There was an online media named ‘netmedia’ that published a sophisticated interview with Danni. The interview was based on a sophisticated veiw point not of her ‘boobs’ thing but of her ‘life and business’ decently. There is worth reading it once so that you can understand how she organized her own life and what she thought of her business. (Apr. 2001)

netmedia: Tell me a little bit about what your site was like when you launched it in July 1995 and how it has evolved over time.

Danni: The original idea was just to make it an extension of my own fan club, which was about merchandising – videos, autographed pictures. And I took that just a tiny step further in that I offered information about other girls that I knew. And I offered videotapes from companies that I had befriended in my years of modeling. So initially it really was just like an enhanced, expanded fan club, and the business model was video sales.

And then I began putting up a lot of fun stuff, like the picture of the week and various different pieces of content. But basically I’d put up the content and then take it back down because I didn’t want to chew up too much bandwidth. It was too expensive. But then I had a lot of people writing me saying they would pay a fee if I would leave that stuff up there so they could get it any time they wanted it.

netmedia: And you were running this all off your own computer out of your house, initially?

Danni: No, I got an ISP in Orange County to host me. This is actually a funny part of the story. I had finally zeroed in on the ISPI wanted, and I was looking at his pricing structure, and I had him on the phone, and I said, “You know, I think we need to talk about having a dedicated server.” And he goes, “Oh, now, now, now, don’t get ahead of yourself. We’ll just put you on the public server. You’ll be just fine.”

I said, “You know, I’ve been talking to a lot of people, and I thinkI’m going to get a lot of traffic.” And he says, “Oh, no, don’t you worry.” The day that we launched, we crashed his public server. And he calls me up in a panic, “Oh, my God! Oh, my God! You got 80,000 hits from Slovenia! So we pulled you off the public server and put you on your own box!”

netmedia: But initially the site was just photos and text and some merchandising?

Danni: Yes, but six months into it, I had all these people saying they would pay a subscription fee if I would leave this stuff up. And so I hatched a deal with a magazine publisher to provide a whole lot of content. In my mind, I thought, “Oh, I’ll make this little subscription site that’ll just kind of run in the background, and thenI can use all this content to supplement and enhance my video catalog,”because I’m still thinking my business model is to sell videotapes and fan club merchandise.

So I launched this pay site. I worked and worked on it, building it up and building this much larger video catalog with the content. I slaved away, like 12 to 14 hour days, and I put it up at 8 o’clock,January 31, wiped my forehead and said, “Whew, now I can relax.” And I went out to dinner with my husband.

When we came back, I checked in, and I’d sold 50 subscriptions! I was jumping up and down going, “Oh, my God. I can’t believe it. I can’t believe it. This is incredible.” And then my husband and I looked at each other and went, “Oh no, now what do we do?” because I hadn’t automated any of it. I didn’t expect it to be anything. I thought maybe we’ll sell five subscriptions a day. So we were getting the orders by email, and then we had to print them out, type them into the database, type them into the password system, type them into the credit card processing software – it was a nightmare.

So then I was desperately hiring people. I would hire anyone that could spell their name. I was teaching people how to use a mouse.Anything to get bodies in to type the data into the databases. It was ridiculous.

netmedia: Then you added streaming to your site in 1997. How’d that go over with your audience?

Danni: Initially, it didn’t have that much of an impact on me because most of the people were on 28.8[Kbps] connections, and they couldn’t have a satisfactory video experience. The value of Danni’s Hard Drive content is the humor and the personality of the girls, and I wasn’t producing any video content myself. I was just making various syndicated feeds available. Video didn’t really become a big deal for us until maybe in the last year and a half. We took the step of starting to produce our own Danni-branded video content about two years ago. It started with the “Boob Bowl,” which was a big hit. That’s really when it started to take off for us.

netmedia: From a business perspective, how has video enhanced your business?

Danni: Well, my bandwidth bills are a lot bigger.(Laughs)

netmedia: Any positive cash flow results?

Danni: Well, yeah. I mean, the website is obviously much more comprehensive and a lot more valuable. We can charge a higher subscription fee because we offer a lot more content.

netmedia: The quality of your video is actually pretty impressive, better than what you often see on such big name sites asNBCi or Is there something about the way you produce your video or the tools you use that allows your video to come out so well?

