If you can’t beat ‘em, join ‘em !

You know how you’ll be trying to do work, and the Internet will inexorably drag you into porn? That’s exactly what happened to Andrew Conru’s career.

A mechanical engineering doctoral student at Stanford who grew up with churchgoing Lutheran parents in northern Indiana–the kind of guy who holds the door for everyone until he gets stuck there so long that someone has to make a joke so he can let go–Conru started the first online dating site, WebPersonals, in the early ’90s. He sold it in 1995, pocketed a minor windfall, and started all over again.

Now he owns 27 sites under an umbrella company called Various, controlling twice as much online dating traffic as better-known rivals Match.com and Yahoo (Charts) Personals. But his clients tend to be much more fun. That’s because most of them post pictures in which they’re having sex. When you’ve already seen your date naked, it’s a lot easier to focus on what she’s saying.

Of all the dating sites Conru has launched–ones for Latinos, seniors, Asians, Jews, churchgoers–the biggest by far is AdultFriendFinder, which accounts for more than 60 percent of Various’s revenue. Conru says his privately held, 450-person company brings in well over $200 million in annual revenue, averaging 40 percent growth for the past nine years. With more than 35 million visitors in 2006 and 75,000 new users registering each day, AFF ranks among the 100 most popular sites in the United States.

It’s become so mainstream that a joke about it appeared in the Diane Keaton and Mandy Moore romantic comedy Because I Said So. “In Hugh Hefner’s day, it was ‘It’s OK to look at sexuality,’” Conru says. “Now it’s OK to be sexual.”

This coming from a gawky, bespectacled guy nicknamed the Professor who collects 1930s movie posters but whose AFF profile states “I’ve had a ménage à trois.” If that’s the least bit true, AdultFriendFinder is a very effective service.

The ultimate fighting machines

Various’s headquarters in Palo Alto isn’t what you’d expect from a major competitor to the likes of Match.com. Through the years the company has gradually taken over almost all of the offices in the dingy, motel-like complex where it moved a decade ago. One of the few non-Various doors has a sign reading “Vineyard Christian Fellowship.” Conru says Vineyard is a very nice neighbor.

Even inside Various’s doors, the company feels less like an industry leader than like a bunch of random businesses. Some people are coding for SeniorFriendFinder, others are doing customer service for FilipinoFriendFinder. It’s like one of those magazine companies where the Christmas-sweatered woman edits Cat Fancy next door to the long-haired Guitar Player rocker dude.

Behind one door on the bottom floor, several writers are working on AFF’s online magazine. A man whose pen name is Colonel Lingus is writing a column about his recent trip to the Adult Entertainment Expo. A woman is reviewing a piece on how to make the most convincing ejaculate for your user photo. Other staffers are digging up “investigative” pieces for March, which they’ve declared, without congressional approval, to be Fantasy Month.

In a bigger office upstairs, Various chief product director Lunatic E’sex–his legal name since he was 21–works with a team that kicks more than 1,000 fake users off AFF each day, people who are trying to solicit visitors to their own adult sites. E’sex, who sports long dark hair, sunglasses, a leather choker, and Guinness-worthy long nails, is particularly good at telling real sex freaks from the fake ones.

Though, to be honest, it’s not that hard. The fake ones are usually incredibly hot women. For a site that gets more traffic than any other adult site in the world, there’s a severe lack of pornworthy images. That’s because the 24 million users from 195 countries (116,000 members in China thus far) are real people, not actresses or models, and many are 40 or older and almost always male, hunting for a very small percentage of women.

Also, it appears that there are a whole lot more swingers out there than anyone thought: Couples make up 10 percent of all accounts and, according to Conru, tend to be the most active. If you wondered what those doughy older people on Real Sex do when they’re not being filmed by HBO, they’re logging in at AFF.

A sex toy story

Sandy Hamilton, a 42-year-old former veterinary technician who lives in Fort Worth, Texas, is so dedicated to the site that she no longer watches TV. If she’s home, she’s on AFF, often putting on free live-cam shows for 1,300 members. She met her ex-roommate on the site and, as the photos on her profile attest, has also met quite a few men very, very intimately.

