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therealestatesparkblog · 6 years

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Interview: Todd Smith on Earning $27M Over 23 Years & His Book Little Things Matter

I was about to sit down and do another deal structure outline, and I thought it would be best, given the time of year, to do one more article that addresses sort of that inner game that is required to have success in any business. Ill get back to deal structuring topics in the coming articles. I had the fortune of interviewing a good friend recently on my podcast. Todd Smith from Sarasota, Florida has been an entrepreneur for over 35 years and has enjoyed extraordinary personal and professional success. He owned his first business at the age of 18, became one of the youngest real estate agents ever inducted into RE/MAXs Hall of Fame at the age of 28, and became an internationally recognized leader and trainer, earningget this$27 million over the last 23 years in that industry. I met Todd at an industry meeting way back in the early 90s and weve stayed connected since. Todd has conducted more than a thousand training sessions and seminars for audiences around the world. Hes also developed numerous training manuals and audio-visual sales tools, teaching entrepreneurs how to achieve professional success and accomplish their personal goals. His journey taught him that success comes from the compounding effect of doing the little things correctly and consistently. Hes the author, quite appropriately, of Little Things Matter. Its a resource for all those who place a priority on being the best they can. Its the first step in a comprehensive program designed to help people improve their business and their personal lives. Ill let you sit in on this interview as Todd shares some amazing nuggets. Remember, those you listen to, hang out with, and network with are extremely important and directly affect your income. Advice on Success From Todd Smith I wrote Little Things Matter because one of the things that my lifes journey has taught me is that its not the big things that separate the best of the best from the rest. Its the little things. Reflecting back on my real estate career, I got started at age 23 in my first year selling real estate, and that was 32 years ago. I made a quarter of a million dollars, and within four years, I was the second-highest producing real estate agent in the state of Illinois at age of 28. I did set goals, but it wasnt that I had a dream of being a top-producing real estate agent. It was all the little things that I did to stand out from the rest as an individual. The little things were making sure that I arrived at all of my appointments five minutes earlythat I rang the doorbell at the exact time of the appointment, that I smiled and greeted the prospective seller, that I made equal eye contact with both the husband and the wife, that I showed an interest in the children, that I got down and took time to pet the cats and dogs, that I talked about things that were of interest to them. I sent hand-written thank you notes. I was always smiling and upbeat and pleasant and focused on them, and I never brought in my mobile phone. I focused on the people in front of me. One of my biggest things was that I was disciplined. I pushed myself every day to do what most people arent willing to do. My discipline combined with my focus on making sure that I was doing every little thing allowed me to achieve that success. I remember listening to Anthony Robbins audio program Unlimited Power, which Id recommend for any of you reading this. I made sure I was mirroring and modeling. If they talked slow, Id talk slow. If they talked faster, I talked faster. If they seemed like they just want to talk and build more of relationship, I talked and built more of a relationship. If they seemed like they wanted to get into talking business, I got into talking business. If they were leaning forward, I was leaning forward. I was always dressed in a suit and tie. My shoes were always shined. I was doing every little thing to build a relationship to connect with them, to have them like me and to have them respect me. As a result of that, my closing rate was 92% over my career. When I say my closing rate, I mean that when I met with sellers who were interviewing multiple other agents, I closed 92% of all my sales. Even with that kind of success, I was saying to myself, OK, why was I successful? I didnt really understand it at the time. Even though I was intentional about the little things, I had no way of comparing myself to anybody. Then I moved into the direct sales career, as Chris indicated above, and I continued to implement that strategy of looking at every little thing I could do to be better. I believed in the global economic system, which is that income follows value.

