His innovation: pioneering the traffic system of trading money for clicks that had since become the backbone of the business. It was called affiliate marketing, a kind of advertising system that would one day be used across the internet, from Amazon to eBay. Before long, he had more than one thousand porn sites in his lair, taking cuts every time someone clicked on an advertiser’s banner, and becoming a multimillionaire. And one who was more than willing to flex his powers if anyone tried to cheat him out of his cash. “I made the rules on the net, because in those days it was like the wild, wild west,” as Fantasy Man later put it.
While Fantasy Man was like the godfather, Warshavsky was the scandalous and diminutive boy wonder. A hyperactive twenty-three-year-old with a large nose and a snorting tic, Warshavsky had made his first fortune in his teens, running a phone sex business out of his bedroom in Seattle. A computer geek, he immediately moved his empire on the early net, establishing a company, the Internet Entertainment Group, that pioneered the most electric innovation in the online porn world, online peepshows.
For a price, visitors to his main site, Club Love, could chat with naked men and women for about $1 a minute. “This is it. This is huge,” he told a reporter for The Wall Street Journal, which ran a front-page story on his booming business. “This combines the interactivity of phone sex with the visuals of television.” The Journal marveled at how “Cyberporn is fast becoming the envy of the Internet. While many other Web outposts are flailing, adult sites are taking in millions of dollars a month. Find a Web site that is in the black and, chances are, its business and content are distinctly blue.”
The article detailed how the innovators in porn had done more than just slap dirty pictures online. Pornographers like Fantasy Man and Warshavsky had figured out nifty innovations in internet marketing, created ads that “popped up” in front of webpages, and succeeded in upselling visitors to actually shelling out money for subscriptions. They’d also created new kinds of delivery mechanisms, secure credit card payments, and live videos. “Internet pornographers deploy savvy tactics that mainstream sites would do well to imitate,” as the story put it. Bob Guccione, the publisher of Penthouse who represented the old media sex empire, put it succinctly to the Journal when he said “There are a lot of computer nerds emerging as porno kings.”
And, for that matter, porno queens. Women were among the most innovative and successful entrepreneurs in the business. Beth Mansfield, an Army brat and NASCAR fan from Alabama, was a single mom and unemployed accountant living in a mobile home when she heard of people making money in porn online. Mansfield didn’t want to make porn, however, so she began carefully curating pages of links to other sites. A concerned mom, she refused to use profanity on her pages, and would substitute asterisks to cloak sh*t and f*ck. But perhaps her greatest innovation was branding—naming the site Persian Kitty, after her cat. Something about the mystique of the name, the idea that a woman was behind the site, went viral—even more so because Mansfield kept her real identity anonymous. Before long, she was selling ads across the web to sites that paid a premium to be listed on her page. In her first year, she made $3.5 million.
A few miles from Mansfield’s mansion in Seattle, an ambitious young stripper named Danni Ashe read a book on HTML programming during a beach vacation. She launched her own fan site online, Danni’s Hard Drive, in 1995 as a place to put her own promotional pictures. Then Ashe struck on a more lucrative idea—charging for membership, still a new idea at the time. She hired models, posted pictures, audio interviews, videos, and charged $15 a month for access—becoming one of the first subscription sites on the internet, besides The Wall Street Journal (which later profiled her in a page-one story about online pornographers, called “Lessons for the Mainstream”). Before long, Ashe was making $2.5 million a year and reportedly using more bandwidth than all of Central America.
As the moguls of porn became the envy of the internet, the federal government conveniently got out of their way. On June 26, 1997, after more than a year of heated debate about the censoring of the internet, the United States Supreme Court struck down the Communications Decency Act for violating the First Amendment. It was a landmark decision, protecting the young medium from government regulation. For better or worse, online porn was here to stay. As humorist Dave Barry put it a few months later, after visiting that year’s AdultDex convention, “this fast-growing billion-dollar industry will undoubtedly come up with newer and better ways to help losers whack off.”