Danni: Well, our facility is 100% digital. So when we’re streaming live, there are no analog components, which in the end, results in a clearer picture. When it comes down to compressing that image to be able to push it through the Internet, it’s going to look a lot better if it’s never been analog. So that is a big plus.

netmedia: And you also use a proprietary, in-web video player, which you call DanniVision. Why do you do that when you could be usingQuickTime or Real or Windows Media Player?

Danni: Three reasons. One, we were unsatisfied with the quality of RealVideo. Two, we find the average consumer is just notable or willing to deal with downloading and configuring a new player every six months. And three, it was cost. If you want a 10,000-stream license from Real, it costs half-a-million dollars a year, and we don’t have millions of dollars of investment money behind us.

So that just doesn’t make sense. We can’t see the value in paying half-a-million dollars for their technology when we could develop our own that our customers would be happier with anyway.

netmedia: But you do offer some Real streams on your site.

Danni: We do, but only in small amounts. Only for things where the audio is really important. In Real, the audio is way ahead of the video. I think the video quality is better on DanniVision, though it depends on your connection. DanniVision is geared to high bandwidth.If you’re trying to watch it on 28.8[Kbps] with sound, it’s going to be lame.

netmedia: Is it difficult to be responsible for developing your own player? I mean, here’s Real, dedicated to creating quality players.Isn’t it difficult to create a player that’s going to give the same kind of quality?

Danni: Well, DanniVision is constantly evolving and getting better every day. And it doesn’t cost us half-a-million dollars to doit. And it offers our customers an option. For those people that are sitting on a cable modem or DSL, they’re going to have a better experience.

They’re going to get clearer, better video. And for those people that just don’t want to fool with the plug in, they’re not going to have to.

netmedia: All right, let’s talk about the money side a bit. What are the biggest revenue generators for you?

Danni: Subscriptions, far and away. We still do some merchandising. And we’re beginning to offer hosting and credit card processing services to other websites. That is really the big growth business for us, right now.

netmedia: Tell me more about that. What is that business, and what is the opportunity?

Danni: Well, in late 1999, early 2000, we had a real crisis in the credit card banking system. You see, right now the only widely adopted payment system on the Internet is credit cards. But all the credit card processing systems are built to service a face-to-face transaction – where you swipe the card, you get the signature, you look the person in the eye and check their ID. There are a lot of protections built into the face-to-face transaction that tell you,”Yes, this is the card holder.” And then, it goes to the credit card processor, which will then do a negative check rather than a positive check. It will only check to see if that card is bad. Is it stolen? Is it over limit? If the card’s not bad, it must be good, and the charge goes through and you happily walk out with merchandise.

On the Internet, especially when you’re selling a digital product, a lot of those protections of finding out whether we are dealing with the card holder are now gone away. You send the transaction out to the credit card processor, it says, “Oh, not a bad guy, go ahead and take it, he’s approved.” And then you’ll find out, three or four weeks later that the credit card number was never assigned or was stolen, and we have no recourse. Because as far as VISA is concerned, it’s our responsibility to find out if they are the actual card holder.

So there are these big holes in the system where online merchants are being as diligent as they can be, yet they’re being failed by the system because they assume they are taking good cards. Only later do they find out that the card was generated with credit card generator software from a hacking site and that the number, while it is valid, has never been assigned to a card holder.

So as an industry, we have these huge, huge problems with fraud. And that’s everyone across the board. Everyone. But the adult industry is the one that’s doing huge volumes in digital merchandise. We’re the only ones that are selling digital video in a real way. Lots of people like Amazon are selling merchandise, but we’re selling a digital product in a large way. So VISA looks at it and goes, where are all these charge backs coming from? Oh, they’re coming from the adult industry.

netmedia: But why isn’t having lots of charge backs as well, even though they’re selling real products?

Danni: Because you at least get a mailing address from someone when you’re selling physical merchandise. It’s not like they can take your product and disappear. You at least have a trail. You know where you shipped the merchandise. So it’s a little safer. Mail order is still more risky than face-to-face, but it’s safer.

So anyway, here we are. We know that software companies that sell software online have charge-back ratios just as high if not higher than us, but they’re not doing the huge kind of volume that we are. So as an industry, we were pretty much targeted at the end of last year. They laid down some very stiff regulations and really high fines. And there were people who paid millions of dollars in fines. And most of the adult businesses took their business offshore. The vast majority of adult merchants now process offshore.