If you want your income to grow, your value must grow first. Very seldom in life does anybody get paid more than their value. If they are getting paid more than their value, one of two things happens. Either their income comes down to their value or their value goes up to their income. Just because youre choosing the real estate market and maybe flipping homes, or buying and selling on terms like Chris and his family to some capacityor youre considering doing thatunderstand that your success is still going to be determined by your value. Youre just not going to say, OK, Im choosing to do something different with my life and Im going to go from making $20 an hour to $100 an hour. Life doesnt work that way. Certainly, the vehicle makes a big difference, but its who you become within that vehicle that makes the biggest difference. There are people who make big money in everything in life. Its all about choosing the right vehicle and pursuing that. The point that I really focused on was continuing to grow myself and be the best that I could be. When I say the best that I could be, its not just the best that I could be in business. Its being the best person I can be. We cant just say, OK, were going to be a certain way in our business life and then be different in our personal life. Im striving to be the best husband I can be, to be the best father I can be, to be the best friend I can be, to be the best contributor in our community that I can be, and to be the best that I can be in my business. These things are based upon where my priorities are and how much time I allocate to each thing. In business, we are a reflection of who we are as people. We built a brand for ourselves, and thats who we are. Our brand is not just heres our business brand, and our business brand is different than our personal brand. No, our brand is more than brand. I am somebody who throughout my career has striven for excellence at these little things. As a result of it, my businesses have sold over $2 billion and Ive learned that there are not very many people at the top. The reason is that most people arent willing to put in the effort to get to the top. Oftentimes when youre successful, you dont know why at the time. As I began to analyze why I was successful, I eventually came to determine that it was because I strived for excellence at the little things. I felt I wanted to write a booknot so much to make money with the book (and I havent made money with the book). You dont write a book to make money; I know very few people who have made money writing books. For me, I wanted to write a book that taught what I believed was the key to success. I wanted to highlight the things that I felt would have the greatest application to the broadest audience of people. Related: My One-Word Answer to: What Separates Those Who Succeed From Those Who Fail, Give Up, or Never Try? It doesnt matter what profession youre in. It could be about professional footballits that wide receiver that can catch the ball with a defensive player in his face on a corner of the end zone and get his feet in bounds. Those are the guys who make it to the NFL. Its not the guy who can catch a football. Everybody can catch a football. Everybody can run. Everybody can run fast. There are a lot of people who can run fast and catch a football, but can you run fast and catch a football in the right circumstances, and handle pressure the right way? Its not the big things, and I could give you analogy after analogy. Its not the big things that make the difference. Its you becoming the best at what you are doing. You become the best at what youre doing by honing in and refining and becoming the best at the little things. If you become great at all of the little things, the compounding effect of your intentional efforts allows you to become the best at what youre doing. 5 Steps Ive Used to Find to Success I have trained hundreds of thousands of people, and Ill tell you that everybody wants a better life. Everybody wants a nicer car. Everybody wants a nicer house. Everybody wants more money. Everybody wants to travel the world. Everybody wants a better quality of life. Everybody wants to put together five deals in six months. It all boils down towhat are you willing to do toachieve that goal? But youve got to set realistic goals. I have found throughout my experience in working with entrepreneurs all over the world that 90 percent of people set unrealistic goals. As I noted above, somebodys making $20 an hour, and just because they begin to do something else, they think theyre going to make $100 an hour. It doesnt work that way. The world doesnt work that way. Thats pie-in-the-sky thinking. For anybody that wants to do something, its most important to begin by asking yourself, Why? Why do I want to do this? How bad is my desire? Because if you dont have the burning desire to be successful with anything youre going to pursue, youre not going to be successful. To be successful in life is not easy. I believe you can be great at anything, but you cant be great at everything. You have to pick what youre going to be focused onwhat youre going to be successful at. 1. Have a burning desire. Youve got to have a strong, burning desire to be successfula desire so strong that it will push you every day to do what is required of you. If youre not willing to do what is required of you, then you might as well not even get started. This is how I coach everybody. Im just not the kind of person who plays games. I say, Hey, if youre not going to do whats required of you to be successful, then dont waste your life on this project; find something else thats important to you. 2. Build your knowledge. How can you be successful at something for which you dont have knowledge? So you say, OK, how do I build my knowledge? How do I become as educated as I can be on this subject? Obviously, I admire all of you who are taking the time to read this, because it tells me that youre wanting to learn. Youre wanting to get better. I talked to a guy recently who is at the absolute top of his game. He is unbelievably successful and listens to all of Chriss podcasts at 1.7 speed, just looking for a little nugget here and there. He says, Hey, 99 percent of the time that I spend listening to something, I may not be learning anything, but its that 1%, that one thing that I learned, that makes a difference. You have to continue to build your knowledge. You have to start building your knowledge, and then you have to continue building your knowledge. 3. Create a plan. OK, so now I know what I want to be successful at. I built my knowledge and whats my plan going to be? Your plan needs to be not just the big picture plan, but it needs to be a plan broken down into what you should do every day. A lot of people will set a goal to have six deals closed, but they dont build their knowledge. They dont have any plan. Theyre just saying, Im going to do it. Life doesnt work that way, and thats not the kind of thinking that comes out of anybodys mouth or mind whos ever been successful, because people who have been successful know that success takes time. Success doesnt happen overnight. Yes, there are a few people who will put together six deals in six months. Nobody wouldve thought that I would have had the success that I did selling 68 homes in my first year in real estate and making a quarter of a million dollars. Yes, it can be done, but it can only be done if you build your knowledge and you have a plan. 4. Execute that plan. Let me just say that most people dont have enough of a desire to push themselves, so most people fail on step one. Of those who do have the desire, very few people will go and say, OK, let me build my knowledge on something. Then you get down to a smaller number that will put together a plan to execute in order to achieve what they have set forth. When you get to step fourexecuting the planthis is where youre down to less than 2% of the people that have gone through the first few points and who are disciplined to execute that plan with excellence. 5. Refine. Based upon what you have learned, youre refining, youre tracking all your numbers, youre looking at all your data, and youre determining: Where do I refine? How do I get better? What is not working? What parts should I focus on that are working? I determined very early on in my real estate career that I was going to focus on for sale by owners. That was my target market. I was very clear on my target market, and I determined I was going to be the best at targeting that market. For each of you reading this, what is your target market? Youre going to try different things and youre going to say, Well, that didnt work. You dont want to say it after trying it one or two times. You have to have enough statistical data to say that something doesnt work. I called my first for sale by owner and they agreed to meet with me. What if my first 10 people had said, No, the reason were selling for sale by owner is because we hate real estate agents? What would that have done to my psyche? But overall, the numbers were what my numbers were regardless of 10 noes in a row or 10 yeses in a row. Expectations begin with goal-setting, and goal-setting is dependent on ones true desire. You can set goals until youre blue in the face. If your desire is not strong enough, youre not going to do whats required of you to achieve those goals. If somebody has got big goals and big expectations, then I hope its a person whos already been successful at something else in life. If this is the first thing youre hoping to be successful in at an extraordinary level, its highly unlikely that its going to happen, whether its this or something else. How many times have you met somebody who began to do something new and who was amazingly great at it right out of the gate? I cant even think of one person, and I know a lot of people. Thats why I say the best of the best are the best at the little things, and the people who are the top achievers are the people who are an inch wide and a mile deep in a single category. As Malcolm Gladwell said in Tipping Point, its when youve got 10,000 hours in something. Thats because youve learned enough, youve refined enough, youve executed enough, and you now are dialed into exactly what it is that you should be doing to get the optimal level of conversions and success. Ive hung out with Chris, for example, and I know the level of discipline he has in all five of these areas; I know the hours he has invested since 1991 in real estate, and as a result, the level of success he and his family are experiencing is no surprise to me. Success leaves cluesfollow the path.

