AVNONLINE PROFILE 200601 - Most Wanted: Wanted List has dominated the online adult rental market, but not without a few bumps along the way.

The princes of DVD porn.

That’s what Wired magazine called Wanted List founders Danny Ting and Anh Tran. Cartoonish references sell magazines to the porn-curious public, but don’t necessarily reflect that Ting and Tran are businessmen, albeit ones who are learning this business as they go.

Ting readily admits that he was naïve about the adult Internet and running a business therein when he and Tran started Wanted List in 2001.

They came to the Valley hoping to be the porn industry’s answer to Netflix, and they’ve succeeded to some degree. Wanted List has 25,000 subscribers, the largest number for online adult DVD rental stores. In the past year and a half they’ve acquired competitors FlickSmart, Rentflixxx, and VTO Enterprises’ Video Takeout and Flick Central. The biggest part of the latter acquisition was VTO’s New Jersey-based warehouse, which gave the company distribution outlets on both coasts (the other is part of the Van Nuys, California, headquarters.) Talking to Tran and Ting, it’s clear these acquisitions won’t be their last, either.

The grand vision

The problem with the Netflix analogy is its 3 million subscribers. Wanted List becoming Netflix would be similar to Adam & Eve turning into Amazon.com—it’s not going to happen due to the limited scope of porn and its marketplace.

Still, that didn’t stop these two former tech consultants from thinking they could do 10 percent of Netflix’s business. Potential investors were pitched numbers like 400,000, which are how many subscribers Wanted List expected to have by 2004.

“You have huge, grandiose visions of where you want to be,” Tran says. “That’s why you get into this business—to make money, but it’s more difficult over time than we realized. You really have to plan carefully. You have to hit the pavement hard.”

So perhaps things haven’t turned out exactly as they planned. Maybe the numbers were inflated to begin with. Who knows, and really, who cares at this point? Although others are quick to point out that Wanted List isn’t profitable, Tran and Ting are more than happy to keep funneling their funds back into building their business.

“There are certain aspects of this business we’re in that, for tax or strategic reasons, we may not want to show a profit. If we decided we wanted to cash out this year, we could turn a key and get X amount,” Ting says. “If we stay with this and cash out in two to four years, we can make X times 10.”

Neither has run a company before, but Ting and Tran share a singular vision.

In separate conversations, Tran echoed his partner’s sentiment almost word for word: “We’ve put all our money back into this company. We can make a profit anytime we want, but why make a dollar today when you can make $10 tomorrow?”

The focus may be singular, but Wanted List’s rise is characterized by a-learn-as-you-go series of adventures. Because they’ve never run a business, Ting and Tran have picked it up as they’ve gone along.

Trial and error

Tran, who handles the financial and legal aspects of the company, says his biggest obstacle was learning how to manage other people. Ting, who oversees the company’s technology and operations, had to learn the same lessons, along with how technology and the industry move. It’s been night and day when compared to their former lives at Arthur Andersen.

“Consulting firms have a very structured path of career development,” Ting says.

“Once you’re outside of that structured path, it opens your eyes to how much you’ve learned about business process, technology, how to get things done, documentation, and things like that. But at some point, all of a sudden you say, ‘Whoa, what do I do now?’ It’s kind of scary that a decision I make now could make or break our company.”

All things considered, Wanted List has done pretty well for itself.

The acquisitions have been hit or miss, Tran says, with some of the companies overperforming and some underperforming. They’ve rolled with it.

Despite being well short of their one-time goal of 400,000 subscribers, they still have faith in their original business model, and in analysis.

“We’ve kept to the core business model. When we first got into this business, one of the main reasons was the analysis. Was the adult market ready for this? We think this is the business model for today for the adult consumer,” Tran says.

Their reasons are numerous. Their arguments are convincing.

