I've conducted many interviews over the past four years for AVN Online, some with smart people who were barely coherent, and some with self-promoting idiots who had an enviable gift of gab. Rarely, however, have I spoken with people who were smart and articulate. Jonathan Silverstein (a.k.a. J-Styles) is both, and more. With his ubiquitous Cheshire Cat grin and chrome dome branding the way, he's been a high-flying presence in this industry from the very beginning, sometimes at the center of attention, sometimes on the sidelines, but always deeply and intimately involved with the top players and, as he would call them, the hugest companies.
His latest venture, which he recently announced, has to do with "blowing out" content, as in selling it bulk on the cheap, and it's whipped up a not insignificant amount of both positive and negative reactions on the boards, complete with the usual puerile nastiness. But if Jonathan plays the boards like a concert pianist, his only true motivation is that purified form of entrepreneurial spirit that compels him to recognize and exploit any and all niche opportunities, ContentBlowout being just the latest. Over the years, he's plied his trade with a candor and positive energy that many could learn from, and while he may talk smack at times, that's just the game; the real fellow is an unmitigated pleasure to be around, and even more important, a decent man.
The Beginning (1996)
"I was living in Woodland Hills trying to figure out what my next move would be, working at a carpet store that also had an interior design service. But I was tired of that, so I went to go visit my cousin, who was in adult, at the Consumer Electronic Show (CES) in Vegas. At the time phone sex was huge, so with his help I did some investigating and ended up taking a job with a company that sold phone sex numbers as a business opportunity, working in this room that took telephone calls from people who wanted to invest in the phone sex business.
"Whenever someone acquired phone sex numbers, the logical next step was [to figure out] how they were going to advertise them, so we also got them involved with placing ads in adult magazines and commercials on television. Also, at the time, the Internet was the buzzword of the day, and there was this advertising agency that we referred all of our customers to put their ads online. These people could get you in front of 20 or 30 million people on the Internet, charging $750 a month for the equivalent of an eighth-of-a-page ad. Now, I don't know anything about computers or the Internet, but that meant that at $6,000 a page it's all profit! I mean, there's no way it costs $6,000 for a page to go up on the Internet. So again I call my cousin and ask him if he knows anyone who has any adult sites on the Internet, and he says go pick up... AVN magazine, and look in the back and go see who placed some ads, I'm sure you'll find something.
"So I did exactly that, and I called up the guy who owned Adult.com at the time. This guy's name was Stan. And I started talking to Stan - and I'm at my office, at the phone sex place - and I say to him, 'We have hundreds of clients a month that go through here and we're looking to get them involved with the Internet; how much would you charge me for a full-page ad on your Website?' And he thought about it for a moment and he said, 'How about a hundred bucks?' I told him that I would provide him with the phone sex numbers and the ad itself, but I need him to provide me with the pictures so that when people come to his site they would see a picture of a beautiful naked girl and the phone sex ad. He said, 'No problem.'
"So I hang up the phone and I'm sitting there, and I'm just smiling, and the guy sitting across from me is like, 'Hey Jonathan, what's going on?' And I look at him and say, 'No more referring customers to the advertising company for the Internet anymore. I have a better deal for you. Instead of $750 a month for an eighth-of-a-page ad, I'll give your customers a full-page ad for $1,000, and instead of you getting a 5 percent commission on $750, I'll give you 20 percent on a thousand.'
"What I did at that moment was give value to the customer and monetary motivation to the salesperson to refer me the business. All I knew was that this guy who owned Adult.com had 500,000 visitors a day, and I was now going to give my advertisers an opportunity to take advantage of the Internet. That's all I knew.
"Within two weeks, I had every salesman in the company referring me business. Then the manager of the company found out what I was doing and gave me the option to either stop or leave. I had made about $15,000 in two weeks, so I decided to leave. I started my first company, Internet Unlimited, went out and bought the most smoking computer at that time - 100 megahertz and 16 megabytes of RAM - got a little 9x9 room as an office, and within three days of leaving, I was dialed in and ready to roll.
"Remember, I didn't know anything about the Internet. I just knew I had an opportunity to make a lot of money and the window of opportunity was right then and there. I started calling all these other phone sex places and pitched the same deal. I did really well the first three months of business, but then the Communications Decency Act (CDA) was passed, and it really scared the people I was doing business with; they pulled away from the adult sites."
"After that, I changed products and began selling the same deal to premium online travel guides, until the CDA fell by the wayside. That's when live one-on-one video services were coming on, and there was this company called Virtual Dreams that had this software that people would be able to download to their computers. Also at the time, it was really easy to get a listing on Yahoo!, so I built my first site using the Virtual Dreams software, since it was a logical extension of the phone sex business, except that with video-conferencing you could see who you were talking to. I just decided to try to do what I did in the phone sex business, and turn this into a business opportunity.