Build Your Influence: Be Likable and Respectable Lets begin at the beginningthe foundation. John Maxwell says that leadership is one word: influence. If I were to ask, What describes influence? the answer would be respect. If you are respected, you have influence. When you have influence, everything in life goes better. Trust falls under respect. You can be trusted but not respected. But you cant be respected and not trusted. If youre not trusted, youre not respected either. Whether youre leading people that work with you, work around you, or work alongside you, your degree of success with them is determined by how these people view you. If you want to have the ultimate success, you want to be the kind of person that people look at and think, I like him/I like her, and I respect him/I respect her. You want to build a brand that when people think of it, they say, I like you and I respect you. If people can say, I like you and I respect you, they will want to do business with you. They will want to come to your birthday party. They will want to come to the talk youre giving about what youre doing. Your ultimate goal is to be a person of influence. If you want to be a person of influence where doors of opportunity open, where people look at you and say, I want to do business with you, where people refer others to you, you need to be somebody who is liked and respected. When you look at being liked, its all the obvious things: smiling, having a pleasant personality, being positive and upbeat, not talking about negative things, not talking negatively about peoplebeing a source of positive, upbeat energy. Whether its over the phone and youre smiling while you talk, or whether youre meeting with somebody and youre smiling, and youre greeting them, and youre repeating their name, all of this is what makes you likable. There are hundreds of factors that influence peoples respect for you. Are you on time? Do you get back to people when you say you will? Do you schedule firm appointments or do you leave them vague and open? What does your communication look like? Do you open your emails by saying, Hi Dean, I hope you had a great weekend? And then you dive into your subject in a new paragraph, and you have white space between your paragraphs, no big monster paragraphs, and everything is proofed and your communication is clear and concise. What do your text messages look like? How long does it take to respond to email? How long does it take you to respond to a phone call? How long does it take you to respond to a text? What is the tone in your communications? These are the hundreds of things that I talk about in my blog and in my book. When youre meeting with somebody do you let them finish talking before you talk? Are you quick to interrupt? When youre listening to people, can they tell youre listening intently or do they think youre waiting to say something? When youre listening and looking at them, are you looking off to the side? All of these things influence peoples respect for you and influence whether they like you. Related: Sorry, But Real Estate Investing is NOT Easy. Still, You Can Succeed if If you want to be somebody that is highly successful in working with people, sellers, buyers, owners, you need to build a brand for yourself such that when people think of you and when they look at you they think, I like him. He is different. I like her. I like the way she accepted responsibility for that challenge rather than making an excuse for it. Or, Even though this was a challenging situation, I respected that he always was on top of his communication with me. I would love to do another deal with him, or I certainly would not hesitate to refer any of my investor friends to her because of the way she handled herself during this entire transaction. Its not just about getting the deal put together, so to speak. Its about how you handle everything from front to finish, and whether they want to do more business with you, and have talked about you to their investment clubs, and talked about you to their friends. People hang around people like themselves. People who own apartment buildings hang around other people who own apartment buildings. People who own multiple pieces of residential real estate hang around other people who own multiple pieces of residential real estate. If you want to be highly successful in this career over the long-term, these are the kinds of things you want to do. And by the way, long-term is how I would be looking at it. This is not a six-month or one-year thing. Dont waste your time if thats what youre thinking. You wont be successful in anything saying, Im going to do this for six months to a year. You have to say, Hey, this is what I want to do. I would love to build this into my lifestyle. I would love to be a guy or a gal that can put together deals and make an income and build a residual income through investment properties. Im going to become the best that I can be at this. What can I do to become the best? You have to look at everything, including your social media posts. Who is going to refer you to some of these people? Maybe its the people who are following you on Facebook. Youre putting pictures of yourself up there partying. Let me tell you, that is not the image thats will cause people to respect you or even like you, so youve got to be thinking about everything. Your brand is your brand. You dont separate it. Its not like, My brand in business is this and my brand in my personal life is that. No, your brand is your brand and people arent stupid. If you think theyre stupid, youre wrong. Theyre going to see it, and theyre going to determine whether or not youre somebody they want to do business with. Maybe somebody comes to them and says, Hey, do you know Eric Milander? Yeah, I know Eric. What do you think about Eric? Im thinking about doing a deal with him. Well, I wouldnt do a deal with Eric if my life depended on it, or Eric is somebody that I really like. Hes a great guy. I love his personality. He just seems to always show interest in me. Hes a good listener. Hes highly responsible. Everybody that I know that knows him thinks highly of him. This is the brand that you want to build if you want to be successful in the world of busines. Especially if you want people to trust you with their money and their real estate, it is important to build this kind of a brand. Plan, Prioritize, and ActDaily Have a to-do list. I know what I need to do so the day is spent doing one thing. While I could have 20 other things on my to-do-list checked off in the same amount of time, those 20 things werent more important than the one thing I did. Going back to my five steps to success above, number three is you put together your plan. Your plan must be broken down into what youre supposed to do every day, and your plan needs to be arranged in priority sequence. If youve got a plan, ask, What are the things that I need to work on first in this plan? What are the things I need to work on second? Then you need to make the decision, Im going to work on things in priority sequence, not Im going to work on things that I want to work on. The things that you dont want to do are the things that make you the most money. Thats how life works. Thats why I say of the thousand little things on my list, not one has a higher value to the market than discipline. Discipline is pushing yourself each day to do what you know you should do even when you dont feel like doing it. If you want to be successfuland this is number one on my listyouve got to put first things first. You have to make sure youre spending your time doing exactly what you predetermined you should be doing with your time today to be productive. It might mean that youre sitting there with your phone in your ear and youre making outgoing calls because you determined right now the absolute most important thing for you to achieve your goals is to prospect. If thats the case, then you stick the phone to your ear and you prospect.