But Fantasy Man and Warshavsky, as Kremen was told, had one big problem: Cohen. Fantasy Man had been introduced to Cohen already at a trade show, and found him boorish. But more recently he’d been hearing bad things from his friends in the business. One by one, he learned, they were getting sued by Cohen. He didn’t like that at all. Who the fuck did this guy think he was? When his friend Serge Birbair called him after he’d been sued, and told him that Cohen, supposedly, had stolen the site from some penniless nerd named Gary Kremen, that was all Fantasy Man needed to hear.
He picked up his phone, and called Warshavsky—proposing that he be the Robin to his Batman in a fight against Cohen. “I want to get ahold of this guy Gary,” he told Warshavsky, “who’s saying that he owns Sex.com and Cohen stole it from him and help him with the lawsuit, because he doesn’t have any money for a lawsuit. Wanna join in with me?”
Warshavsky, at the time, was riding higher than ever. He had recently released a stolen sex video of actress Pamela Anderson and her husband, Tommy Lee, on his site, driving legions of web surfers to his site. When he heard Fantasy Man’s proposal, Warshavsky snorted approvingly. He didn’t like the way everyone was being bullied by this guy either. “They were intimidated,” as Warshavsky later put it to Wired. “He basically strong-armed them. The guy is really kind of a scumbag.”
But this wasn’t just altruism, it was about money. After some due diligence, they determined that Kremen, the Match.com inventor and Stanford MBA, had a credible complaint. So they wanted to get on board. When they called Kremen, they could hear the anxiety in his voice. “He seemed like a tech nerd,” Fantasy Man recalled, “antisocial. A guy not interested in adult.” But a smart guy nonetheless. Kremen felt a mutual respect, intellectually at least. Warshavsky seemed like a weird live wire, but Fantasy Man was pure business.
They told Kremen what they had in mind. They would put up $100,000 money for him to sue Cohen—in exchange for 51 percent of Sex.com if and when he got the domain back. Kremen wasn’t interested in running Sex.com, he didn’t aspire to be some kind of twenty-first-century Larry Flynt. He just wanted justice. So if these two guys wanted to help him in exchange for a controlling interest in Sex.com, so be it. “That’s great!” Kremen told them.
With a few grand from Fantasy Man and Warshavsky, Kremen got Falco to dig in and turn up whatever she could against Cohen. They sent a mass email across the adult industry online, asking for information from anyone who’d been targeted by his enemy’s wrath. “Several sites, such as Sexia.Com, SexCom.Net, HotSex.Com have been either threatened or actually sued by Mr. Cohen for trademark infringement for the use of the word Sex in their domain name,” he wrote. “We are interested in obtaining information on this matter and are willing to share what we know about Mr. Cohen’s actions.”
But he also had to reach out to the alleged author of the letter that was used to get Sex.com from NSI: his estranged ex-roommate, Sharyn Dimmick. Falco found her living in a trailer north of San Francisco, and Dimmick was unequivocal when shown the letter. It was forged, she said, and signed an affidavit verifying as much, as well as that she didn’t have the authority to transfer the rights in the first place. Affidavit in hand, Falco fired it off to Network Solutions, along with another request to give the site back.
While Kremen waited for a response from NSI, he used the leverage to go after Cohen directly too. But Cohen, he discovered, was busy covering his trail. With the help of his attorneys, Kremen learned that Cohen had sold Sex.com to a Mexican
company called Sand Man Internacional, based in Tijuana. And Sand Man was owned by another company, Ocean Fund International, based in Tortola, British Virgin Islands.
In a press release by Ocean Fund, the chairman, the regally named Sir William Douglas, said Sex.com was bringing in a net income of $95.5 million in the fourth quarter alone. In fact, the site was generating so much traffic that it was causing “major internet congestion problems,” the release stated, which forced Sex.com to open its own internet network access point in Tijuana. With traffic growing at 18 percent per month, Sir William Douglas went on, Cohen was worth every penny of his $17 million salary and $100 million in stock options. “I have full confidence in a smooth transition of our roles and that Stephen will succeed in bringing further growth and accomplishments to our Company,” Douglas stated.