“People are tired of late fees,” he explains. “They’re tired of going into video stores where they have to concern themselves with what they purchase and who’s around them. Four years ago DVD was just gaining ground, with DVD players getting into more than 50 percent of American homes. Meanwhile, you have the Internet, which was created for porn, it seems. They seemed to gel together at that time, and we said, ‘This is the next evolution in the way people will get their adult movies. Let’s be it for them.’”

Nontraditional methods

In order to be anything on the Web, you need eyeballs, and Wanted List has taken some interesting routes to get them. They don’t rely as heavily on their affiliate program as other adult marketers do, they can’t advertise in mainstream outlets like Netflix does, and they don’t have the built-in traffic source of competitors like CECash’s URentDVDs.

Thus far, Wanted List has used a two-tiered plan.

First, consumer-focused contests, and lots of them. Things like guess-the-porn-star-genitalia-contest “Label That Labia” and cosponsored studio ventures where winners got to direct a movie for Madness Pictures, choose a name for the Bad Seed mascot, and name a Red Light District title have been successful for the company.

“We’ve tried to drive traffic to our site, not for the purpose of [surfers] becoming members, but to have fun, to check out cool things on our site that really have very little to do with the core business model—contests, games, interviews,” Tran says. “When you’re able to drive that traffic for reasons not of your core business model, people are able to see your site.”

The second method that’s proved successful has been the ability to get the Wanted List name in mainstream magazines like Wired, Stuff, and Coed.

“We’ve entered an era of lad mags—the Maxims and the Stuffs of the world really propelled these mainstream magazines to have an edgier feel to them,” Tran says. “Sometimes they straddle that line of what’s acceptable with a little adult content. It’s not too hardcore and not in your face, but it’s something funny and witty. We’ve been lucky enough to get into those magazines by writing articles, running contests, and doing similar partnerships.”

Wanted List also has been able to successfully court the female market, something they’ve done, as Tran says, by not having tits and asses all over their site. Instead they’ve tried to give it a sexy feel, along with features for women like articles from Playgirl.

Another thing Wanted List has is retention.

No, they can’t match Netflix retention, which is said to be two years on average. For the adult space, however, their 10 to 12 month average is far above the norm.

“One of the top reasons why people quit our service is because they’ve had a little bit too much porn. So they leave for a couple months and then come back,” Tran says.

“Netflix keeps their customers for 24 months because people are always watching mainstream movies. I think if we can hit that year mark we’re doing pretty well. We have amazing retention when it comes to the adult market, probably better than any company out there.”

Building the brand

Although Tran and Ting have become comfortable with their transition from mainstream to adult – after building their business, partying with porn stars seems to be priority No. 2 – they don’t expect Wanted List to be their end-all venture.

They’ve had to consider the possible encroachment of Video-on-Demand (VoD) on their market, but don’t consider it a threat just yet. Thusly, they’ve decided to focus on their core business rather than expanding their offerings.

Tran believes Wanted List has a five-to-seven-year shelf life. Ting says he and Tran have already discussed exit strategies. Ideally, both partners would like to build the company to a level where it is self-sufficient, allowing them to work on other ventures.

“For us, [reaching that point] is going to be [retaining] a certain level of subscribers. I still think there are a lot of people who don’t know our product is out there, and I think it appeals to people who don’t like going to a store; they like anonymity,” Ting says. “We want to get more people knowing we’re here, and we’re not going anywhere.”

Tran concurs, pointing to the big brands and their customer loyalty as the watershed.

“Our goal is to try to massage our customer base and really get them to trust us a service provider,” Tran says. “If it happens to be the case that everyone is switching to VoD, I think we have the capability to switch over and maintain our customer base because it’s the name Wanted List they trust. Over the years, companies like Vivid and Hustler have done a very good job of doing that.”

The “princes of DVD” probably won’t ever conquer Netflix in terms of numbers, but the success they’ve achieved with their edgy innovation likely means Ting and Tran will be at the top of the industry’s most wanted list for a long time.