Gamma Entertainment (www.gammae.com) is a big company with a low profile. Located in Montreal, where an obstinate European sensibility defines the 400-year-old city, all 24 full-time employees are native French speakers, a fact that might just explain the company's unobtrusiveness.
"One reason we might be so quiet is because of the language barrier," admits Carl Bernard, the 24-year-old founder, president, and co-owner of Gamma. "It's hard sometimes for me to integrate with an English crowd."
If true - we had no problem communicating - it hasn't hurt business, and the implication is that it's had something to do with facilitating it. "I think we are a bit different than a lot of companies," adds Bernard. "We stay very quiet, very tame. We're not the loudmouths at the trade shows. People know that we're business people, and that they can trust doing business with us, and that's the reason why we're successful. Not because we have a big mouth, selling more than we can deliver, but because we deliver what we promise."
Since 1996, Gamma has grown from a single-Website home-based business to a major affiliate sponsor working out of 5,000 square feet of office space, offering related services such as hosting, banner exchange, content, marketing, and Web development.
With more than 40,000 registered Webmasters, the affiliate program is their bread and butter. "But that doesn't mean they're all active people," says Bernard. "We send out 2,000 checks per month, and a few hundred people account for the major part of our traffic. These are people that have stuck with us since the beginning. They know that they are going to get their check, that the stats are accurate, and that we're not shaving. It's harder to convince newer people [of that] now, because there is so much competition."
In many ways, Gamma's humble beginnings, especially the personal nature of Bernard's initial inspiration, characterize the archetypal Internet porn success story. "I was looking for some porn sites with young girls, as a surfer," admits Bernard, who was 18 at the time. "But I couldn't find any, so I started collecting pictures of young models, and then I put together a Website, and it started making money. So that's how it started."
Bernard culled his content from the only available source. "Newsgroups, of course," he says. How much did he pay for it? "Not a dime," he says, "like everyone back then."
But those were the formative Wild West days of the adult Internet industry, when the landscape was populated by loose outfits that have long since been replaced with sleek operations that keep tight rein on bottom lines and obvious extra-legal shenanigans. Back then, the first Gamma Website, Teen of the Week, evolved rapidly.
"A few months later we renamed it The Web's Youngest Women," says Bernard. The site, www.webyoung.com, was popular from the get go. "Yes, it was working out, people were signing up. Even before we were accepting credit cards, we were accepting 900 number payments. Then we added credit cards, and then we started buying advertising, and then we added a second and a third Website, and then an affiliate program a year later, in 1997. Amateur Hardcore had just started their program, and so had Cybererotica, so we started ours a few weeks after Cybererotica announced theirs."
At first, it was a distinctly hands-on operation. "I learned everything by myself," says Bernard, "right from the beginning. I was doing all the programming myself, so we didn't have to hire people and wait months to get stuff programmed."
Growth was exponential after that. They were getting a lot of traffic from a site called Banner Exchange, but when the owner wanted to sell, Gamma was afraid they might lose the traffic, so they bought the company for $1.2 million in 1999. That's how they got into the banner exchange business.
The other services they provide were similarly added one by one out of necessity. Content, for instance. "Back in 1998 and 1999, when we started the teen sites, teen content was very hard to find," says Bernard. "There wasn't any CD we could buy, or licensed content, or plug-in galleries; there wasn't any of that, so we had no choice but to hire photographers who would go hunting for models."
It didn't last, according to Barnard. "We stopped making our own content because we found that it wasn't really profitable to have exclusive content, so now we only license and purchase."
To further increase efficiency, the company has honed its operations even more the last few years. "We made a big change two years ago," says Bernard. "Before that, we were working from home, subcontracting everything: design, programming, hosting. Now we do everything here [in the offices]. We went from hands off to hands on because it's much easier to control everything and then give the company the direction you want. I think we've progressed a lot since we got the office and the programmers, and have our own network. We control our costs much better, as well as our priorities."
Gamma's main priority at the moment is their new affiliate program, Gamma Extreme, which will be built around a network of 40 new sites, 10 of which are already up. Webmaster payouts will be increased from $25 to $35.
"I think $35 is the [industry] average," says Bernard. "Some are paying more, $40 or $50, but they're paying on the active membership model. This is per sign-up. How we're doing it is on new sign-ups; instead of charging $29.95, we're now charging $39.95. We pay for the trial, and the Webmasters will still get paid $35 in the new program. We're taking that chance, but we were taking the same chance paying $25. The difference is that we built new sites that are more expensive, so in the long run we'll make more money. It wasn't possible to pay as much by charging only $29.95. Some sites [out there] are charging $39.95 or $44.95, and I've even seen sites at $49.95. So, instead of increasing the price on our old sites, which we didn't think was fair for our members, we just created a bunch of new sites. It's basically all the same content, but it's more expensive. And the trial is more expensive; $5.49, I think, instead of $4.95."
Another big part of their business, according to Barnard, is email marketing, which acts as an adjunct to the affiliate program. "People submit emails to us," he says. "They put boxes on their Website and get paid 45 cents per submitted email. We get a lot of emails. We're mailing 2.5 million opt-in emails per day, people who subscribe to our main daily newsletter, Teen by Mail."
I recall an earlier comment, and ask Bernard if he thinks shaving is a widespread practice in the industry. "Whatever people are calling it, a lot of people are not tracking every sale," he says. "I think either they will only track sales from the first processor and will forget the other ones, or they will not pay on checks, on 900s, on dialers. But every company has their little ways of shaving. I think it's because everyone has to pay so much to be competitive. How can you attract Webmasters paying $20 for signups when other companies are offering $80? The only way I can see it is by only counting one signup out of four."
He warns that, as signup ratios continue to decrease, more companies will trim their staffs and/or their budgets. "They won't be able to justify paying, say, $120,000 for a marketing guy. They either have to shave more or cut the salaries at some point in time."
Bernard has avoided that ugly prospect by making sure his numbers add up and by maintaining a streamlined operation. "I think we have a very small staff for everything we do," he says. "We've always kept everything minimal, and being in Montreal salaries are much lower, so I think we are in a very good position because of that." He says that while taxes are higher in Canada, there are less legal restrictions. "Legally, I think there is more we can do. We don't censor any pictures, and we don't put little dots on the tour."
Neither does he flirt with edgy content. "We have always been very careful about what we promote," he says. "To me, 'Lolita' means 16, and I guess to a lot of other people also. We have always been very careful about not using that word. It's the same thing with bestiality; we never want to touch it even if we know it's very profitable.
"It's all about sign-up ratios," he adds, explaining why those sites continue to proliferate. "People are trying to find niches that will get more people to sign up. But people are weirdoes," he adds, with a laugh. "They'll buy everything."