Fleshpots of gold elude vice merchants

Nobody knows how much the online pornography business in SA is worth. Estimates vary so widely that they are near meaningless, except to give one a sense that there are indeed companies and individuals making substantial amounts of money from the online red-light district.

The same seems to hold true of estimates of the worldwide size of the market, although the general consensus is that billions of dollars are being spent by a mostly male audience to look at pictures of naked women.

I think there is one group of sites in the US run by a multi-millionaire which does its own pictures, the rest just get it from the Web.

Web developer,.,

Online pornography has a unique stigma to it, which both attracts and repels people. On the one hand, it is the ubiquitous available pornography which causes many people new to the Internet to believe that anything is permissible online and that they can abandon the reserve adopted in the real world.

On the other hand, most people involved in the trade have found the general population to associate online sites with child pornography, bestiality and extreme fetishes. Such material undoubtedly exists, but you will be hard pressed to find it on a Web site open to the general public, or even one that accepts subscriptions online. It is normally restricted to closed user groups that use the Internet simply as a medium to swap material.

The belief that they may run into illegal and disturbing content keeps the more conservative segment of the population wary of porn sites, but it is a different kind of fear that discourages the technically semi-literate.

Porn Web sites do not operate by the usual rules, and most Webmasters are willing to do anything to increase the flow of money from their operations, including the use of pop-up and pop-under windows and automatically opening new browser windows when another is closed. This, combined with the practice of circulating traffic between a small number of sites, can lead a surfer astray in an endless loop from which there can appear to be no escape.

Mainstream Web sites can ill afford similar tactics, which are sure to annoy many into never returning. Consequently, these tricks are often the exclusive domain of pornographers.

You can do hetero, kinky, all the weird and wonderful things out there down to feet fetishes, lace underwear, anything you want is out there.

Russell Lundie,., sex.co.za

But the most enduring myth about online pornography is the vast riches it allegedly generates. Sex, it would seem, is immune to boom and bust cycles, and will always sell, and many dream of dipping into the endless stream of revenue they believe to flow to porn sites. Some may take the first steps to making that dream a reality, but few go far down the road and fewer still succeed.

That this is true of SA can be shown through a simple exercise: There are 138 registered domain names in the South African .co.za space with term "sex" contained in them. Some of these are relatively innocent, such as citrusexport.co.za, home of the Citrus Growers Organisation of SA, and "rope access engineering" site accessexprts.co.za.

Removing those and a couple of bona fide sexual education sites leaves just under 100 sites clearly registered with the sexual act in mind. Of those, only 22 have active pornographic or adult-related Web sites associated with them, and two companies between them own nine of these domains.

Those that do establish themselves in the adult business say it has peculiar problems and rewards, and they have some interesting stories to tell. But their advice is unanimous: don`t try this at home.

One Web development company that did go down the pornography road says it is relatively easy to set up a Web site that can be counted on to keep ticking over and bringing in money.

The development company, which prefers not to be named, was approached by a client to develop a large number of Web sites from scratch, down to sourcing the pictures and movies. Sourcing the material turned out to be the easy part, as the adult industry does not take much cognisance of copyright or intellectual property.

"We got [the material] from other Web sites," says a manager at the company. "I think there is one group of sites in the US run by a multi-millionaire which does its own pictures, the rest just get it from the Web."

One site was built, supported by a database of harvested pictures and movie files, and the other nearly 20 required sites were designed and built to use the exact same database as its back-end system.

"The HTML part of the portals were completely changed," the manager says. The idea is to make the sites seem different and prevent users from detecting a similarity between any of them, which gives the business "more chance of catching subscribers to subscribe to what is basically the same thing".

You don`t just go to a bank and say: 'I`m setting up an adult Web site and need an account please.`

Peter,., Ladynet

And despite zero marketing of the wares, the company says the sites have had a number of subscriptions, with an average of 400 to 500 hits in any given seven-day period. Roughly 70% of that traffic comes from local surfers, with a large percentage from the rest of the African continent and the remainder from Europe and the US.

However, the major revenue stream and main reason for multiple sites is not to lure subscribers, but to cash in on driving traffic elsewhere. The manager says some US and Asian sites pay five American cents per click-through on their banners and a percentage of the subscription revenue should any of those clickers sign up for their service.

The model is an attractive one to emulate, especially as the problems the company faced in its development were mundane and well-known to all developers: looming deadlines, transferring domain names and setting up credit card payments.

"Another one of our recent projects was a shoe site, selling shoes," the manager says. "This is basically the same back-end, layout and design. But instead of displaying shoes you are displaying porn."

That is exactly why there is such a plethora of pornographic Web sites out there, he says. "You have to be different, but different things are illegal and we won`t go there."