"I went back to all the phone sex clients I had dealt with, and said, 'Why not continue with your advertising on the Internet, but instead of phone sex numbers promote this live one-on-one service?' Then I started having Websites built for $350, and turned around and sold them for from $3,500 to $7,500, creating yet another business. I probably sold about 30 or 40 Websites, kept some for myself, but also generating the payouts for the minutes that I got from the company, which was $2 a minute; the people who bought Websites from me paid a dollar a minute, so I made a dollar for every minute a site generated. It was one of the earlier affiliate programs, since Virtual Dreams paid anyone that promoted this software to download.
"Then, of course, I wanted to do what the phone sex companies were doing, which was place ads in all the major newspapers and have people call in about investing in their own Websites. So I called up all the people that had bought Websites from me, and one guy decided to put up the money so we could start a room, hire some sales people, have somebody build the sites, place ads in all the newspapers, and we'd split the profits.
"So I closed down my office and got into business with this guy, and we started placing ads, but the moment we did that he started having his own ideas. He didn't want to have just video-conferencing, but also wanted to create a master Website also and sell people on being affiliates for it. Unfortunately, even though we ended up generating a quarter of a million dollars the first few months, he had spent so much money on developing the site - about $220,000 up to that point - that he was now running out of money. We had to go to CES that January to promote the idea to the adult video market, and that's where I ran into Seth Warshavsky."
The Show (1997)
"At that time, the most prolific sites I saw were Virtual Dreams, Club Love (or IEG), Cybererotica, and the live fucking from Amsterdam that Python had started. I was very impressed with Warshavsky. He was a young-looking kid who had this huge booth [at CES] with porn stars all around him, and appeared to have this tremendous Internet business. I had to go meet him. I shook hands with him and spoke with him for a few minutes, and then went back to L.A., where the other company was on the verge of folding. I decided to put together a business plan and shop it around to investors. I spent about a week putting it together, printed up about 20 copies, planning to go back to the same people who had invested in phone sex numbers and Websites.
"But then I saw an article in The Wall Street Journal with Seth and Danni Ashe on the cover, and I thought, 'I've met this guy; I can get a hold of him.' Well, it turned out that another guy I was doing business with knew Seth, so we ended up going out to dinner, where I pitched Seth on the idea of selling adult sites to the general public as a business opportunity, and he loved it. The next day he flew back to Seattle, I faxed him a copy of the business plan, and the next day he called me up, put me on the phone with his assistant, and flew me up the following day, where he pitched me on doing my business plan and on also being IEG's director of sales and marketing. I'd have to relocate to Seattle, but I was ready to make the move and follow my instincts, so I moved up in the summer. It was beautiful for 30 days and then rained for the next seven months.
Ultimately, Seth's motives were to have someone in there to deal with the Webmasters of that time. Prior to that, I had no idea about anything; all I saw were Seth's Websites everywhere on the Internet. But after being up there a couple of weeks I found out that he had bounced some checks to some Webmasters, and I started to wonder whether this had been the best move for me. I had to go to a trade show in Florida, my first representing IEG, and I went and put my best foot forward, but Seth hadn't just bounced a few checks; he'd bounced a lot of checks; one for three cents, literally.
"So I started building relationships with people, trying to position myself in such a way that people would differentiate between me and Seth, because even though I worked for Seth, I'm not Seth, I'm not IEG. I'm Jonathan, the director of sales and marketing for this company, and if you do business with me you're going to make money. I also started analyzing the industry, looking at who the up-and-coming players were, aligning myself with those people on a social level through the business, because a lot of people, regardless of what I said, still didn't want to do business with IEG because of Seth.
"Eventually, people began to know who I was. I was a likable person and an honest person, and the people who did do business with me always got what I said they would get, and it became something where I really was a separate entity from IEG. I was Jonathan and the face of IEG to the Webmaster community, because even though Seth had really started to become this little media mogul, painted as the Bill Gates of porn, he didn't have any relationships within the industry because he had made himself a pariah."
All Good Things Must End (and Begin) (1998)
"We were getting ready for another CES show, and just prior to going I met with Seth and told him that I was going to leave and move back down to Los Angeles. He asked me why and offered me more money, but I just told him that I wanted to move on with my own career, building on the contacts that I had made.