I remember when I was getting started in my various careers, where I would sit at the phone all day and prospect. I remember there were days I made up to 300 phone calls. Why? Because that was what I should do today. I didnt sit there and say, Oh, Im going to redesign my brochure or Im going to make my website look better or Im going to make my business card look better. Im going to think through my presentation again, or Im going to work on my phone script. No, it was me picking up the phone with my heart beating out of my chest, making phone call after phone call after phone call after phone call. It was refining my approach. When people didnt do business with me, I always asked them why and I learned a lot by asking them why. Number two for being productive is working your to-do-list in priority sequence and pushing yourself to do the things that you know you should do without excuses and without justifying those excuses. You could say to yourself, Todays not a good day for me to make prospecting calls because its cloudy, or today is not a good day for me to make prospecting calls because Im a little tired. Im going to wait until tomorrow. This is what everybody says. This is what 99.9% of the people do. They make excuses for not doing what they know they should do, whether its eating right, whether its exercising, whether its prospecting. Whatever it is they know they should do, most people dont do itand thats why most people arent successful. You have to have a plan. That plan needs to be broken down into what you should be doing each day. You need to be executing that plan each day with excellence. You need to be looking at everything youre doing each day and saying, How can I do what Im doing better? and then making adjustments. As Chris indicated in the introduction, its the compounding effect of these little things. The first time youre focused on making equal eye contact with each person in the room, you may not be great at it, but if you work on it every time youre in a room of people, youre going to get a little bit better every time. Each time youre in a room like that youre saying to yourself, OK, Im going to be very deliberate in making sure everybody in this room feels included in the conversation. We all know we should remember names, but how many times do we remember a persons name? Its about being in the present. Its about being intentional, Im meeting somebody. I need to make sure I remember their name. Oh shoot, I forgot their name. Well, I have to get better tomorrow. Its about every day, pushing yourself to get better at the things that you know you should be doing. TakeawaysThe little things are the small, meaningful actions that make your clients like and respect you.Income follows value: You have to create higher value before you can create higher income.The five steps to success are: (1) Have a burning desire, (2) Build your knowledge, (3) Create a plan, (4) Execute the plan, (5) Refine.Success comes after a lot of hours!Each day make a to-do list with the one important thing you need to do.Dont procrastinate; do it even if you dont like it. The things that you dont want to do are the things that make you the most money.

What little things do you do to differentiate yourself in your market? Leave your questions and comments below! https://www.biggerpockets.com/renewsblog/todd-smith-interview

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mavwrekmarketing · 7 years

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Image: Shutterstock / turgaygundogdu

Lazy. Entitled. Narcissistic.

At both the popular and academic level, those three words pretty well sum up the problem with millennials. But why stop there? Theyre job-hopping, promotion-expecting, still-living-at-home-with-their-parents, social-media junkies whose only shared passion seems to be the vague desire for fame. Oh, and theyre also insecure (so if you could not call attention to those deficiencies, thatd be great). Of course, its one thing to identify the problem its another to go after the solution.

The question is: How? To find out, I connected with five leaders at the helm of successful and millennial-dominated companies. Their lessons all reflect powerful insights that are far more about how to lead millennials than about just lamenting whats wrong.

1. Raise the bar

With 620,000 followers, a podcast garnering one million monthly downloads, and over $100 million in sales through his fitness brands last year, Andy Frisella is more a force of nature than a CEO. In fact, the name of his podcast and website make that point clear: The MFCEO. (You can guess what MF stands for.)

However, Frisellas passion for millennialswhich comprise all but five of his 130 employeesstems from a surprising source: empathy. There are these kids out there who want to be successful, Frisella told me, but their entire life theyve never had to work to be successful. They dont understand reality. Everyone likes to dog millennials like theyre not as good as previous generations, but the truth is that its not millennials who have failed. Its the people that raised them. Its us.

That kind of ownership is why, instead of lowering the bar, Frisella raises it: They come in at 19 years old; many stay, but obviously some move on. My goal during that time is to make them so good through the challenges of work that they come back and say, That is the best thing that ever f****** happened to me.

Pushing back against the participation award culture most millennials grew up in, Frisella makes expectations clear. Encouragement is earned, never given. The result is an culture that elevates young workers while also building self-confidence only in a job well done.

2. Cultivate a common passion

In 2005, Jones Soda was a bonafide pop-culture phenomenon. Features in Fast Company, Entrepreneur, and Inc. chronicled the manufacturer’s iconic bottles along with their 30% year-over-year revenue growth.

Then, everything fell apart. Over the next decade, Jones wouldnt see a single profitable quarter, downsize by 63 percent, and eventually get delisted from NASDAQ. As the fifth CEO in as many years, thats the landscape Jennifer Cue entered in 2012.

The situation, Cue recalls, demanded creative problem solving and a team that shared a common entrepreneurial spirit.

So, with a 60% millennial workforce, she led by example. In addition to coming in as CEO at a very low salary offset by equity, Cue invested $680,000 of her own money into the company. More vital still, she played to her teams strengths regardless of their titles and responsibilities.

The lesson: Trusting and empowering millennials by providing challenges and opportunity for growth leads to an incredible sense of fulfillment. Its important not to generalize and not to categorize teams by age or demographic. The great thing about Jones is that we all share a common passion for what were doing.

3. Give up control

Handing over the management of 750,000 followers to a college intern sounds like a recipe for disaster. Especially during your companys most busy time of the year. And yet, thats exactly what Candice Galek founder and CEO of Bikini Luxe does every summer. With ecommerce, you always have to be on your toes, the Forbes 30 Under 30 recipient explains, and having a creative team whos eager to learn, experiment, and try stuff out is crucial.

Even riskier is the fact only 8 of Galeks 48 regular employees and 10 seasonal interns work in the same location she does. Why roll the dice?

In Galeks words, Weve learned to love the creative mindset and flexibility of our primarily millennial team members. Trying to control everything for the sake of quality and branding doesnt just kill creativity, it crushes the spirit of the people who work for you regardless of their age.

Plenty of organizations pay lip service to employee freedom. Giving your people the flexibility to pick where and when they work is a step in the right direction. But the real test comes from giving up control over what you post, publish, share, and even produce. This doesnt mean weak leadership, but it does mean giving millennials the tools they need to grow and then letting them.

4. Bring work and play together

Since launching in 2014, Studypool a 500 Startups-backed learning portal thats raised $2.5 million in venture capital has made their vision becoming the Google of academics a reality. Numbers like 40,000 online tutors and over a million student accounts prove it.