“I’m not interested in having a relationship right now,” Hamilton says. “Love does me dirty.” Instead, she prefers to meet guys online. The courting ritual goes like this: She sends the required two e-mails back and forth to unlock personal e-mail addresses and real names. Then she’ll have a long, deep phone conversation. After that, she arranges a time to get together, leaves her door unlocked, and gets in bed naked.

“Tim,” 50, met his 28-year-old fiancée on the site, though they tell friends they met at the Coke display at Wal-Mart (Charts). They still have sex with other Peoria, Ill., AFF users about twice a month, and one of those couples will serve as bridesmaid and groomsman at their wedding in May.

“Ours is kind of a Cinderella story,” Tim says. “A lot of people on the site look up to us and ask us for advice.”

These are precisely the people, Conru has learned, who make the best customers. And he’s been looking for customers for a long time. Despite his engineering background, engineering personality, and engineering looks, he has always considered himself an entrepreneur. He started his first enterprise when he was 8, selling his parents’ vegetables to neighbors. (“I learned a lot of business stuff back then,” he says. “No matter how bad I wanted to sell a 10-pound zucchini, no one wanted to buy it.”)

He started five more businesses while he was in grad school. From 1993 to 1997, Conru would work all day on his companies, including a Web development firm, and work on his doctoral thesis at night. The morning he finished it, he threw his notes in the garbage and went in to work as usual.

After figuring out that building websites for others wasn’t nearly as lucrative as creating his own permanent revenue stream, he started another matchmaking site, not entirely unlike the one he had sold to an Australian company.

FriendFinder was intended as a site where people could find buddies for poker or fishing or golf. “When I first started, I thought I could help people,” he says while eating a chicken sandwich he started only after finishing all the salad on his plate. “I was going to give more options to people who weren’t social and didn’t get out much.”

People, perhaps, like mechanical engineering grad students at Stanford who grew up with churchgoing Lutheran parents in northern Indiana.

Getting in the skin game

A few days after the site went live, however, Conru found that people were posting naked pictures of themselves, looking for partners for activities that clearly were not golf. So he deleted them. They’d post them again. And he’d delete them again.

“I decided to create a release valve,” he says about the launch of AdultFriendFinder. “Six months later the adult site was as big as the regular site.”

Conru soon discovered something even more interesting than the fact that people in Peoria are willing to act on their elaborate fantasy lives. He found he could build a community through exclusion. Most other social-networking sites, from Match.com (Charts) and eHarmony to MySpace (Charts) and YouTube (Charts), are based on the assumption that the site that amasses the most users wins.

Conru, on the other hand, believed that people would pay more to be part of a small group of like-minded souls. After all, you don’t shop for a mate at Wal-Mart; you want to go to a cool bar. And if that bar brings in the kind of crowd you like, you’ll pay more for the drinks. The average AFF user pays $20 a month; others shell out as much as $50.

“The more niche you get, the more value per member,” Conru explains. “People pay money for a filter.” He wasn’t bothering to charge members of his religious dating site, BigChurch.com, until the guy who ran it insisted. Registrations jumped immediately. “He was right,” Conru says. “On the Web there are not enough filters for sincerity.”

While most websites then were taking in venture capital, Conru grew the business organically, in part because the VCs didn’t want to have anything to do with his nudie pictures, but also because he’d taken funding for an earlier startup and wound up disappointed with his cut.

“When you start out, you don’t need a lot of money, as the Web 2.0 crowd finally figured out,” he says. “All I really needed was a computer.” And when you discover a world where people pay you to put up their homemade porn, you can keep your costs pretty low.

Selling sex on cells

To expand without investment capital, Conru invented a massive affiliate program, in effect outsourcing his marketing to the public. Anyone who could direct traffic to his sites would get a cut of the business they sent his way, in the deal structure of their choosing (per click, per registration, or as a lifetime cut of the money spent by the referral). Various now has more than 500,000 of these affiliates.

Michael McQuown, whose company Thunder Road places ads for AFF, makes at least a third of his revenue from Various. And he prefers sending users AFF’s way, since it converts traffic to signups the most often. “They pioneered the first really good affiliate program,” McQuown says, “and they still have the best one.”

