Why has the money in sextech dried up? Because forecasting is very, very bad in the sextech space. That’s why the money is gone. Thanks for reading.
NO NO wait ok actually I have more to say. Let me explain.
In 2011, I was part of the well-meaning but chaotic brand marketing team at Ann Summers.
Thanks to an eye-wateringly expensive physical estate of shops consuming much of the revenue, as well as a complex and completely ungovernable Party Plan division (a business model so staggeringly convoluted that I could never fathom how it made money in the first place), margins were breathtakingly slim.
Even against modest targets, turnover regularly fell short. I remember a new marketing director taking the floor in an all-hands meeting once. It was his first time.
He cleared his throat a little, and then, in that specific kind of posh British accent that sounded more like it should be reporting the cricket scores on Radio Shropshire than discussing sex toy sales in a Croydon warehouse, he said smiling, “here is the monthly sales report: knickers down, dildos up. Thank you.”
Laughter and applause. It was good first impression.
But every month was a struggle to bring those knickers back up. Sales forecasts were almost always missed. It was extremely hard to grow the margin there.
And then came an unlikely saviour: Snowqueens Icedragon.
Thrifty Shades
You might know her better as E. L. James, and you might be more familiar with her work, Master Of The Universe, under the name 50 Shades Of Grey.
The 50 Shades franchise was the rising tide that lifted all pleasure industry ships. Even though the official licensing went exclusively to Lovehoney, we all benefitted from the groundswell of titillation and frank sexual dialogue. Everyone did. Over night, every adult shop window display in our green and verdant land had switched to black and white pictures of ties, and the marketing copy was all in ITC American Typewriter font, in reference to the book’s cover.
It was shameless, and it was effective. Pipedreams spun off an entire brand, Fetish Fantasies, that walked the line of 50 Shades copyright infringement, just to exploit the enthusiasm for light BDSM products without having to pay for the official licensing.
But stupidity followed, because while sales spiked extravagantly across the industry in the wake of that dubious franchise, so did the expectation among industry executives that it would continue forever.
New budgets were created, new targets set, and all were based on short-sighted forecasting informed by numbers generated by the 50 Shades uplift, projecting those overblown numbers forward, long into the future.
Weathering The Forecast
No one seemed to predict a subsidence, as though the wave would just keep rolling up the beach, forever. But as history reveals, most consumers had put their 50 Shades fling to bed by the second book, and the movie trilogy really didn’t maintain the momentum like the forecasters expected.
(Lovehoney managed to drag 50 Shades out the longest, since they felt the lash of E. L. James’ personal whip urging them to push the merch, and her royalties, as hard as they can, even to this day.)
So when 50 Shades inevitably tailed off, a lot of marketing directors discreetly started to raise the vague spectre of “difficult trading conditions” and “souring relations with China” as reasons why their forecasting was off, to distract people from the fact they had been complacent. China was never the actual reason though. The reason was that because the original forecasting was based on inflated numbers, those targets were always going to be missed when enthusiasm for 50 Shades waned.
And because everybody was too polite to call it out at the time, we all let it happen again, but this time worse.
By 2020, I was actually at Lovehoney, after a spell at LELO. For the first time, there were major investors sniffing around our little sex toy industry, reaching their busy hands into our businesses and examining our numbers to see if money could be extracted.
The sales figures from the peak of the 50 Shades boom were wheeled out to prove we were profitable, and equity firms started buying up adult businesses in the expectation of a quick and profitable exit.
Then, various lockdowns caused a meteoric spike in sales across the industry. Having not learned our lessons about these anomalies, our forecasts for the future were all based on the sales surges as a result of COVID. Departmental budgets were created, based on those forecasts, sextech start-ups started frothing up all over the place, and investors, big and small alike, started throwing money around.
Objections, including my own at that time, that this was not going to last forever, were dismissed in favour of hiring everybody within walking distance of the office and doing weird marketing stunts like sending a sex toy into space on a hot air balloon.
OnlyFlans
Very quickly, though, the world began to return to normal, like a skybound sex toy slumping back to Earth. Those forecasts suddenly looked horrifically ambitious, and across the industry budgets were quickly slashed again, and people and departments began to be sloughed off.
The pleasure industry, however, was now stuck with investors who demanded a return on their money. The majority of major brands in this industry now have serious investorship behind them, each one fearing they might miss the boat. Seduced by aggressive forecasts, between about 2017 and 2023, reckless money had been pouring in.
And now, like someone who’d lied on their CV to get their job and felt lost on their first day, our entire industry’s performance was under scrutiny. Lockdown demand did not continue as predicted. Of course it didn’t. And once the lockdowns were over, investors were stuck with lethargic businesses that had briefly punched above their weight-class.
Since none of those investors have seen a successful exit yet, new investors are hesitant. It wasn’t as dramatic as a bubble bursting, more like a flan deflating in a cupboard. But once the inherent flan-ness of our industry had been revealed, new money has not been forthcoming.
Until one of those bigger businesses sees some success, the smaller businesses can only work within their current means, until the next big social upheaval.
And that’s why the money dried up.
It’s because there are a lot of people in this industry who are very good at looking at the numbers, but not enough people who are good at looking at the landscape.
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