community, you have to functionality that lets people interact. Tube8 users get a profile page (often rather touchingly filled with personal interests in case they might meet a potential date on there), can share their favourites with other users, rate videos and leave comments on them too. Really, all that boils down to is a torrent of who-ca-make-the-most-misogynistic-comment one-upmanship, but even that is enough to keep people coming back to the site.

The balancing act

Like a lot of businesses, Tube8.com will ultimately boil down to an exercise in mathematics. As well as the usual overheads in running  their business (staff, advertising etc) each visitor and view of a video will cost the company a fixed amount in bandwidth and hosting. By working out the percentage of people who view or click ads, they will have created a batch of information for advertisers outlining visitor numbers and demographics alongside clickthrough rates for ads on the site. Because they have this knowledge, they can work out roughly what they need to charge advertisers in order to make money.

So for example, if the average user costs Tube8 £1 a month in bandwidth and hosting and only clicks on an ad once in a hundred visits, that click has to generate them over £1 in order for them to turn a profit. To recoup this there are a few options:

• Charge advertisers £1.20 a click
  You know that on average, 1 in a hundred visits results in a click on an ad, and that a hundred visits costs you roughly a quid. Charging advertisers over a quid for a click therefore nets you a bit of profit. On a large site with millions of visitors, that can soon stack up.
• Charge advertisers £1.20 for every 100 views of their advert
  Some advertisers, weirdly enough, don’t actually care about clickthroughs or sales. Big brands – used to advertising on media like TV and radio – are often mainly interested in ‘exposure’: how many people in a particular demographic ‘see’ a particular ad or message. If a hundred visits cost you a quid, you can charge such people over that amount (all this is tracked through software) and make money. Normally, this is charged on the basis of Cost Per Mille – or cost per a thousand views, if you speak English. So your advertising rate card would probably read “£12 CPM” for a banner ad.
• Join an advertiser’s affiliate scheme wherever a conversion is worth, say, a fiver.
  If they went down the affiliate route, Tube8 would have to work on the basis that if 100 of their users click an advert, only a percentage of those will actually go on to make a purchase. For the sake of argument, imagine that 20% of people who click the ad will end up making a sale – you therefore have to get a fiver or so out of every sale to break even or make a profit.

In the case of Tube8.com, you have an audience of several thousand dedicated masturbators who tune between a couple of times a week (if they’re married and have to find space in their schedule) and every night (if they’re single or an incorrigible pervert). I’m tempted to suggest that the audience is also largely – although not exclusively – male. From that, you don’t have to work enormously hard to divine a load of things that potentially have crossover appeal. If someone’s knocking it out nightly to videos of Sasha Grey then you can reasonably conclude that chances are they are a young, single male with enough internet connection to download several videos a night. Ergo, they have disposable cash.

So who wants to advertise to a young single male? Well you can probably fill in your own blanks – but things that lead to mind are online dating sites, masturbatory aids, broadband providers and so on.

In conclusion

Tube.com is, I’m sure, operating in a sphere that many would find morally indefensible. However, as someone probably said, the markets are blind to morality. Regardless whether you think it’s healthy for someone to make money out of a woman being prepared to shove a pineapple up her arse for the edification of wankers, Tube8 has a lesson about making your website pay its way. Find a niche, invest in content, build a community and do some maths to make it all profitable.