Notoriety cuts two ways for adultery website

No matter how much global controversy it engenders, there is nothing illegal about AshleyMadison.com, the contentious Canadian website that promotes only one product - infidelity.

While founder and chief executive Noel Biderman claims both growth and profits, the site that was launched in 2001 has nonetheless found itself in more than one cul-de-sac.

Notoriety cuts two ways in this case - it attracts customers to sign up in droves, but simultaneously alienates investors.

Expansion into new markets always brings the need for a substantial cash injection. But unsurprisingly, Mr Biderman has been repeatedly burned by major banks and big-budget investors.

Even the bankrupt United States city of Detroit is giving the cold shoulder to the site's attempts at alternative exposure.

Last week, the website made a formal offer of US$10 million (S$12.4 million) for the right to change the name of a Detroit island park to AshleyMadison.com Island for the next decade.

Remember that in July this year, Detroit filed the largest municipal bankruptcy in US history, with estimated debts of US$18.5 billion. That dire financial situation notwithstanding, the city shows no sign of jumping at the current seven-figure offer.

It is not the only major rebuff since its launch. In 2010, Avid Life Media, which owns the infidelity site, had to abandon a plan to go public on the Toronto Stock Exchange where it hoped to attract an estimated US$60 million in an initial public offering.

In the past, at least one big bank is said to have rebuffed Mr Biderman's quest for funding with the explanation that his core business does not fit with its conservative values. This brand of rejection is a recurring theme, even as his site has been welcomed in new markets around the world by users hoping to find partners in sin.

It is really no surprise that the company has echoed US foreign policy and engaged in its own pivot to Asia. The simple economic reality is that today's Asia is a serious commercial haven not just for bricks-and-mortar companies that offer trade and a variety of financial services, but also for expanding e-commerce sites.

Accordingly, the company entered the Japanese market in June this year and CNN reported last month that Mr Biderman claimed the foray attracted 500,000 members in the first three months.

It then extended its service to Hong Kong last month. Now, predictably, it has its sights on Singapore because the Republic's growing financial importance makes it the Switzerland of Asia.

Just as much as the website polarises opinion, it opens up interesting discussion points. While it operates in a moral grey area, it attracts many who have no qualms to sign up in droves.

But while the site is not infringing laws, it caters to a basic biological instinct while it unashamedly exploits human frailty. And that is precisely why a civilised society cannot simply brush aside its existence. In a way, the business says as much about society as it does about successful commerce.

Women are a key component of the site's business plan, a core concept that Mr Biderman explained in an interview with Jeff Haden of Inc.com last year.

Referring to his aspirations before the 2001 launch, he explained: "I was willing to bet that the Internet was the next big jump for women. So I had to convince them that finding and meeting people online was better than finding them in the workplace - and once I did, I knew the men would follow. There's a reason clubs have ladies' nights: Attract women, and men will follow."

This key strategy, according to Newsweek, has been integral in the business. It reported last month: "Users buy credits that cover e-mail and chat conversations. Pricing starts at US$49 for 100 credits, which allows a user to e-mail 20 women. Only men pay for credits; women can join and chat for free."

So here's the thing. Theoretically, what would you do if you found out your accountant had invested your money in a company that - according to a recent media report - has increased revenue "18-fold in six years"? When you realise your cash is propping up this controversial website, would you pull your money out because you do not condone infidelity?

This is the ethical no-man's-land where the thin line between morality and commerce becomes blurred. Clearly, Mr Biderman is painfully familiar with this ambivalence. The business has tried unsuccessfully to embrace several levels of marketing awareness.

Not surprisingly, there are roadblocks. Facebook and TV networks will not accept its advertisements and the infidelity website has also been prevented from advertising during the Super Bowl, where a 30-second ad slot this year costs US$4 million.

Despite constant controversy and outrage in print and electronic media, growth has been steady.

According to data released by the site - but not independently confirmed - it had 4.9 million members globally in 2009, of whom 4.1 million were in the US. But this year, it says it has more than 21 million members, of whom 12.7 million are American.

With that growth has come the need for new funding, which in turn brings searing investor scrutiny. Tech & Innovation Daily reported last week that Mr Biderman claimed that the company had US$30 million in profit on revenue of US$90 million last year.

But the investment climate seems to be slowly changing, with a New York hedge fund, Fortress Investments, reportedly poised to channel US$50 million into Avid Life Media.

This in turn brings the debate back to the grey area where moral repugnance is countered by an attractive investment.

One word of advice, however - if you are about to write to your accountant to say that you want to be an angel investor in the parent company of the infidelity website, don't end the letter with the words "Yours faithfully".

dmcmahon@sph.com.sg

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