At least as far back as 2008, Backpage.com was accepting paid ads for its “erotic services” section. These include, of course, prostitution ads. Here’s a 2008 blog post from Backpage bragging that it’s policy of charging for “erotic services” actually reduces “illeagal postings.”
Craigslist will start charging for erotic services soon. Backpage.com has been doing this for years. It is perhaps the best way to reduce the prank postings, illegal postings, and postings by under aged users.
Not many solutions for user content generated sites are perfect when it comes to content quality. Craig will face some of the same challenges we face. While there is fraud with employer postings, it is significantly higher in adult. I outlined a few challenges below.
So Goldman knew or should have known a company in which its private equity fund was invested was deriving revenue from paid ads for “erotic services.” This doesn’t necessarily mean illegal activity, much less trafficking in sex slavery. But it certainly means that Goldman has had years to determine whether it was comfortable with its, ahem, exposure to Backpage.com.
Craig’s List got out of the erotic services businesss altogether in 2010, right about the same time that Goldman relinquished its board seat. This was like hitting the jackpot for Backpage.com, which started being the place to go for "erotic services" banned by Craig.
“The [Goldman PE] Fund relinquished its board seat in January 2010 as a result of being uncomfortable with the direction of the company and an inability to influence its operations. We have been trying to exit this investment for a considerable period and have now entered into an agreement to sell the fund's stake in the company,” Goldman said in a statement.
That’s all very true. Goldman never set out to invest in the leading prostitution ad website. They got there through a failed private equity deal.
In some ways, this is all very unfair to Goldman. I’ve seen sex services ads on many websites, including the New York Times-owned About.com. Goldman just had the misfortune of accidentally owning a stake in the biggest of them.
I have no idea what value the Goldman fund assigned to its Village Voice investment all these years later. It’s very likely that most of it was written off. No doubt they are now asking why they didn’t just divest entirely — at any terms — back when they gave up the board seat.
The answer is probably that the numbers on the spreadsheet told them that the risk was minimal. But spreadsheets can’t tell you the risk of having "Goldman" and "Sex Trafficking" screaming from the headlines.
John on Twitter. (Market and financial news, adventures in New York City, plus whatever is on his mind.) You can email him at email@example.com.
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