"The day I was leaving, I got a call from Steve Hirsch, who I knew because IEG had managed some of Vivid's sites. He asked me what my intentions were, and said that they were right at the beginning of launching their own Internet division and he wanted to sit down and talk to me. I flew down, got an apartment, and met with Steve, who put a very attractive offer on the table. I was pretty much blown away, but had to decide whether I wanted to start my own company or work with the hugest brand in adult and run their Internet division. I started talking to people who had become my friends in the industry - Greg Dumas, Scott Schalin, Joe E, and Ron Levi - not mentioning Vivid by name, and got various responses from them about what I should do. Ron - who was the only person I told the entire deal to, because we had become friends and I had been able to get him to do business with Seth after many years of him hating Seth and not doing anything with him. He basically looked at me and said, 'Fuck that. I want you to be the president of my company, and I'll give you x, y and z.'
"Well, one was the biggest name brand in adult entertainment, period, and one was the hugest adult family of sites, period. In the end, I took the job with Cybererotica because of the salary, the bonuses, the benefits, and the lifestyle that I thought I was looking for. I went from the hugest media company to the hugest company in the Webmaster market."
"Ron is a very smart man. One of the things he said to me prior to taking the position was, 'Look, I'm no dummy. I know that there are people out there that love me and people out there that hate me, and people out there who are completely intimidated by me. You, on the other hand, are a very likable person and very approachable, and I think there are people out there that won't approach me who will approach you.'
"It's a very smart guy who is able to look at himself and say something like that, and it was true, very true. Ron's an explosive personality, there's no doubt about it, but I'll tell you something else; from day one to the day I left, I had a mad amount of respect for him. I mean, I learned a tremendous amount from Seth about how not to do business and a tremendous amount from Ron about how to do business. Those were two really key experiences for me; both lasted about a year and a half, and the one thing that Seth lacked, Ron had. If Seth had had the Webmaster base that Cybererotica had, as well as all the media coverage, his would have been a $150 million a year business. That was the one thing that he was never able to do."
Moving On (2000)
"Eventually my contract was up for renegotiation. Ron had offered me some additional money, but there were a few sticking points in the contract that we had gone back and forth over, and in the end we couldn't come to an agreement, so we just agreed to disagree.
"When I left Cybererotica, I had no plans in place, and I had a knot in my stomach because I was leaving hundreds of thousands [of dollars] behind and didn't know what I was going to do. Fortunately for me, the day I left I made a post on the boards that I was leaving to start my own Internet consulting company and specialize in sales, marketing and management, and got 150 e-mails in two days.
"Within the first month, I had four clients paying me $10,000 a month [for my services]. After several months, though, I got involved with Elite Cash and decided not to continue with the consulting clients, because I was going to have some guaranteed money coming in from the Elite Cash program, and was going to own like 23 percent of the company. Because I had equity in the deal, I could live on less money and build the company up. I spent the next ten months with Elite Cash and blew through my life savings. That was definitely a lesson learned, which was to not live beyond my means any more, which I don't."
Striking Out (2001)
"In January 2001 I met Scott, who owns Cloud 9 Content. It was three months after Elite Cash had dissolved, and I was searching for my next move but was struggling because I couldn't figure out what it would be, but there was an Internext Convention that January in Vegas and my goal was to come out of that show with the next thing. I met Scott, saw his photography, and was totally impressed, because to my eyes it was the only content out there that could compete with Matrix Content. We ended working out a deal where my company would be the sales and marketing arm for his company, and I would go to all my contacts and try to get some bulk deals done.
"In a matter of a month, we had generated tens and tens of thousands of dollars in revenue for the company, which made me very excited and put me in a decent financial position. I was able to decide what my real next move would be, because it wasn't necessarily going to be this content thing. Now that I'd sold all these big packages, I didn't have that many people to sell big packages with.
"I had a conversation with my cousin, who had originally helped me with the phone sex business, and told him that I wanted to get involved in the permission-based (i.e. double opt-in) marketing business. Now, I don't know anything about e-mail, servers, connectivity or any of that stuff, because I never had to deal with that stuff, but we discussed it and eventually I was offered a partnership on an e-mail list that they owned and had the rights to re-market, except they didn't have the time and energy to put into it. So they said that if I wanted to get involved, I could.
"So I started a permission-based e-mail marketing company, and what that did was give me the motivation to go out and start cutting other deals with other people, because once we started mailing and understanding how the mailing business worked, we were able to position ourselves so that we could start a hosting company to offset our costs. So now we could take on clients who did what we were doing and start building this vertical relationship with people who were in a similar business. We were able to turn the hosting business into something that not only offset the costs of us running our mailing business, but also became a profit center for us as well. So now that we had a hosting business and a marketing business, I started cutting deals with other companies that owned the data, the e-mail addresses, and had the rights that double-opted these people in, and made deals with them to manage their databases. This was like March of 2002."