Twenty-three years old, CEO Richard Werbe credits being a millennial as part of the reason hes been so successful: While people may assume that my age is a deterrent to my ability lead, its actually the contrary. Like its platform, Studypools culture embraces a work hard, play hard mentality. I know the importance of keeping my team passionate about their work and excited to come to come into the office every day.

While they might sound like small things, Werbe streams music, furnishes a pantry full of snacks, doesnt enforce a dress code, and provides a game room in the office to blow off steam. He also encourages his team to work remotely whenever possible. Theres no point in pushing my team to the point where their job becomes something they resent, Werbe notes, being close in age to my employees makes me particularly aware of the well-being of my team and how to best keep them focused and enthusiastic.

5. Help them plan for whats next

Headquartered in Northern California, Azazie is on a mission to disrupt bridal fashion through affordable customization. With an average employee age of 27, theyre by millennials, for millennials. Whats their secret?

The same tailor-made approach theyve applied to 300,000 dresses, they also apply to staff. As Rachel Hogue an early customer service rep turned senior manager told me, Its about setting individual goals and playing to individual strengths.

Rather than major on quotas, Hogue meets one-on-one with each employee monthly to incorporate their passions and future plans into daily work. By encouraging kindness and open communication, Hogue fosters an environment built on collaboration: Each of our employees is unique. Its my job to ensure they feel comfortable to step up, share an idea, and spearhead new initiatives.

If 300% sales growth in 2017 is any indication, that approach pays off handsomely because when your employees are happy, theyll make your customers happy.

Leading millennials is about leadership

In the end, whether you agree or disagree with the mainstream view on millennials isnt the point.

So, what is? Perhaps Simon Sinek put it best in the closing lines of Millennials in the Workplace: We now have a responsibility to make up the shortfall and help this amazing, idealistic, fantastic generation build their confidence, learn patience, learn the social skills, [and] find a better balance between life and technology because quite frankly its the right thing to do.

Even if millennials are the problem its leaders like you who can offer the solution.

Aaron Orendorff is the founder of iconiContent and a regular contributor at Entrepreneur, Lifehacker, Fast Company, Business Insider and more. Connect with him about content marketing (and bunnies) on Facebook or Twitter.

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ralphmorgan-blog1 · 7 years

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The Porn Business Isnt Anything Like You Think It Is

Midway through the second season of Silicon Valley, the HBO series that so skillfully spoofs the Bay Area tech scene, the plot turns to porn.

Inside the offices of Pied Piper, the fictional startup at the heart of the show, a shaggy-haired coder hacks into a rival company. The rival, he discovers, has landed a $15 million contract with a porn outfit called Intersite, also fictional, agreeing to build software that will compress Intersite’s videos and send them across the ‘net. Pied Piper’s CEO, Richard Hendricks, is bemused. “I don’t understand,” he says. “How does Intersite have all this money?”

“It’s pornography,” says the guy with the highfalutin facial hair.

“Adult content has driven more important tech adoption than anything,” says another colleague. “The first fiction ever published on a printing press was an erotic tale. And from there: super 8 film, Polaroid, home video, digital, video on demand—”

“—credit card verification systems, Snapchat—” adds a third.

“Pornography accounts for 37 percent of all Internet traffic.”

“Thirty-eightwhen I’m on it,” says the guy with the highfalutin facial hair.

In many ways, the exchange is typical of the show. It’s good for multiple laughs, particularly if you’re wise to the shamelessly eccentric ways of the modern tech world. Punchline aside, the big laugh is that nod to Snapchat, a mainstream private-messaging-and-video-chat app whose status as a porn service is, shall we say, unofficial. But Pied Piper’s porn encounter is a rare case where Silicon Valley gets things wrong. Typically, the parody rings so very true. In this case, it doesn’t.

‘The thing about the adult industry today is that … it’s a very low-margin business.’Chris O'Connell, Mikandi

In the popular imagination, the eternaltrope is that the porn industry drives the adoption of new technology; that it accounts for some astronomically large portion of all Internet traffic; and, yes, that it generates equally enormous sums of money for all the faceless people who run its operations. We picture these people as sleazy Southern Californians wearing pinkie rings and polyester. Or, if we’ve come to realize that the pinkie-ring caricaturemakes absolutely no sense in the age of the Internet, we see them as ruthlessly clever businesspeople with a sixth sense for where the big money lies. That’s the stereotype Silicon Valleyembraces. Later in the episode, when Hendricks turns up at an adult industry conference, we encounter an army of porn execs dressed like bankers.

But it isn’t like that at all.

Some of it may have been true in years past. But no longer. A colleague of mine calls this a meso-idea, an idea that has ceased to be true but that people continue to repeat, ad infinitum, as if it still was. With the rise of mobile devices and platforms from the likes of Apple and Google, not to mention the proliferation of free videos on YouTube-like porn sites, the adult industryis in a bind. Money is hard to come by, and as the industry struggles to find new revenue streams,it’s facing extra competition from mainstream social media. Its very identity is being stolen as theworld evolves both technologically and culturally.

It’s a world where Playboy is going PG-13—in print and online—because it can’t compete with the Internet at large. Mobile and social media platforms have pulled us away from the openness of the worldwide web and into walled gardens, squeezing the avenues of distribution for porn, co-opting its audience (at least in part), and forcing outfits like Playboy to become more “mainstream.” The larger porn industry is headed in the same direction, careening away from the stereotypes held by journalists and pundits and pop culturelike Silicon Valley. “That’s obviously a fictional adult company—because I don’t know a single one that would pay $15 million for compression software,” quips Chris O’Connell, who helps run a real adult company called Mikandi. “The thing about the adult industry today is that … it’s a very low-margin business.”

Mikandi operates the world’s largest porn app store. When I talked to the publisher of XBIZ, the leading adult business news organization, he called it “the future of the porn industry.” And in some ways, it is. But that future isn’t what the popular imagination expects.

