Public Outcry Scuttles Yahoo’s Plans for Porn

Yahoo Inc. cut short its brief romance with the adult-entertainment industry Friday, saying it will shutter its X-rated online store and block merchants from selling adult-oriented material on the world’s leading Internet site.

The online giant also said it will stop accepting classified ads or auction listings for adult items and will accept no new advertisements for pornographic materials or Web sites.

The move derails Yahoo’s longer-term strategy for its adults-only store and to work more closely with merchants and film production companies in the adult-entertainment industry, plans that have been in the works for at least 18 months.

Friday’s announcement was prompted by a massive outcry from hundreds of thousands of Yahoo users, said company President Jeff Mallett. The public backlash came after the Los Angeles Times reported Wednesday that the online powerhouse had recently expanded its offerings of hard-core DVDs and videotapes.

“We had a large outpouring [of concern]. People felt concerned that [adult materials] didn’t make a better experience for them,” Mallett said. “We listened and made a decision.”

He said Yahoo will continue to provide open access to information and not restrict its Web search away from adult materials.

Wall Street analysts said the move comes at a difficult time for the Internet giant, which is struggling with losses amid a sharp downturn in advertising.

“Given that their business is under a lot of pressure, their revenues are going to be way off and they still are having senior management defections, they don’t need this distraction,” said John H. Corcoran, executive director for the Internet and new media group at CIBC World Markets.

The move to ban pornography was unusual for Yahoo, which has positioned itself as an general broker of uncensored information and products, akin to a combination shopping mall and public library. Only once before has it restricted a category of products from its site. In January, after months of pressure from the French government, Yahoo prohibited the sale of Nazi artifacts from its auctions.

This week, Yahoo defended its online store for adult-entertainment products. It described its approach as little different from a long-standing practice of hosting merchants who sell such materials “under stringent control” to prevent access by children.

All X-rated product sales on Yahoo ended Friday. Some ads and auctions will continue for as long as a few weeks, Mallett said, until their contracts expire.

The store was a “healthy driver of traffic. . . . Yahoo was just another [sales] venue, but they will be gravely missed,” said Ilan Bunim, chief executive of Gamelink Inc., a leading online adult-entertainment film distributor.

Mallett said Yahoo’s revenue from such ads and sales of adult merchandise are trivial. Yahoo earned 2% of the sales price of all such items, according to the company.

Merchants and officials at adult-entertainment film companies, however, said Yahoo’s interest in the X-rated world was anything but trivial.

Yahoo officials have spent months trying to set up a larger e-commerce venture that would, for example, repackage editorial content developed by the adult entertainment industry, film studio officials and merchants said.

“We were very surprised” by Friday’s news, said Bunim, whose company was the “featured” merchant on Yahoo’s now-defunct video store.

Yahoo had been selling a limited selection of adult titles through its main online video store for at least 18 months, merchants said.

Yahoo then launched its online DVD and video store devoted to erotic films. Shoppers had to register an e-mail address and enter information, to verify their age. Once cleared, they could purchase titles aimed at both straight and gay audiences and from a variety of categories.

Yahoo “was not core to our business, but there is demand out there” from their customers, said Eric Garrison, chief technology officer and founder of Digilot.com, a leading online digital-entertainment distributor and one of the merchants that sold mainstream and adult DVD titles through Yahoo. “Then, they told us they wanted to be the conduit [to adult entertainment].”

In January, Yahoo staff attended an adult-entertainment industry trade show in Las Vegas, Garrison said. They met with various merchants and film studios to discuss future plans.

There were going to be “profiles on all the adult porn stars [and] interviews. That was the direction they were going,” said Garrison and sources at three different production companies. Yahoo would not create the content, he said. Instead, it would be provided by the leading adult film companies and others.

“Yahoo is constantly in talks with lots of companies in a variety of businesses. It’s not in our nature to speculate about what businesses we may or may not be getting into,” said Yahoo spokesman Jackson Holtz. He added: “We are not getting into [the pornography] business.”

Internet industry analysts said Yahoo’s rapid reversal reflects the uncontrollable power of the Internet that the company itself has helped to unleash.

“The Internet is lightning fast at creating controversy and allowing people to express their opinion,” said Henry Blodget, an Internet analyst with the investment banker Merrill Lynch.

Word of Yahoo’s erotica shop spread across the Net, triggering responses that ranged from outrage to amusement. On the news site Slashdot, one reader noted that “Content creation is cheap, no warehousing or shipping costs, and the addicts will pay, pay, pay to get their itch scratched.”

But at least one group was starting to organize an online boycott. American Family Assn., a Christian organization, said it was planning to launch a “Stop Yahoo” Web site on Monday, said Patrick Trueman, legal counsel for the association.