Porn sales unlikely to boost Yahoo! profits

Analysts warn that pornography sales -- far from boosting Yahoo!'s balance sheet -- could seriously damage its brand

Leading Internet portal Yahoo! is turning to the porn market as a new stream of revenue, but online financial analysts warn there is little money to be made in this market.

As a victim of the current slump in online advertising sales, Yahoo! is one of the first leading dotcoms seeking to make a profit from the sale of hardcore pornographic videos and DVDs. According to Internet analysts however, the global Yahoo! brand may not be enough to rake in any profit from this market.

"The online pornography market is not the pot of gold that everyone seems to think it is, as it's a highly fragmented market, " said Nick Rosen, analyst at the Online Research Agency. "Yahoo has fantastic traffic, but there is no reason to believe it could achieve market leadership in this area -- it's not what the brand is known for."

Only one Internet pornography company is publicly listed on the US-based Nasdaq index, and this reports an annual turnover of just $30m. "This is not an impressive figure," said Rosen. "Yahoo! has the advantage of having an in depth knowledge of porn through its sex-obsessed Internet users using its sexually orientated chatrooms, but they won't find it easy to turn this money into cash."

It is not illegal to distribute or trade pornography over the Internet, but to date major Internet companies have been unwilling to associate themselves with such material. AOL has no plans to sell adult material, and Amazon.com does not promote porn, but customers can search for it if they already know the title of material thta contains it. Yahoo! currently offers 469 categories of sex on 3,407 sites.

"Yahoo! takes extra precautions to ensure that its products are only available to age appropriate audiences by placing adult merchandise and products behind a secure firewall," said a Yahoo! spokesperson. "To enter this area, users need to enter their credit card details and verify their age."

Daniel O'Boyle Kelly, a senior analyst at IDC, is concerned that Yahoo!s decision to enter the porn market could have a detrimental affect on its brand in the long term. "It doesn't seem like a natural progression for Yahoo! to move into porn -- it may solve the company's short term financial difficulties, but in the long term it could be more damaging." Despite his reservations about the sustainability of the pornography financial model, O'Boyle Kelly admits that smaller online players may follow Yahoo!s lead in attempt to find a replacement for the failing online advertising model.

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What Yahoo has actually done is simply to be honest by providing sex-related content at a higher price than footie-connected stuff. Guy Kewney's guess is that within a year, Yahoo will probably spin off its explicit section into a new, totally unrelated operation and until then, they'll have to endure a lot of people saying How Awful It All Is. Go to AnchorDesk UK for the news comment.

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