Russell Lundie runs a large number of the local gallery Web sites, under his companies Ovar Management and CT Morpheus Webpage Design. Sex.co.za is his flagship site. He is a technology man who says he can have a new adult Web site up and running in 20 minutes.

"It takes about three seconds to set up the server," he says. "The graphics and the layout take the longest."

Lundie uses a database that is constantly downloading pictures from pornographic newsgroups. Images are filtered by size, dimension and keyword; for example, anything containing the word "child" will be trashed. The picture`s origin is also checked against a blacklist of known posters of illegal material and for duplication, all of which cuts out about 80% of the downloaded pictures, he says. The clean database is then categorised.

"You can do hetero, kinky, all the weird and wonderful things out there down to feet fetishes, lace underwear, anything you want is out there," he says.

Then the moderators step forward and decide what is posted onto the various Web sites. The moderators are associates who Lundie trains in the ins and outs of the business, with a view to eventually having them run sites as partners.

"As they grow and develop their skills, they get bigger and bigger equity stakes in the running of the sites," he says.

If one out of every hundred of your hits stays and spends money and becomes a buyer, you have 99 visitors to pass on to somebody else, and that same kind of traffic from them to you.

Anonymous former pornographer,.,

Lundie, as others, has found bandwidth to be the biggest expense. He says an individual subscriber can request files totalling anything from 10MB to 400MB in a month, with some using spiders to harvest pictures.

"Many guys put up sites thinking it is a goldmine, then they have users pulling incredible bandwidth and then they wonder why they aren`t making money," he says. This is why Ovar sells access to its database not only over a limited period of time, but by the byte. The packages vary from site to site, but one month of access on sex.co.za, limited to 50MB, costs R65.

Despite having the system in place and running sites like prime domain sex.co.za, Lundie is scornful of the gallery business. He says the main problem is the continuing proliferation of similar sites.

"The galleries are just what we do to keep the natives amused while we are pursuing our main area of interest," he says.

This interest is personal advertising, with eroticpersonals.co.za as the flagship site.

"Eroticpersonals is a goldmine but it is a hell of a lot of work and incredibly long hours," he says. 'For galleries you just need pictures, but for personals there has to be interest, happenings. It has to be interactive, and it has to be updated."

The site was launched about two years ago, and now claims up to 15 000 online profiles. Lundie says the site can pull up to 50 000 impressions per day, as browsers tend to access more pages per visit than other content sites could expect. An estimated 90% of the audience is South African.

The personal ads are free to browse, with different membership levels to post messages, or bundled packages which include access to gallery sites. Lundie says that less than 30% of the income on the site, which has a larger audience than sex.co.za, is from banner advertising.

Ladynet.co.za is neither a pornography site, although it features a number of photographs that can be classified as erotic, nor is it an e-commerce site, even though it could see a surfer spend a chunk of cash.

Ladynet is what the mainstream industry would call an online facilitator. It hosts a booking engine for striptease dancers which allows searches by very specific criteria, which can tell a punter, for example, that Kim is the best bet for a blue-eyed, red haired "bunny gram" delivery in the Gauteng area.

Peter, who prefers his last name not to be used, says he had the idea for the site almost six years ago but only implemented it in 1999 after finding the right partner to make his vision a reality. He is now running it himself while holding down another job, and describes the venture as "certainly profitable".

"At the moment we have about 150 to 200 users coming in per day. It dipped recently -- at one stage we had up to 700 users a day," he says. Those users translate into a fairly consistent two to three dancers being booked per day, with a commission on the R600 to R700 fee going back to Ladynet.

A smaller male-stripper counterpart, studline.co.za, brings in less than a fifth of the Ladynet business.

Ladynet is a classic facilitator, and does nothing but act as an agent. Once the booking is done online, it is sent off to Johannesburg-based Executive Entertainment, which confirms the booking and handles all logistics. Executive also represents all the featured dancers.

Many guys put up sites thinking it is a goldmine, then they have users pulling incredible bandwidth and then they wonder why they aren`t making money.

Russell Lundie,., sex.co.za

Like many other adult companies, the biggest expense the business has is its bandwidth costs; as part of its community services it offers a chatroom and live webcam where "we pull in a dancer that is having a quiet time to do the webcam for us".

But Peter believes the "phenomenal rate of return business" is due to the faith people have in his system once they have used it. "This is not just pie in the sky. They are available and will dance for you. Once people try it and they know it works, they come back."

Most of the marketing efforts for the site are online, such as ensuring a top ranking on local search engines for the term "strippers". Peter says the personal touch also helps in his market, and the business cards the voluptuous dancers hand out to clients with the URL emblazoned on it accounts for a lot of traffic. A problem peculiar to the adult industry finally convinced him that physical banners advertising the goods on offer weren`t a viable idea. "I put up a couple but they generally just went missing," he says.

