The Dirty Business of Internet Porn

Looking for that one ingredient that'll make your web site "sticky" -- the elusive amalgam of graphics, text and audio that keep online visitors from leaving? Here's a hint -- the answer lies not so much in technical wizardry, but in online content. Of all the Internet truisms, the truest is that Content is King. And if content can be considered the engine that drives interest on the Internet, online pornography must be considered the cyber equivalent of rocket fuel. So you thought the Internet's seamy, seductive dens of iniquity were only frequented by the morally bankrupt, socially maladjusted who walk among us? Well, wake up and smell the suspicious credit card charges -- it's worst than you think.

Business is Booming

The commercial juggernaut that goes by the name of E-commerce owes as much of its success to dot coms whose names include "XXX", "Girlz2go", and "Hot1" as it does those that include "amazon", "priceline" and "ebay". If you have content of a sexual nature, you can rest assured that folks will beat a path to your door -- usually a credit card in one hand and a restless mouse in the other. Kate Delhagen, analyst for Forrester Research, estimates that the cyber-sex trade is one of the most profitable areas on the Internet. According to Forrester, web porn sales totaled $140 million in 1997, and will rise to $366 million by 2001. That constitutes more than 10 percent of all online retailing. Sex sites rank among the most visited on the Internet. Researcher Relevant Knowledge, for instance, found that 13 percent of the 57 million surfers over age 12 visited at least one of the top 10 sex sites in May.

Baremuffin (c'mon -- this is obviously not her real name) is suddenly very quiet. Having consented to this interview over a week ago, she's now having cold feet. Considering the full-body exposure her previous line of work guaranteed, cold feet was the least of this former exotic dancer's occupational hazards. "I got into the cyberporn business the same reason I started stripping -- because the money was really good" she says, warming up to the topic. "I had some health issues, was ending a bad relationship, and needed a steady stream of income that would allow me to be home with my children. Stripping really doesn't allow this to happen."

How easy is it to get started in the cyberporn business? Baremuffin started Yourpaysite.com , one of a handful of adult content providers that supply a host of free services that include but are not limited to web site hosting, a secure server for credit card transactions, shopping cart and chat room technology, bulletin boards, streaming adult videos, and pornographic pictures cover numerous categories, -- all in exchange for 50% of the profits. The only catch is that the marketing onus is on you, and if you don't have sufficient traffic, yourpaysite.com will take down you site.

With staggeringly low barriers to entry, it's a not surprise that there are estimated 500,000 adult web sites that open for business each year. According to porn site operator Kim Nielsen, most of them are small-time operations that generate less than $1,000.00 per month.

Netrepreneurs looking to the cyberporn industry to generate million-dollar fortunes would love to have the track record of Nielsen. In 1996 this former University of Florida grad started with a Dell computer, a $50 monthly account with an ISP and 40 pictures he bought from a photographer he found through Usenet postings. Last year the business that grossed $900,000 and expects to gross around $3 million this year.

Nielsen claims his site gets 22 million hits daily, generates $250,000 monthly and that he spends $150,000 on images and $40,000 on server and network costs. The rest is essentially profit.

Not bad for a guy who started the site as a way to test his theories of marketing in his graduate business school dissertation.

Government Policing

In this mostly conservative political climate, it's no surprise that Congress has passed legislation that attempts to curtail the cyberporn industry. The trick is to draft bills that pass constitutional muster. In 1996, Congress passed the Communications Decency Act, outlawing the transmission of indecent material to children. But the Supreme Court struck down the law 9-0. Earlier this year, the 3rd U.S. Circuit Court of Appeals upheld an injunction that prevented the Child Online Protection Act from taking effect on the grounds that the law's censoring provisions were overly broad and impacted even non-pornographic websites. Both rulings essentially placed the Internet under Free Speech protection. Undaunted, in late July the House approved legislation by Rep. Steve Largent, R-Okla calling on the Justice Department to broaden its prosecutorial efforts beyond child pornography.