O’Connell, Mikandi’s 29-year-old chief architect, lives in Tucson, Arizona, and he runs the company with Jesse Adams and Jen McEwen, the young Seattle couple who launched the store back in 2009, providing an alternative to the Android and iPhone app stores that forbid adult content. Apple also bars Mikandi itself from iPhones, and the only way to use it on an Android phone is to download it manually through a web browser—the same browser that serves up a seemingly endless stream of free pornography.

That said, Mikandi aims to offer stuff you can’t get elsewhere. A smartphone app does video and animation much better than a browser, and the store serves up carefully crafted stuff like hand-drawn hentai—aka Japanese porn animation. Over the last three years, the word “hentai” accounted for more Mikandi searches than the word “free.” The premium apps carry a price tag, and the company takes a cut whenever anyone buys one.

But the audience is relatively small. About 2.5 million people are registered with the Mikandi store, with about 345,000 visiting every three months. All of which means: O’Connell, Adams, and McEwen pull in yearly salaries somewhere in the low six figures, after paying “competitive” wages to a handful of coders in Seattle and Eastern Europe. “None of us own a yacht,” O’Connell says. Or as McEwen puts it: “You can’t understand the obstacles that are in our way.”

‘The Perfect Storm’

She doesnt mean obstacles of morality or law. Yes, many people frown on porn, calling it exploitative and debasing. But many others just see it as a part of life—a big part of life. There’s an enormous audience for porn, and whatever it signifies, whatever emotions it stirs in critics, this audience isnt going away. McEwen means economic obstacles, business obstacles, technical obstacles.

It wasn’t always this way. In the early aughts, online porn was ridiculously lucrative. Colin Rowntree, a porn producer, director, distributor, and member of the Adult Video News Hall of Fame, was a just mid-level player, and in those days, he and his wife, Angie, earned millions each year. But at the end of the decade, just about everything changed. Apple introduced the iPhone, which moved so much of our digital lives onto mobile devices whileofficially banning pornography in its App Store. Google pushed porn to the fringes of its search engine. And as The Economist and Buzzfeed have described, an army of “Tube sites”—essentially Youtube knockoffswith names likeYouporn and Pornhub—began offering a smorgasbord of online porn for free, much of it pirated, making it far more difficult for pornographers and distributorsto make money. All this happened as the worldwide economy tanked.

“It was the perfect storm,” says Rowntree. “People no longer wanted to pull out their credit cards. But they said: ‘Oh, there’s this thing called YouPorn. It may be grained and shitty, but at least I can masturbate.'”

The adult industry sought new avenues, including porn app stores, porn search engines like Rowntree’s Boodigo, and other workarounds, as well as “live cams,” where people pay to watch and interact with an adult performer in real time. That’s pretty much what strippers and porn stars have offered over Snapchat. But this too has its limits. One of the kings of live cams, Kink.com, the company the operates out of a castle-like former armory in San Francisco’s Mission District, has also seen revenues decline in recent years. Snapchat now works to shut down accounts dedicated to pornography.

Jen McEwen, Chris O’Connell and Jesse Adams. Annie Marie Musselman for WIRED

Certainly, some people will pay for a better experience than they can get on a Tube site. Todd Glider is the CEO of CMP Group, whose video service, Badoink, has found another loophole in the smartphone market—-it offers a video streaming tool that’s ostensibly content-neutral but can be used for porn—and he says the company pulls in $55 million a year in revenues. But the best content is often pirated and offered for free, much like Hollywood blockbusters and best-selling albums. The difference is that Hollywood has the political andeconomic power to suppress pirated content—and push official content through mainstream services. The porn biz can issue DMCA takedown notices and threaten legal action like anyone else, but it doesn’t have the clout to enforce the notices on a wide scale—or make anyone care that it’s being ripped off.

“The adult industry isn’t able to enforce its intellectual property protection,” says Kate Darling, a researcher at the MIT Media Lab who explored the economics of the adult industry in the 2013 study What Drives IP without IP? A Study of the Online Adult Entertainment Industry. “It’s not that much different from others industries—except that policy makers don’t really look at the adult industry and aren’t interested in helping the adult industry.”

Meanwhile, with the rise of Netflix and YouTube and so many other mainstream video services—including Facebook and Twitter—porn is no longer the dominant form of online video. It’s hard to tell how much porn streams across the ‘net—no reliable operation tracks this, including Sandvine, the primary source for internet traffic research—but it doesn’t account for 37 percent of all traffic. It’s not even close. Mikandi declines to discuss its traffic. But a better barometer is the Pornhub Network, which now spans several of the major Tube sites. Pornhub says its network receives about 100 million visits a day, and at least on part of the network, the average visit lasts about nine minutes. If you extrapolate, that’s somewhere in the range of 450 million hours of viewing a month. Meanwhile, Netflix serves 60 million subscribers, and these subscribers watch over 3.3 billion hours of programming a month (10 billion a quarter). Youtube claims hundreds of millions of hours of viewing daily.

“What happens is: someone comes up with a stat [about porn traffic] and everyone repeats it, but it’s not necessarily true,” Pornhub vice president Corey Price says. “If you just look at YouTube’s numbers, they’re astounding.”

The corollary is that, with the rising power of companies like Apple and Google and Facebook, the adult industry doesn’t drive new technology. In many respects, it doesn’t even have access to new technology. The big tech companies behind the big platforms control not only the gateway services (the iPhone app store, Google Search, the Facebook social network) but the gateway devices (the iPhone, Android phones, Google Chromecast, the Amazon Fire TV, the Oculus Rift virtual reality headset). And for the most part, they’ve shut porn out. Besides, these giants now drive new technology faster than services like Mikandi or Pornhub ever could.