The affiliate program helped Various to grow, between 1998 and 2001, from 16 employees to 80, forcing Conru to act less like an entrepreneur and more like a CEO–a role he didn’t exactly embrace. “That’s a bumpy ride,” he says. “You go from being one of the guys to running the company. It’s a tough skill for a founder, learning to be hands-off.”

Having never had a boss except in a few summer jobs, Conru had little idea about how to deal with employees he barely knew. So he brought in a human resources coordinator, choosing Natalie Cedeno–a devout Christian who was initially so uncomfortable with AFF that she would ask other employees to spell out dirty words to her–because she was a POW interrogator during Desert Storm. Conru figured those skills would be useful not just for hiring but also for jettisoning people he’d hired too quickly during the boom.

“In 2000 it was so hard to find people that we hired a homeless guy because he could type,” Conru says. “He slept under the desk. We just required that he keep his shoes on.”

During Cedeno’s first three weeks, she canned more than 30 people. “It was emotionally hard,” Conru says. Cedeno also initiated strict compliance rules, such as a time-card system, believing that Various was particularly vulnerable to lawsuits because of the risqué nature of the business. “She said, ‘Do you know what COBRA is?’ And I said, ‘Yes. It’s a snake,’” Conru says. “I knew it was something you threw at people when they left.”
Entrepreneur finds ’suite’ dreams

But as AFF grew, Conru’s entrepreneurial jones was feeling less and less sated. So he kept launching new sites. So many, in fact, that he’s able to decorate the walls near his corner office with posters of the failures (Slim.com, Nicecards.com, Sharerent.com, and others). About half of the things he’s tried over the years ultimately flamed out, he says. “You need to do as many as possible simultaneously and see what sticks. Especially on the Internet, where the cost of entry is so low.”

And when things fail, he doesn’t feel as bad because he has so much other stuff going on. This may be the same theory AFF users employ with dating.

A few years ago, he also started to expand by buying other companies. Back when he ran his small Web development shop in 1994, Conru had hired Lars Mapstead to bang out HTML for $11 an hour. It didn’t take Mapstead long to figure out that he could make a lot more by starting his own Web development company.

So he did. And the two stayed friends, which is surprising once you get a glance at Mapstead. A 37-year-old blond surfer dude with a big shock of chin hair, he wears loud Hawaiian shirts and is known in the industry as Legendary Lars. Since it’s too cold for the Hawaiian shirt, today he’s wearing a ski cap that says “Legendary” and a T-shirt that also says “Legendary.” It’s unlikely that his underwear does not say “Legendary.”

Once Mapstead got into the adult space, first with chat rooms and then with Cams.com (phone sex with a video-camera), he and Conru agreed not to invade each other’s turf. In their own little porn Treaty of Tordesillas, Conru got online communities and Mapstead got live video. In 2005, when the lines started to blur, they merged, with Mapstead getting about 10 percent of Various.

And 100 percent of the attention. Conru, who has avoided interviews through the years and has flown only once since an engine caught fire on a flight from Hawaii eight years ago, has made Mapstead the face of Various. That becomes most apparent every January, when Mapstead drags Conru to Las Vegas for the Adult Entertainment Expo’s Players Ball, where guests dress as pimps and hookers. “He lasts for 15 minutes, then says, ‘There’s nobody to talk to about business here,’” Mapstead says. “Then he goes upstairs to code.”

Live rich, retire richer

Mapstead also generates many of the ideas for new ventures. “Every time he comes up with something, I start thinking, ‘How much work is this going to be?’” Conru says. “There are times I tell Lars not to come up with any more. It’s like he’s beating me up with ideas.” In the past two years, the two have expanded Various from 200 to 450 employees, adding Cams.com workers in Las Vegas and customer service reps in Taiwan and the Philippines.

Conru sees this as another tipping point for the company. “You have to become like a VC,” he says. “My role will be acting as a mentor to a bunch of entrepreneurs. I don’t know if I’m the right person to do that.”

Part of the issue is that if Conru hopes to continue his current growth rate, he can’t just come up with ideas for new sites. He’ll have to acquire more companies. This year his goal is to buy six businesses–preferably outside the adult industry. So far he’s done well with the three purchases he’s made (Gradfinder.com, Bondage.com, and a personals site called Fast Cupid), but he’s been weighing other choices for an uncharacteristically long time.