We did the opposite. We sort of circled the wagons and applied the resources of our company to finding ways to patch the holes in the fraud. So we’ve built these really elaborate systems for identifying fraud and stopping it. As a result, we’ve gotten our charge backs down to .005%, which is incredibly low. Incredibly low. And we now are offering that service to other people.

netmedia: You’ve also talked about the problem of charging very small amounts of money online. Is that still an issue?

Danni: That is still a problem, yes, because when you get a merchant account, they want to know what your average ticket’s going to be. If you tell them your average ticket’s going to be $1, they’re going to say, “No, sorry, it’s not worth our while.” And it’s not going to be worth your while as the merchant either because the fees they’re going to charge you per transaction are going to make it unfeasible. So you’re really kind of forced to charge at least $10. And so, you’re stuck. You have to aggregate a lot of content and try to get people interested in that aggregated piece of content at that higher price.It’s much like what HBO does or Showtime does. They say, “Hey, we have this huge lineup of programming that you should be willing to pay this much a month for.” And that’s our only option. We don’t have the option of saying, “Well, if you just want this one video, or this one photoset, you can pay me 50 cents for it.” It would be like walking into a drug store to buy a tube of toothpaste and having them say, “No, I’m sorry you have to spend $20 in this type of store. You can’t have your toothpaste.” And that’s the situation that we’re in until we find some sort of cash system that gets wide adoption.

netmedia: Now there are companies, like Qpass and CyberCash, that offer various e-cash solutions. Don’t they solve the problem?

Danni: Well, they all have their good points, and they all have their weaknesses. But the one big weakness that they all share is that none of them are getting it into the hands of consumers.

For a cash system to work, everybody has to have it. Right now, there are maybe 15 different e-cash systems, and as a merchant, it’s not feasible to try and support all 15. All of those 15 e-cash merchants probably have only penetrated maybe 5% of the consumers. So, it’s like what’s going to come first, the chicken or the egg? How do you get this stuff into consumer’s hands? How do you get them to download the wallets and start using this system? Because it’s not until the customers start using it that the merchant’s are going start offering it. And vice versa.

netmedia: Now, in terms of what mainstream entertainment websites can learn from the adult community, the obvious question is, is there something they can learn, or are adult entertainment sites so successful simply because sex sells?

Danni: That’s true, but that’s only part of it. I think one of the real reasons for our success on the Internet is necessity. We don’t have the cushion of having a lot of money behind us, so we don’t have the luxury of being able to screw off and waste a bunch of money.We have to cut to the chase. You have to figure out what people want, and you have to sell it to them as quickly and as efficiently as you can. And I think in the mainstream Internet world, that’s kind of been lost. Everybody’s so busy making things cool, so busy trying to entice and satisfy investors that they haven’t really gotten down to the dull business of creating a business, the business of servicing your customers.

netmedia: Is it possible for mainstream entertainment sites to create a successful business model, or is there no content beyond sex and maybe sports that’s compelling enough to make it viable?

Danni: Sure, they can do it. I just think they need to get a lot more realistic. You have to stop trying to sell things that people don’t want, and you have to start making it easier for them to get the things that they do want.

It’s just a question of getting practical. I think in-web video is a really good example. I can’t think of one example of a business in the mainstream world that’s using in-web streaming video. They’re all using plug-ins. But what we know is if you give people a choice to watch this video on Real Video or as an in-web video, 90% of them will watch it in-web because it’s easier. And it’s much less expensive to develop and maintain.

netmedia: In terms of business models that are working in the adult entertainment industry, what are some of the different ones that exist? They’re not all run the way you run your business, isn’t that right?

Danni: There are really four predominant business models. The first is the free site, which is the model used by the largest number of sites. There are hundreds of thousands of little mom-and-pop free sites that will offer a certain amount of free content to generate traffic. They’ll then take that traffic and trade it with other free sites to generate more traffic. And then they’ll skim some of that traffic and sell it to pay sites, and that’s how they make their money.So they use a lot of networking and giving away of free content to generate large pools of traffic, then they’ll sell off some of that traffic to pay sites who will then try to sell the visitor a subscription.

netmedia: And the free sites sell traffic to the pay sites through a banner placement or something like that?