Porn distributors have become the imitators, not the innovators. This summer, Pornhub introduced a for-pay service, an alternative to its ad-driven free porn sites. In a press release, the company called it “the Netflix of porn.” When I talk to Price, he compares it to Spotify. And remember: the Tubes sites have spent the last decade mimicking Youtube. “We’ve innovated in some areas,” Price says. “But the adult industry being the leader of technology? If it was ever true, it isn’t true today.”

Silicon Valley doesn’t even get the clothes right. The reality is that people from porn companies wear whatever they want at conferences—a lot like people from other tech companies. “People who work in the adult industry are like people who work for other startups,” says one industry veteran. “But they have an edge. They have a certain countercultural attitude.” They’re a lot like people from other tech companies in so many ways. They just deal in a different type of online content. And even the content isn’t as different as you might think.

This Is What the Porn Industry Looks Like

Back in 1998, in his preternaturally entertaining expos of the porn business, “Big Red Son,” which detailed his visit to an industry mega-conference, David Foster Wallace observed a world populated by people who wore bad toupees and pinkie rings and used the word class “as a noun to mean refinement.” “All the clichs,” he said, “are true.”

They wouldn’t stay true for long. The Internet would soon remake the industry. It became less about producers and directors in Southern California, and more about people who put stuff on the ‘net. Old-school producers and directors are still around, but they’ve been superseded by the people who deliver the porn, and these people have moved into production as well. Twenty years later, almost none of Wallace’s cliches are true. In fact, not even the clichs that replaced those clichs are true. Nowadays, the porn industry looks nothing like those guys in bad toupees—and nothing like the steely-eyed execs who show up in Silicon Valley. It looks like Chris O’Connell.

The big adult business-to-business conference is called Internext, and it’s held at the Hard Rock Hotel, just off the Las Vegas strip. On the first day of this year’s show, O’Connell turned up in a blue mohair and wool suit, with a red tie and matching handkerchief. As he walked down the hall that Saturday night, past the framed guitars, the signed Led Zeppelin photos, and the freestanding, poster-sized porn-tech ads, he carried a lit Dominican cigar in one hand, and two smartphones in the other. The second phone is unlocked and rooted, so he can test new software code.

This is pretty much what he always looks like—though, if it’s cold, he might add a waistcoat, an overcoat, and a black fur felt fedora-like hat fashioned by a haberdasher in Romania. And on a Sunday morning, he might relax in a rugby shirt. But whatever he wears, he doesn’t wear it with irony. “I’m not a hipster,” O’Connell says. And he’s not. He’s a registered Republican. He’s an engineer who quotes Adam Smith. He’s a shareholder in a porn company who carries a commercial pilot’s license. Hes neither a ruthless businessmen in a suit, nor a coder in a hoodie. Hes a coder in a suit with a bit more color to it. He’s a guy with his own tastes—in clothes, in politics, in technology, in sex.

He lives in Arizona because he likes the politics, including the gun laws. Like many others in the porn business, he sits at the libertarian end of the spectrum. Free speech and free guns. He also lives in Arizona because that’s where he went to grad school. After three years of liberal arts at Middlebury in Vermont and a few more years in the Silicon Valley startup world, he studied astronomy at the University of Arizona, working with the Large Binocular Telescope and contributing to academic papers in publications like The Astrophysical Journal and The Astronomical Society of the Pacific. At one point, to make some extra money, he helped build some websites, and some of them were adult sites. Mikandi was a next step. The world was going mobile, and the likes of Apple wouldn’t allow porn apps. He thought it should. But he also liked the idea of, in his own way, rebuilding what Apple had built. He still does. “It’s a very hard thing to do,” he says.

As a metaphor, O’Connell works on multiple levels. He talks not like some smarmy San Fernando Valley opportunist or one of the porn industry automatons in Silicon Valley, but like a software engineer enthralled with things like the HHVM virtual machine, the Cloudfare content distribution network, and other really geeky stuff. After all, that’s what he is. He doesn’t just use tech. He builds it. And he does this under the aegis of a company whose Seattle offices, on the first floor of a nondescript building with no doorman, sit in the shadow of the glass towers that house Amazon, one of the big companies squeezing the porn industry. Plus, he’s the guy who put porn on Google Glass.

The Steve Jobs Effect

Jesse Adams and Jen McEwen launched Mikandi in the fall of 2009 after spending two years in China bootstrapping a business that made vibrating condom rings and other sex toys. At first, the Mikandi app store wasn’t much of a store. “We launched the day after Thanksgiving,” Adams says, “with no apps.” But it caught O’Connell’s eye. He had spent the last six month building a similar store, just so he could get one of his own apps onto phones, and he asked Adams and McEwen if they could combine forces. “They had the marketing,” he says, “and I had the technology.”

Jen McEwen. Annie Marie Musselman for WIRED

Before long, the store also caught the eye of Steve Jobs. That spring, the Apple founder and tech world patron saint unveiled the latest incarnation of the world’s most influential smartphone—the iPhone 4—and afterwards, he took questions from the press. At one point, a reporter asked if Apple would ever let people install software on the iPhone without the company’s explicit approval, and in response, Jobs pointed to Android. Google let people install almost anything on Android phones—if they ventured outside the official Android app store.

“You know, there’s a porn store for Android,” Jobs said, referring to Mikandi, warning that this store delivered porn apps without discrimination. “Anyone can download them. You can. Your kids can. That’s just not a place we want to go.”

It was another reminder that the Internet had changed in the age of the smartphone, that many devices no longer offered unfettered access to whatever the world cared to send across the Internet. But that bit of Jobsian self-righteousness also carried some untended consequences. Though Jobs didn’t mention it by name, about 10,000 people downloaded Mikandi onto their Android phones over the next 12 hours—ten times more than the usual—and traffic to the store promptly tripled.

And yet, all these years later, Mikandi remains a small business. O’Connell loves what he does. So do Adams and McEwen. And their business is successful. But it’s small. That’s because a porn startup can’t raise large amounts of money like other startups. And because their store has been pushed to the edge of the Android world. And because so much porn is available for free from the tube sites and other sources. “The adult industry has a very large content library, with, to use one of the buzzwords of the Internet, a very long tail,” O’Connell says. “You have so few viewers for each piece of content.” But nowadays, those aren’t the only forces keeping the company from the enormous bucks.