“Most acquisitions lose money,” he explains. “It’s kind of like playing poker. Poker is a dangerous game. If you’re doing well, you think it’s skill, and if you’re doing poorly, it’s the cards.” Conru also plans to start some mainstream companies based on the features he’s built for his adult sites. For instance, he hopes to use code from Cams.com and AFF to allow tutors in India to teach English to people in China. “We already have the sunk cost,” he says. “We may as well try it in another area.”

This is a good time to segue out of the adult market and online dating, because both of those industries are hurting. Not only has the Web dating niche matured out of its growth phase, but the porn gold rush is over too. “People used to go to bulletin boards, but now they go straight to the search engines, so there’s this tollbooth effect,” Conru says. “All the money is going to the search engines.”

But Conru can’t sell his business and start over, even though that’s exactly what he would have done years ago if he hadn’t slipped into the adult world. He can’t sell because AFF is far too big for any adult company to afford and far too dirty for any mainstream company to stomach. And because most investment banks don’t want to get involved with pictures of people having sex in their own bedrooms–let alone kitchens, living rooms, motel rooms, airplane bathrooms, and Renaissance fairs–he’ll likely never get a fair price for going public.

So unless he can diversify himself out of the vice niche, something not even Philip Morris has been able to do, Conru is destined for a life in porn. He’s at peace with that, though. “I never thought I’d be in the adult business,” he says. “But the people are more fun. They’re less stuffy.” Besides, if he hadn’t, it’s a fair guess that he would never have had that threesome.

Make Online Profits !

Whether you’re just beginning to develop your business model or simply analyzing an existing business, your chief focus should be on how you’re going to generate income. There are seven ways to generate revenue on the Web:

#1. Sell your own products. The main advantage to selling your own products is that you ultimately control how much profit you make on every sale and you therefore have the potential for the biggest profit margin. You know exactly what each product costs, and you can try out different price points to see what works the best. People appreciate good value, and removing the middleman is a great way to provide your customers with competitive prices that keep them coming back for more.

#2. Sell your own services. Whether you’re a small-town dentist, a high-priced online legal consultant, a real estate agent, a tutor, a landscaper, a bed and breakfast owner, an auto-mechanic, a caterer, a fitness trainer or anything in between, you can profit from selling your service online. It’s easy to get started selling a service online, but your revenue potential, in most cases, is limited. That’s because, unlike someone selling a physical product that can be stored and shipped on demand, you can only provide as many services as your time allows.

When you sell a service, you’re essentially selling a relationship with yourself. And this requires that you spend more time and effort establishing your credibility and developing rapport with your visitors than is typically required on a site selling a physical product. You not only need to establish the benefits of the service you’re offering, you also need to establish the value of you providing this service.

#3. Drop ship products. If you want to sell products without the hassles of tracking your inventory, setting up warehouse space and maintaining a confusing shipping/receiving infrastructure, drop-shipping may be the choice for you. Drop shipping lets you sell quality, brand-name products on your site for a hefty profit, while the drop shipper takes care of fulfilling the order. They warehouse the stock, pack the orders and ship them out to your customers.

#4. Recommend affiliate products. Recommending affiliate products creates a “no-risk” partnership that allows you to promote another company’s products or services on your site to earn a percentage of their sales. As one of the company’s “affiliates” or promotion partners, you earn a commission each time someone you’ve referred to their site makes a purchase. To advertise their wares, you might post a banner on your site that links to the affiliate program’s site, or you might publish an article about the company and their products in your newsletter.

#5. Sell ad space. Once your site has lots of highly targeted traffic, or a large, targeted opt-in list, you may be able to sell advertising. Advertisers are willing to buy ads when they’re being directed at large numbers of their target market. Nowadays, though, advertising revenues are a lot less than they used to be, so I don’t recommend you plan on making this your sole source of income. Selling ad space can be a great additional profit stream, but it’s unlikely to keep your business afloat on its own.