This was just a shell game, Kremen suspected, phony companies made by Cohen to keep his money safe. Cohen’s lawyer made their position perfectly clear during a call in February 1998 in which he told Falco that Kremen was “a kook” who “would never see a penny” of what he was asking because Cohen’s companies were incorporated offshore. A few weeks later, NSI followed suit—denying Kremen’s request to get back the site and, effectively, leaving it up to the courts to decide.
Kremen felt the air leave his lungs. He had done everything right, he thought: been in the right place at the right time, registered domains when no one cared, started an online dating empire, and for what? He felt defeated. And it got worse when, over his objections, the Match.com board decided to sell it to Cendant, a consumer-services company in Connecticut, for a paltry $7 million. Despite pioneering online dating, Kremen left with nothing but a title on his Match.com profile, “Founder.”
But he wasn’t going to lose out again. Cohen hadn’t just stolen his website, he believed, he’d taken his property. And the implications of that went far beyond him. He wasn’t just fighting for Sex.com, he was fighting for the future of the internet, for the soul of what it meant to stake a claim in this new world online. The internet wasn’t just some invisible world of ones and zeroes, it was a place, a world where humanity would soon migrate. If someone could just take another person’s property, then what would that mean for the future of life online? It would mean that it meant nothing.
And so, on July 9, 1998, Kremen sued Cohen in the U.S. District Court for the Northern District of California, “seeking damages, injunctive relief and a declaration of ownership for an Internet domain name.” Soon after, he added NSI as a defendant, alleging that they were liable for transferring the domain name based on Cohen’s forged letter. Then he steadied himself. As much as he thought it was everyone’s war, it was his alone to fight.
CHAPTER 7
THE ART OF WAR
There was the Switch Hitter, the Double Whammy, the Anvil Stroke. And then: the Shuttle Cock, the Bookends, the Flame. Moreover, the Base Clutch, the Love Tug, the Two-Timer, the Thigh-Swatter, Best Fist Forward, the Milker, the Perpetual Penetration, the Palm Swirl, Tiny Circles, the Ring, the Door Knob, the Shaft, and the Small Pinch. They were all the names of the techniques listed by Stephen Cohen in the instructional essay he was writing for Sex.com on “How to Give the Perfect Handjob.” He titled the essay in hot pink font against a bright yellow background, and continued in italicized black. “Sex means more than intercourse, exploring all the different variations enhances your sex life and keeps it from getting stale,” he typed. “. . . So, read on and learn how to let your fingers do the walking.”
Cohen had reason to feel excited—and not just because he’d won $86,000 in Vegas on a Caribbean poker machine. By the summer of 1998, running Sex.com had become the central passion of Cohen’s life. It had delivered on the promise he’d only imagined back when he launched the French Connection BBS, creating an online empire of sex for which he alone would be king. It also felt like validation for just how insanely far ahead of the curve he really was, despite his run-ins with the law: it was him—not Bill Gates (whom he claimed to have hobnobbed with at a computer convention), not Steve Jobs, certainly not Gary fucking Kremen—who realized that the real engine of the internet was the two things everybody wanted even if they wouldn’t admit it: the sucking and the fucking.
And he had once again found love. Her name was Rosa Montano, a secretary at a bank he’d met through a mutual friend in Mexico, where he’d been traveling for years. He affectionately called her “Rosey.” Rosey, who had two daughters of her own, came from a large family, with five brothers and sisters, and was just the kind of woman Cohen needed: one who provided the sense of family he’d long desired, but left him to his business without asking questions. In November 1997, he married her in Vegas—his fifth marriage but, she hoped, his last.
Since then, he’d been splitting his time between Vegas, where his mother still lived, and Mexico, where he moved with Rosey and her kids into San Antonio Del Mar, an oceanfront community thirty minutes southwest of Tijuana. He opened an office on a busy street in Tijuana, where he ran the day-to-day action of Sex.com. Cohen had help in Marshall Zolp, whom he’d met in prison. Zolp had a history of security fraud, including a $100 million pension scam, as well as bilking investors out of $2.4 million in a phony company that claimed to have invented a self-chilling beer can. Zolp oversaw the live video feeds that ran over Sex.com, arranging for the women in Tijuana to undress in front of a flank of computers. “No per minute charges!!!” Cohen wrote on the website. “No Software Needed!!! Pick the girl(s) you want to watch from any of our 11 hot shows! Some stages also have FREE CHAT, where you call the shots! And our MAIN STAGE features fluid motion video with SOUND.”