Ironically, O’Connell says, a company like Mikandi is also in a bind because so much free porn—or porn-like stuff—is now available through social media, from people posting stuff that isn’t necessarily for financial gain. Facebook bans adult content. And other social sites have done much the same. But not all of them. Twitter puts pop-up warnings over porn, but you can still get to it. Tinder isn’t all that different from an adult dating app. Snapchat cracks down on accounts dedicated to porn, but it is, by definition, a service for trading private pictures and videos. If you can get private pictures and videos through Snapchat, you aren’t as interested in porn from porn companies.

In some respects, the porn industry has been replaced by millions of people with ready access to camera tech, posting stuff to the Internet. That’s just the way the modern Internet works. “Adult,” O’Connell says, “is getting rolled into everything else.”

‘It’s Chaos. It’s Fragmented. It’s Broken. It’s Blocked’

As he built Mikandi amidst this new world order, O’Connell didn’t pay $15 million for video software. He and his team built it themselves. That’s pretty much the way it works in the porn business. Part of it, O’Connell says, is that with all that free porn available across the `net, industry margins are much too thin for that kind of spending. But even if a company did pay $15 million for that kind of tech, it isn’t likely to pay a mainstream startup a la Pied Piper.

The Silicon Valley bit about the industry driving the adoption of credit card verification systems takes on a new meaning when you consider that many credit card services now refuse to work with adult operations (in the early years, fraud, inordinate chargebacks, and other abuses were rampant). Many mainstream technology vendors take much the same stance, including companies that build email services and, yes, video engines.

“For adult companies, it’s chaos. It’s fragmented. It’s broken. It’s blocked,” Adams says. “You have to build your own newsletter service. You have to build your own billing system. All the game tools for distribution and ads—none of that is available to adult companies. All the awesome stuff that everyone expects you to have is blocked.”

That means adult operations need people like Chris O’Connell. After building the Mikandi video engine, O’Connell helps run a side business, Sendfaster, that sells similar technology to other operations, including customers outside the adult industry. Video tech isn’t just a cost. It’s a source of revenue. “The realities of the adult industry have meant that companies have to be scrappy,” O’Connell says.

And yet, no matter how much technology people like O’Connell are willing and able to build, they will still reach enormous roadblocks—just because their tech handles adult content. In 2013, O’Connell landed a ticket to Google I/O, the company’s annual developer conference, and he was among the few who had the opportunity to purchase a pair of Google’s computerized eyewear. He did, and that meant he could build software for the device, which seems to project a tiny computer screen somewhere out in front of you when you slip it over your eyes. So, together with Adams and others, he built an app called “Tits and Glass.” He was in the vanguard of a new kind of porn. The app let you share “share, comment, and vote on your favorite sexy photos with Google Glasses.” Then Google shut it down.

Jesse Adams. Annie Marie Musselman for WIRED

Just after the app was released, the Internet giant changed its terms of service, banning content that contained nudity, graphic sex acts, or sexually explicit material. That was the end of Tits and Glass. Later, O’Connell and crew also built an app store for Google Chrome OS—the company’s laptop and desktop operating system—and that was blocked, too. They wanted to put one on Google Chromecast, a gadget that puts apps and video on your TV. Same result.

Virtual Unreality

Nowadays, the prevailing narrative is that virtual reality will re-energize the porn industry. After I spoke to Alec Helmy, the publisher of XBIZ, whocalled Mikandi the future, he wrote back and mentioned VR. Buzzfeed, in its lengthy porn feature, paints VR as the great porn hope. You hear the same thing from, well, WIRED. But the future is more complicated than that. Think of Chris O’Connell and Google Glass. Think of Mikandi and Steve Jobs.

VR and its cousin, “augmented reality,” are controlled by the big corporations. Facebook owns the Oculus Rift. Microsoft built the Hololens. Google does Google Glass. These will treat porn at least like Android treats porn—or maybe even like Glass treated porn when O’Connell unveiled his app. In other words, they won’t allow it through official channels and maybe not at all.

Yes, the adult industry will build virtual reality porn. It has already started. Glider’s CMP Corp offers 180-degree and 360-degree videos through a site called BadoinkVR.com. But in more ways than one, porn VR will sit on the fringes of the Internet. And the mainstream services will offer VR that’s pretty porn-like. No, really. If we can communicate with each other via virtual reality, we will trade pornography—or stuff that’s close to it. Culturally, we’re moving towards a world where this kind of thing is more acceptable, where we’re more open about it. As much as the big corporations bar porn from their services, it still shows up, thanks in part to the people and companies who don’t call themselves porn vendors.

If all this true, then the stuff coming from the adult industry means less. As O’Connell explains, much the same thing is happening on today’s 2D Internet. If we have Snapchat and Twitter and Tumblr, we don’t need the porn companies—or at least, we don’t need them as much as we once did.

O’Connell and Adams and McEwen now kinda wish they had branded themselves as a mainstream operation—not as a porn business. If they called themselves something else, they would have more freedom to do what they want to do. Indeed, as Mikandi competes with all those mainstream services, it’s moving closer to mainstream content. Their store now offers games and comics and e-books. They’re embracing many of the same digital artists whose work shows up on Tumblr and other mainstream services. “In some ways, it’s about: how can we get less adult? Or rather: how do we serve our users more of the time? How do we provide them with the stuff they want all of the time?” O’Connell explains.

When it comes right down to it, he says, Mikandi isn’t all that different from your typical tech startup. It uses many of the same tools to build much the same tech. Yes, it still serves up stuff that’s more extreme than what you might find on even the most liberal of mainstream services. But that will slowly change too, as the mainstream moves closer and closer to porn. “You begin to wonder,” O’Connell says, “if the industry will cease to be its own thing.”