#6. Create a joint venture with like-minded businesses. Joint ventures are all about related businesses teaming up and combining skills, products, services and resources to create new streams of income and profit. One great way to profit through joint ventures is to seek out products or services that would benefit your visitors, and then approach the companies that provide those products or services. Ask them if you can recommend their product or service on your site for a portion of the profits. Most companies will gladly agree to this arrangement–after all, there’s no risk for them since they only pay you when you refer a paying customer.

#7. Start an affiliate program. With your own affiliate program, you can recruit an army of people (your affiliates) who will recommend your product on their web site for a percentage of any sale they refer. You have the power to exponentially increase your income as more and more affiliates sign up and you continue to teach your existing affiliates how to increase their commission checks (and your income).

It’s one of the most powerful forms of online advertising I know. It allows you to grow your profits while keeping your business small, since you don’t have to go out and spend money on salespeople and advertising. Your affiliates do the advertising for you, and you only pay them when they make a sale.

Succeed !

Think you can’t afford to implement any effective marketing tactics? Think again. Here are five ways to make a splash on a shoestring budget.

1. Talk to your clients. It’s amazing how much money businesses spend to gather market information and attract new clients when they have a wealth of opportunity and information in their existing client base. One of the best ways to increase revenue is to talk to existing customers. Ideally, this should be done by someone outside your company so clients are willing to be honest and open.

When you assess perceptions, you don’t need to talk to hundreds of individuals; simply choose 5 to ten clients and contact them to ask if they’d participate in a phone interview. Here’s how it works:

* Send a letter asking permission to have someone contact them about your company.
* Have the interviewer call and ask value-based questions such as:

What problems were you trying to solve or what challenges were you facing when you considered the services of Company ABC?
How important were Company ABC’s services in solving your problems or addressing your challenges?
What did you value most about this company’s work?
What other products or services do you wish they offered that could help you with other business challenges?
*

After all the interviews have been conducted, compile the information to discover trends and themes.
*

Send a thank-you letter to every client who participated. Include key lessons from the interviews and explain the specific changes you plan to make to your business based on this information.

The important part here is to use what you learn. If you don’t make changes to your business, then you’ve wasted everyone’s time. One company that recently did this tripled its business in one year—the owners learned what people wanted, how their solution made a difference, how to present it, and how to price it, and then proceeded to make changes that improved those areas.

Keys to success: The conversation with your customers is just that, a conversation. Don’t fire questions at them; instead, have the interviewer engage in a conversation and gather as much valuable data as you can. Remember, it’s not about how satisfied they are—it’s about how much they valued your product or service.

2. Creatively package your marketing campaigns. A postcard is one way to market your business. But how about putting a small box together with a fork, knife, spoon and a custom printed napkin that invites your prospect to “have lunch on us?” Think outside the box, and your marketing campaigns will have more impact.

And don’t be afraid to see what other people in other industries are doing and adapt that to your business. Think about the little details that will get attention. I once did a marketing program to the food industry that had a brochure vacuum-sealed in the same plastic used to wrap bacon. The same piece sent to technology companies used static shield envelopes. This campaign earned 96% recognition when follow-up calls were placed.

Keys to success: Set a clear objective for your marketing campaign, and identify how you’ll measure its success. Then follow up to measure the results and adjust the program if necessary.

3. Get the word out with publicity. Think you can’t do PR or publicity without employing the services of a high-priced firm? You can! Although a good firm brings tremendous contacts and experience, most small companies can do enough PR on their own to spark the public’s interest. One great resource for the media unsavvy comes from Shock PR, a Holliston, Massachusetts-based public relations firm. Their product, PR in a Box, delivers templates, tips and step-by-step instructions on how to prepare releases and pitch stories that will intrigue the media.

Keys to success: In one word, leverage. Though it does happen, don’t expect one story placement to generate thousands in revenue. Your success depends on leveraging each press release, each article and each published mention. Put it all on your Web site: Create a news page and add a What’s New area on your home page. Add it to your marketing kit and send the piece to clients, colleagues and professional organizations. Include a note in your newsletter that says ‘Recently Seen In…’ And remember: PR is more cost-effective and more credible than advertising.