The "Columbia House" Model (2002)
"Now we had tens of millions of names, and re-marketed those people on a daily and weekly basis, acquiring new deals as we went along, and that's pretty much what I was doing up until six or eight months ago, when I started looking for a new program, something different to market. In the past, I had done really well with video offers and other hard-good sales, and I did some research and found this company in Vegas that was doing something I thought was incredible, which was taking the Columbia House business model and applying to adult videotapes and DVDs. What that means is that the surfer can get up to 12 free triple-X movies or DVDs for the cost of shipping and handling only. It's a lead-generating business that's profitable. You're not buying the leads and spending money on the leads; you're actually making money on the leads so that you can re-market those people with other adult tapes. And there's money to be made on the shipping and handling. The first tape is $9.99 for shipping and handling, and each additional tape is $6.95. The average order, let's say, is about $80, so there's profit for my partner and for me. It's all about volume.
"So I set an account with this guy, and now my new company, Virtual iNet Promotions, is the sales and marketing arm for VideostoreCash, which is owned by Direct Link Media Group. Then, after several months, I was again looking for something else, because I figured I could make special media or DVD offers my niche in this business. So I was talking to the guys over at Effex Media, who had been working on a project called Erotic Rental Cash (www.eroticrentalcash.com), and we're now in the final stages of a deal whereby Virtual iNet Promotions will handle sales and marketing for them.
That brings us up to a couple of months ago, when I received a call from Scott, the owner of Cloud 9 Content, who came up with a great idea that no one had ever done in this business. He had about $30,000 worth of content that he had shot over the past few years, and while he was making a decent living selling his content every month, he told me that he wanted to blow the content out at 95 percent off. I was like, 'What?,' but he told me that he'd worked out the numbers, and if we could sell a hundred, two hundred, or five hundred of them for $2,100, it would be an incredible boon to his business, and he could take that money and reinvest it in new equipment, locations, and content. So I ended up striking a deal with him so that I would manage the promotion, and we started the promotion on April 16, 2003, with the plan to run it for only two weeks, but then we decided, based on the demand, to extend the offer.
The Wal-Mart Model (2003)
"There's a huge opportunity in the content business right now. During and after the blowout sale, people contacted me to make deals with other companies to blow out their content as well. In response, I've registered and am launching ContentBlowout.com, positioning myself to be the go to guy for all your content needs. I'm going to have all these special offers for great content, whether it's slick magazine quality porn star kind of content or amateur content, all in bulk. Whatever niche it is, you'll be able to get a tremendous amount of it for a very reasonable price. It's great, for instance, for the huge programs that want to add a massive amount of content to the massive amount they already have.
"Webmasters can now go out and buy $40 and $60 sets and spend $1,000 a month on content or they can come to ContentBlowout.com and every month have between 5 and 6 deals for huge blocks of content at extremely reduced prices, and get seriously high-quality images and videos for pennies on the dollar. On the other side, the opportunity is there for the content providers to sell a lot of packages and generate a nice amount of cash flow for themselves by offering the content in this manner. That doesn't mean these content companies that are going out of business, but if there are some content providers out there that are hurting and don't see the cash flow coming in like they used to, this is something that they might consider.
"Nobody has ever sold content at the rate I'm selling this content. I'm not looking to squeeze the content providers. I'm looking to make them a lot of money, and more importantly, give Webmasters a tremendous value for their dollar. Yes, I've had some other content providers complaining that we were ruining the business, and no one would buy content with these prices so low, and they were going to go out of business and all of this stuff, and I started thinking, 'Wow, there's a real opportunity here. It's time for Wal-Mart to come to town!"
"When I look back at my history, I always made moves and adjustments to go forward in a logical progression. I feel like this business is a lot like the real estate business. No matter what is going on in the economy, if you're in the real estate business, there's always a way to make money. Whether with mortgages, refinancing, or foreclosures, there's always some aspect of real estate where a smart person can look at the business and say, 'Here are the opportunities right now.'
"I feel like the adult Internet business is the same way. The opportunities are always changing, and if you can just take a step back and look at the landscape, you can pinpoint the next place to go, where the money trail is, whether it's with permission-based e-mail marketing, hard-good sales, or becoming the Wal-Mart of the content business.
"The adult Industry on the Web is not going anywhere. It's here to stay, but at this stage of the game, people who are involved really need to run their businesses like business people. It's not the Wild West anymore. Because of that, people will fall out of this industry at a much faster pace than they have in the past. The true entrepreneurs are the ones who will stick it out; they may have rough times, but they're going to be successful over the long term.
"So this is like a rebirth for me. I recently moved down to San Diego and have a lot of latitude to do what I want during the day. I'm not tied to anyplace anymore and I'm really excited about doing sales and marketing, and getting back on the boards and contacting people. It's rejuvenating for me to have a great deal to offer, and everybody needs to hear about it, because with VideostoreCash.com, EroticRentalCash.com, and especially ContentBlowout.com, I'm positioning myself for the next wave."