While Zolp handled the strippers, Cohen badgered Jordan Levinson, his marketing consultant, about the banner ads, which were going up and up in price with demand. With nine million members, he told buyers, he was claiming upward of 146 million unique hits daily. A single banner ad could sell as much as $50,000 a pop, with some advertisers spending more than $1 million per month alone. “The entire world was typing Sex.com,” said Jonathan Silverstein, who worked with Club Love, calling it a “banner farm that was printing money.”
Analysts valued the site at more than $100 million, but Levinson tried to appease his boss with even bigger numbers. He denied his better instincts when Cohen wanted to redesign the site so as to cram more banner ads on a page, despite the garish design. But Cohen wasn’t out to win any interactive art awards. He only wanted to continue doing the one thing that everyone in the online gold rush was dreaming about: making millions through electronic commerce online.
With so much money and traffic coming in, Cohen hatched an even bigger plan for his empire, to make his company worth $60 to $100 billion. As he saw it, domain names were just the beginning. The bigger money in the future was going to be about bringing internet access to the masses by building out an infrastructure—cable, microwave, and so on—that’s where the money would be, he explained:
An example, AT&T just purchased TCI, which is a cable company in Colorado, paid $40 billion for it, and it’s a complete fiber infrastructure. Sex.com, if it becomes part of this, will be able to provide a 24/7 production on this—on this fiber system, which will substantially raise its value, and it will raise the value of the whole thing. But the real value is not going to be in the domain names in the future. The real value is going to be in the infrastructure. This month the Internet authority is just about to release four or five other domain names which are going—which are going to even diminish the value of Sex.com.
Another thing that you’ve got to take into consideration is that in a lot of foreign countries, sex is something that is not readily available. A lot of people are married through their parents, through arranged weddings. Sex is not something that is free and easy as it is in the United States and some foreign countries. And we get a lot of users from these areas, because they’re basically sexually frustrated. As society [as] a whole starts to enlarge and freedoms become more available, the value of Sex.com sta
rts to diminish. The fiber infrastructure is the only thing left that will keep a real true value in Sex.com. And it becomes a very true value.
I have a different concept than most people. I believe that the whole Internet is going to change. I believe that telephones that we know today are going to change. I believe that television as we know it today is going to change. And I think it’s all going to be IP to fiber optics. I believe—and my company believes—that the people that own the fiber optics and the infrastructure are going to be sitting in the perfect position. I think Sex.com will be more of a transmission in the future over a TV over IP. I think the rights could be worth upper billions.
So Cohen set about building his new dream: becoming the largest internet service provider to Tijuana. Cohen had long been an engineering geek at heart, not unlike Kremen, someone who relished the feeling of a tool in his hand, a screw to be tightened. So while the computers buzzed in his warehouse on Diego Rivera Avenue, he got to work. Just beyond the Border Patrol in San Ysidro, California, and up a hill behind a train track on a short dirt road called Rail Court, he found a perfect patch of land on which to build a point of presence, or POP, from which he could build his internet service provider. The land had once been the location of a used car lot, but had since fallen into disrepair. A fence surrounded a patch of withered palm trees, and a dilapidated three-room, one-story shack in the middle.
Cohen headed up there one dusty afternoon past the railroad tracks, and purchased it for $500,000. Needing to get the rights to run the fiber optics down to the border, Cohen had to strike a deal with the railroad, which hired an assessor to survey the metes and bounds. With his plan approved, Cohen and several Mexicans who worked for Sand Man came out one day to set everything up. As he stood under the hot sun, he gazed out over the buildings of Tijuana in the distance, imagining the bright future to come. Bueno.
The Players Ball Page 10