4. Leverage existing relationships. Most people know at least 200 people. Do the math: If you know 200 people and they each know 200 people, that’s 40,000 potential contacts! Spend time developing relationships with the people you already know—clients, colleagues, people you meet through professional networking organizations, friends and even family.

Start by making a list of all the people you know. Next, prioritize your list into As, Bs and Cs. As are your advocates. These are the people who feel strongly about you. They’re the “cheerleaders” who would refer business to you right now. Bs could become advocates if they knew more about you, so you need to spend time with these people to educate them. Cs are those people you don’t communicate with often enough. You may keep them in the loop, but they need more time and nurturing before they’d refer any business your way. If there are any names that remain, delete them.

Keys to success: Educate, don’t sell. The key here is to build relationships. These develop over time as you create credibility and trust. To be truly effective, you must always be on the lookout for ways you can help your network. Start from the perspective of giving more than you ask, and your network will become your most valuable marketing tool.

5. Commit to e-mail marketing. Marketing through e-mail is flexible, cost-effective, easy to measure (assuming you put the right tracking in place), and high impact. It allows you to easily drive traffic to your Web site, reach a broad geographic audience and stay in frequent contact with your customers and prospects. E-mail marketing allows you to market your services and establish your expertise with your audience.

Use it for newsletters, new product announcements or to share your publicity success—the ideas are endless. But know that this flexibility and ease-of-use can cause problems. Remember, this is a marketing campaign. So be sure to think it through, develop an appropriate message, create a piece that reflects your brand, know your objectives, and make sure the information is valuable for your market, or people will quickly unsubscribe.

Keys to success: Don’t be seen as a “spammer”! Send e-mail only to those people who have given permission. When someone asks to be removed, respond immediately.

You are the product !

Challenge #1: You are the product. When you sell a service, you are the product, whether you’re a real estate agent, doctor, lawyer, bed & breakfast owner, auto-mechanic, caterer, hair stylist, fitness trainer, accountant, investment advisor, childcare provider, housekeeper, dog walker, landscaper…whatever. You’re selling your time with the promise of a particular result as opposed to a tangible product.

Challenge #2: Your time is limited. Unlike someone selling a physical product that can be stored and shipped on demand, you can only provide as many services as your time allows. And assuming you pause to sleep and eat like the rest of us, this means you’re limited to an 8-hour day. (Okay, 12- to 16-hour days if you love your work as much as I do.)

Challenge #3: You must prove your ability to deliver measurable results, while emphasizing flexibility. People will want to see proof that you’ve delivered great results for other clients, but they’ll also want to know that you’re flexible enough to meet their own unique needs. So you must walk a fine line, making sure that you keep confidential client information confidential, while (1) proving that you’ve satisfied the needs of other clients like them with great results and (2) demonstrating your ability to customize your service to meet their personal, unique needs.

Challenge #4: You’re using a global medium to attract local business. Service-based businesses frequently rely on local clients. Sure, the owner of a bed & breakfast in Seattle may be thrilled to be attracting clients from Australia’s Gold Coast. But is the landscaper in Seattle going to be equally receptive to securing a weekly hedge trimming and lawn-mowing client from Australia? Probably not. So service-based sites that rely on local customers need to actively pursue sources of local traffic.

Just the facts !

If I could show you a simple, proven strategy for earning a reliable income from the web,

Would you want to hear about it ?

Of course you would, that’s why you’re still reading this! With this inside information you will learn how to earn a few extra dollars each week, or go hog-wild like we did, and replace your regular job.

Perhaps you’ve heard of us already, or perhaps you just discovered this site through SmartComputing, C/Net’s ZDNet or even Entrepreneur Magazine.

We aren’t one of those “lucky” folks who managed to ditch my job, for the relaxing lifestyle of an online business. And since 1996 we’ve been getting our kicks helping others do the same.

Please read that again. we’ve been doing this for nearly a decade. It is important you understand that we aren’t another ’self-proclaimed guru’ trying to turn a buck. We’ve made our money online and plenty of it. That’s why this site is VERY different from what you may be used to.

This website is simply a detailed, web-based guide that will show you exactly how we have been… and how you will be… able to literally “make a living from the Internet”. There’s no hype or wild claims here to waste your time.

Just the facts !