Danni Ashe: Danni's drive to Net profits

Danni Ashe was working as a stripper in 1995 when she launched a website from her bedroom. Today Danni's Hard Drive is a $30m business. The 'World's Most Downloaded Woman'

Danni Ashe is the only woman in the world who has appeared on the cover of both The Wall Street Journal and Jugs magazine. She's the most downloaded woman on the internet – her image has been accessed more than one billion times. Ashe embraced internet technologies in early 1995 to create an online business now estimated to be worth $30m. Hers is a story that most online businesses could only dream of.

Danni's Hard Drive was launched from Ashe's bedroom as a hobby six years ago. At the time, she was working as a stripper and discovered that many men were trading her image in online newsgroups. She decided to investigate. "They were fascinated by me, asking me lots of questions, so I realised there was an opportunity to create more depth in adult entertainment," she explains. Danni's Hard Drive now employs 45 staff and its profit margins run between 20 and 30 per cent – a figure that's just a pipe dream for other online content sites. The website has 4.5 million unique users a month, made a profit of some $6.5m (£4.6m) last year and is forecasting a profit of $7m to $8m this year.

So why is porn such a success on the Web? Gregory Clayman, president of videosecrets.com, which supplies live video footage for porn sites such as danni.com and penthouse.com, believes it comes down to consumer demand. "People like to do three things on the Web: check stocks, check e-mail and check porn," he says.

The internet and pornography court an uneasy relationship, though. Last April, Yahoo! was forced to ban the sale of pornography on its shopping section because of mounting public opinion. And Danni Ashe says that it can be difficult to strike deals with other internet sites.

"Big dot.coms have a love/hate relationship with porn sites. They all need our profit and our audience. They often make overtures to us, but someone on the board will stop the deal. It's very frustrating for us. We'd love to do business with them."

Toine Rodenburg is the general manager at Pythonvideo.com. The six-year-old company streams live video content to its 3,000 sites from a number of clubs it owns in Amsterdam's red light district.

"All the portals love us because we pay our bills and we measure our ads so we always strike good deals," he says. "The problem is that most portals are investment driven and the board of directors might have a problem with adult content."

In 1995, when the the internet was giving away everything for free, the adult entertainment industry was pioneering the subscription model. According to the research company Datamonitor, of the $2bn (£1.42bn) revenue from paid online content last year, $1.4bn (£995m) was spent on adult entertainment.

For example, Danni's Hard Drive attracts 29,000 paying users, all of whom fork out a monthly subscription of $24.95. Compare that with the subscription charges for The Wall Street Journal's online edition – just $59 a year. Similarly, the average monthly subscription for Rodenburg's 3,000 porn sites is about $29.95. "Some subscriptions are more expensive if they're purely live feeds as the costs are higher to run these studios 24 hours a day," he explains.

Pythonvideo.com stumbled across the online subscription model by chance. The company grew out of the red light district in Amsterdam where it owns several sex theatres. In 1995, it decided to stream live video from its sex shows on the internet to act as a promotion and encourage more tourists to visit its theatres. The popularity of the online shows made them realise it should be developed into a separate business model rather than as a mere promotional tool. "At first it was just an extension of placing ads in Yellow Pages or in magazines," Rodenburg explains.

Another little known fact about the online adult entertainment industry is that it has always been an innovator of technology. Porn site programmers pioneered much of the technology that is now essential to e-commerce such as credit card processing, online advertising, traffic management, one-click buying and streaming media.

Other innovations include drop dialling, which enables websites to extract cash from their customers without a credit card. The technology drops the user's internet connection and dials a new one, usually on a premium-rate number.

The technological expertise of porn sites is leading some to offer their services to other websites. Danni Ashe expects this part of Danni's Hard Drive to provide 50 per cent of the company's revenue in three year's time. "We're used to dealing with a lot of traffic," she explains. "We've had to build a lot of tools to support our business in streaming media. They've been finely tuned and are applicable to other businesses."

One issue that Ashe has been grappling with for a number of years is the limited nature of payment systems on the Web. "Payment systems are at the heart of the failure of the dot.com world," she insists. "Credit cards are very limiting. They make you very vulnerable to fraud and they limit the ability to price a product accordingly.

"I've been looking at micro-payment systems since 1995. The problem is that I can't sell one video clip for $1. I'm in the position where the only business model that works is aggregation of content. It's hard to sell subscriptions because people are usually only interested in one piece of the system," she says.

Although porn sites have not been affected by the slump in online advertising that is blighting the rest of the internet sector, online adult entertainment has its own set of challenges. Both Danni Ashe and Toine Rodenburg admit they are facing much more competition in the online porn business. This has shaken up established relationships and the status quo of the industry.

"Much of the online porn business operates on moving traffic among the sites," Ashe says. "Thousands of smaller sites generate traffic and sell it on to the bigger sites through affiliate programmes. Many of the new sites don't know what they're doing and we're seeing a glut of free material out there. It makes it much harder for us to sell subscriptions.

"We're seeing a saturation of the adult world. An ocean of people have got involved in the online porn business who don't belong here," says Ashe. "I think we've become victims of our own success."