Danni: Yes, through different variations of affiliate programs and banner programs. Now, between the free sites and the pay sites, there’s these sort of like network sites, which act almost like routers. They find ways to get all the free sites to link to them and then they sort of re-route the traffic back out according to some system. That’s just another way of moving the traffic around. Really, when you look at the adult business models, it’s all about moving traffic. And about sharing traffic. You’ll find arch competitors sharing traffic. It’s very communal.

netmedia: Which is a big difference, I would say, from the mainstream sites, where you really don’t see that at all.

Danni: The reason the sharing of traffic is so important is that you have to have a lot of eyeballs because the conversion rates are so low – which is largely a function of the problems with the payment system that we talked about. We only sell three or four subscriptions per thousand visitors. That means you’ve got to have a lot of people visiting the site to make a business work. So adult websites have gotten good at moving that traffic around and making sure they get as many eyeballs looking at their page as possible.

So you’ve got these small free sites that are generating traffic.Then you have the network sites, which are sort of routing the traffic around. And then you have the pay sites, which are in the business of selling subscriptions. They will try and sell a subscription to a visitor, and often times if they are unable to, they will then resell the traffic to another pay site, which will then resell the traffic to another pay site. And that’s what gets you into those annoying pop-up consoles that you can’t get out of. That’s the practice of selling exit traffic.

Then, the fourth type of business model are the content syndicates, which are the companies that produce the live feeds, the 24-hour live feeds, the live chat feeds, and the photo archives and various videoclip archives. These companies specialize in creating and packaging content that they then sell to pay sites. So there are a lot of pay sites that just buy all of their content from syndicators and then buy all of their traffic from other sites. And so basically what they’re doing is just playing a numbers game. You buy your content, and then you buy your traffic, and if you keep the ratios just right, you’ll make money.

Danni’s Hard Drive is very different in that respect in that we have a whole different perspective on how we approach the business in that we’re looking to build a brand, looking to build a destination. And some don’t buy very much traffic, and we don’t buy very much content.It’s much more about creating an area that people really enjoy and feel safe and want to revisit. That’s the one thing that really sets us apart and makes us very different.

netmedia: Tell me more about that. How do you distinguish yourself with so much competition out there in the adult world?

Danni: Well we stand out in a lot of ways. One, by being very softcore. We really stick to our guns about softcore, which makes us pretty unique. I think Danni’s Hard Drive is a place where the wife isn’t going to mind anywhere near as much. You know, we’re kind of likePlayboy in that respect. We have a lot couples visiting, and it’s a very nice, funny, happy, well-lit place. In other places, where the whole subject matter is treated less respectfully and with less fun, you might start going, “Eew, what am I doing here? Why am I doing this?” So it’s very important to me to create that environment that’s very positive and inviting and very focused on the models as people and personalities. I mean, we certainly expose their bodies and do all the traditional things in that regard, but we add that extra element of,OK, this is who she is as a person, and she has a sense of humor; she tells jokes. You know, she’s a cool person. So there’s that, and there’s the fact that we’re brand building rather than just turning traffic. To us, it’s more of a brand building game than a numbers game.

netmedia: So when all is said and done, would it be wrong for anybody to conclude that it is, in fact, easy to run an adult site?That all you have to do is get a computer, put up some sexy pictures, and you’ll make money?

Danni: That might have been the case five years ago. It’s not the case any more. The market is flooded. Now there are hundreds of thousands of sites. And you know, like any business, there’s only so much to go around. It’s not that easy to just walk in and make money.There are lots of people failing. I think there’s always room for a new idea, a fresh angle, but for anyone who thinks they’re just going to copycat their way into success, that window of opportunity is gone.

netmedia: Where do you take the site from here?

Danni: We’re looking at a lot of ways of expanding it, and really it’s kind of a 50/50 split between exploiting our technology and continuing to build the brand. We have the DanniVision technology that a lot of people have shown interest in. We’re considering packaging it for other people to use. We’ve been very successful at offering our credit card processing technology and our hosting technologies to other businesses. We lease our studio to other businesses. So there’s all of that sort of thing. Then there’s taking the Danni brand and moving it into a videotape line, moving it into cable and pay-per-view, moving it into foreign language editions. Just looking for ways to expand the business and the brand.

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