A rather more serious problem was setting up banking facilities. "The biggest problem we have had is that banks in SA are not open to adult business," Peter says. "You don`t just go to a bank and say: 'I`m setting up an adult Web site and need an account please.` They are worried about the risk of fraud."

Although Ladynet is a free site and does not process any transactions, another part of the business did require setting up a bank account. Peter is proud of the Web site developed for "Blaze Gordon", a superstar stripper also featured on Ladynet. Access to all picture galleries on her site, and similar ones for other dancers, cost between R50 and R100 a month, all major credit cards accepted.

Other streams of revenue are more difficult to establish. Peter says he would love to run paid-for banner advertising on the site, but has run into a brick wall with those who hold the purse strings.

"The money is with the corporates, but they are sceptical about anything to do with the adult industry. I have approached a number of larger corporates but no luck yet."

A previous owner of sex.co.za, who has since moved out of the adult industry but wishes to remain anonymous, says too many people make the mistake of overestimating the market for their wares.

"People have this fanciful idea that online adult [content] is a pot of gold at the end of a vice-bow," he says. "The adult market is a gateway to the Web, one that has a sort of novelty value, but it has got severe limitations to it. As a business it is a waste of time."

He says the amount of free pictures available on the Net, combined with the crippling cost of bandwidth for an image-intensive site, makes gallery sites unpromising. Although they can be made to work, "it is not something that would excite an investor".

The Internet, he believes, has moved past its first phase where pornography was a novelty, and past its second phase of information provision where it still had a place. In the third phase of valuable services, he sees little place for the sites that make up the majority of adult content both locally and overseas.

And sources of revenue are scarce.

"You can forget about advertising. Most of the banners are banner exchanges, and in principle it is better to keep your traffic in-house than send it somewhere else."

The adult market is a gateway to the Web, one that has a sort of novelty value, but it has got severe limitations to it. As a business it is a waste of time.

Previous owner,., sex.co.za

This leads to the standard practice, copied from American players, of putting together a host of sites based on the same material and hosted on the same server, but which appear to the user to be unrelated. He says it is also often a good idea to do an exchange deal with a group of Webmasters catering for a nearly similar market.

"The aim is to circulate traffic between you. It is standard for people to follow links and the obvious thing to do is try and identify what they are looking for and to make them stay. If one out of every 100 of your hits stays and spends money and becomes a buyer, you have 99 visitors to pass on to somebody else, and that same kind of traffic from them to you."

Nor does he see the sale of sex toys and related products as a lucrative market.

"It is not a massive market," he says. "I think people find the Net useful in that it is anonymous and impersonal, and there will always be a market for toys, but on the whole people have just overplayed the industry."

The exception may be services such as Lundie`s personals, but that remains to be seen.

Paul Alexander is in charge of a large chain of adult product e-commerce stores operated by Tradeserv. The business started with gallery site Eroticaxxx.co.za, after a bricks-and-mortar adult chain decided to go online. The gallery site was converted into an online store in August 1999, and now sells products ranging from "shiny pouch" male underwear to "nympho drops".

Since Eroticaxxx was converted, the company has built up an empire of nine domains and 59 associate sites. Alexander says the stores attract between 9 000 and 12 000 visitors a month, about 95% local, of which up to 170 buy something. Transactions average between R200 and R250, "although occasional orders of over R3 000 are not uncommon".

Alexander describes the level of profit the business generates as a bronze mine, as opposed to a goldmine.

"South Africans are still very cautious when ordering adult-related products," he explains. "Although we are extremely discreet when dispatching client orders, their fear is that it may be opened up by someone else besides themselves, thereby causing embarrassment."

South Africans are still very cautious when ordering adult-related products.

Paul Alexander,., Eroticaxxx.co.za

There is also the problem of credit card fraud and the resulting reticence of banks. "Once we get onto the main stream internationally, and our local banking institutions are able to guarantee no charge backs on fraudulent credit card transactions, then I believe we will enter into the `goldmine` area of Internet business in SA," he says.

Fraud also makes it difficult to break into international business, as Alexander says the resources to trace fraudulent credit card transactions are not available to his business.

So what sells adult products online? Alexander says adult is no different from anything else, even though Tradeserv operates multiple sites as a marketing strategy and many clients would rather not be seen purchasing his products. "I believe you can sell almost anything on the Internet as long as you provide the service a client deserves when he or she spends their hard-earned money with you," he says.

The online pornography industry seems to have little to teach struggling mainstream e-commerce sites.

The problems faced in Web development seem universal, as does the limited nature of the reward. A liberated view of copyright ownership means sourcing porn content can be a breeze, but by the same token it devalues the wares on offer, and the same holds true for automation and other tricks of the trade.

Easy access may mean that more people will access online pornography than will ever buy a dirty magazine, yet the limitations are the same. As one player put it: "You can only look at so many pictures of stark naked women before it gets boring."