Porn industry leaders -- what there are of them -- have taken notice. In an effort to mitigate any draconian legislation that could hamper their profitability, two of porn's largest moguls are trying to clean up the industry before the government does it for them. Danni Ashe and Andrew Edmond testified this summer before a panel of commissioners who will be helping Congress rewrite the nation's child pornography laws later this month. Ashe, the owner of danni.com, is the holder of the Guiness World Record as the most downloaded woman on the Internet. How insatiable is our appetite for Danni images? According to the website www.mostdownloadedwoman.com, since 1996 Ashe's image has been downloaded 841,271,545 times. If each image of Danni that's been downloaded were printed on a separate piece of Xerox paper the stack would be over 278,285 feet tall -- that's 52.7 miles, or 47 miles into space. If each downloaded image were printed on standard letter size paper and laid end-to-end they'd stretch 144,940 miles -- or three and a half times around the world.

Edmond is chief executive officer of Flying Crocodile, Inc., which has a stable of more than 280,000 adult entertainment sites in cyberspace. The problem, according to the two of them, is that the cyberporn industry is made up of thousands of mainly small, home-based Web sites that have complicated traffic-sharing agreements.

At the heart of these agreements are e-mail lists containing millions upon millions of addresses of adults lifted from newsgroup postings or picked up from cookies. (A cookie is a small piece of data that is sent to your browser from a web server and stored on your computer's hard drive. A cookie can't read data off your hard disk, files created by other sites, or, do not damage your system. Cookies are used to identify which pages on a web site you have visited so the next time you visit, those pages may be readily accessible.) Unfortunately, these lists inadvertently contain the email addresses of children. The lists are bought and used to solicit for extremely violent, graphic and illegal forms of porn, then passed between cyberporn entrepreneurs like a rock star in a moshe pit. For instance, if you go to webcrawler.com and search for "German girls", the sites that make up your returned results string aren't necessarily the ones with young children dressed in lederhosen and looking like they stepped off a cocoa mix box. These email misuses are at the heart of the most egregious problem facing anyone trying to regulate this industry.

The other problem is that the cyberporn industry is years ahead of the rest of the Internet industry when it comes to innovative e-marketing. Most of the online marketing techniques we take for granted have their roots in cyberporn. Animated banner ads, web link rings, pop-up boxes, automatically opening up new browser windows, password-protected areas, streaming video and many e-commerce tools all started with Internet porn sites. New innovations include porn sites that play dirty tricks on the search engines by deliberately adding country names or the word "girls" to a Web site so they will show up on search results, and setting up "mushroom URLs" that exist only long enough to send out thousands of porn-filled messages and links.

The industry's willingness to police itself may be a little too little, too late. Besides Congress, other government agencies and legitimate businesses are scrutinizing the industry. According to the Federal Trade Commission attorney Stephen Cohen, the industry also is coming under increasing scrutiny for use of fraudulent or deceptive business practices, which he said are used by roughly 10 percent of the online adult Web sites. "We continue to see problems with the use of the world 'free,' " said Cohen. "A lot of these sites are advertising free content, but then when you get down into it, it turns out not to be free."

The FTC took action in July to force X-pics, a nearly bankrupt adult Web site operator, to repay consumers whose credit cards were charged without authorization, the first time the agency has acted to stem the practice known as "slamming."

If you're thinking about using your credit card to pay for those pictures of Dr. Laura in her birthday suit, don't bother reaching for your American Express Card. In termination letters mailed out in late May, American Express informed all of its adult website merchant accounts that they would no longer allow AmEx credit cards to be used to pay for access to cybersex sites. But before you start handing out Morality Medals, American Express's decision boils down to simple economics. While online merchants themselves have to foot the bill for phony charges, American Express has to pay administrators to process the disputes. And a lot of porn site charges are disputed. Fraud accounts for some disputes; many porn sites bill by using business names that are different from the website name; and many porn surfers deny they've made the charges when confronted by a spouse -- something pornographers refer to as the "gak factor." (Husbands run up a credit card bill at a smut site, then go "gak" when their wives see the monthly statement). MasterCard and Visa also have cracked down on "charge backs" -- transactions that are canceled due to disputes or credit card fraud -- levying substantial financial penalties against merchants who are unable to keep their rates below 1 percent.

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