Harnessing the Internet: The German Porn King's Revolutionary Model

By Uwe Buse

Part 2: Software-Based Model

Thylmann was an unknown when he entered the business more than 10 years ago. He programmed billing software and was a computer geek who knew his way around numbers and data. He created software called NATS, which enables users to determine which banner ads, links or recommendations a surfer used to reach a porn site on the Internet. If the surfer isn't just looking and becomes a paying customer, the site operator pays a commission. NATS makes it possible to manage this activity. It isn't much more than dry bookkeeping, just modified to suit the needs of the porn industry.

In 2006, Thylmann sold his shares in the company that marketed NATS for an amount estimated to be in the single-digit millions. Within a year, he had used the money to buy three companies, including a German-language website called Privat Amateure (Private Amateurs). Thylmann claims that he was able to increase the profits of the three companies by 50 percent within three months.

In March 2010, Thylmann bought the Canadian holding company Mansef from the members of a pub foosball team who liked women with big breasts. Using Mansef as a base, Thylmann gradually developed his privately held corporation.

Mansef owned the websites Brazzers, Mofos and Pornhub, a competitor of YouPorn. Brazzers is one of the best known and most popular pay porn sites on the web. The site and its female porn stars allegedly played a role in the resurging popularity of large silicon breasts in the industry, after they had been out of style for some time.

When Thylmann was negotiating with the owners of Mansef, he initially hoped that the purchase would go through within a month. But it took three months, partly because Thylmann was unable to pay cash. He also couldn't get credit from anyone.

At the end of the negotiations, Thylmann agreed to pay a portion of the purchase price directly after contract signing, and the rest in 16 monthly installments. Under the agreement, if Thylmann was only a few days late in making one of the payments, Mansef would be returned immediately to its founders.

These terms were "very seller-friendly," as Thylmann later said. To make sure that he would never have to experience the same situation again, he spent a lot of time cleaning up his companies' accounting. "After that, we were in a position to receive a loan from a Wall Street fund," he said. The loan probably amounted to about $140 million. He used the money to buy YouPorn and other companies, Thylmann said at one of his rare public appearances in January at the Internext Expo in Las Vegas, an industry conference.

Contrasting Attitudes

It isn't easy to explain Thylmann's success. First you have to understand his attitude toward pornography, and to understand why anyone needs an attitude in this industry at all, it's worth paying Jeff Stewart a visit.

Stewart's company is headquartered in a plain, flat-roofed building in the San Fernando Valley in northern Los Angeles, the Hollywood of the porn industry. Stewart is standing in the corridor wearing a green T-shirt with the words "Relax, it's not your daughter" printed on it.

If it weren't for the scars on his face, Stewart would resemble the actor Christoph Maria Herbst, who stars on the popular German television series Stromberg. Stewart walks into his office, a small, box-like room with a large screen on the wall. A close-up of a black woman, dripping with sweat, her buttocks sticking straight up in the air, appears on the screen. Suddenly a green liquid shoots out of her anus. Stewart glances absentmindedly at the monitor and says: "I really have no idea how that happened."

Stewart had a lot to drink the night before and didn't sleep much. His eyes are glassy, and he seems surprised to hear that SPIEGEL isn't a porn magazine from Germany. Once he has processed his disappointment, he says: "Doesn't matter," and burps.

Stewart specializes in hard oral sex, known in the industry as "throatfucking." His videos show women who fight against the gag reflex, their mascara smeared and their eyes wide open in panic.

Stewart is a classic porn entrepreneur who, like many others, has turned his personal fetish into a business. He says: "I like dominating women. It's good that other men like it too, or else I'd probably have to get a real job." Stewart's attitude toward pornography is that he is essentially filming his own, darkest fantasies, turning them into videos. I want to torture women and so do you, and that's why I'm going to show you how -- Stewart's business model is nothing but a nonstop show to boost his own ego.

Dog-Eat-Dog Environment

Stewart is the opposite of Thylmann. The German is interested in other things, like "monetizing Internet traffic," as he calls it, and in the selection and frequency of rotation of ads on websites. In Las Vegas, Thylmann proudly tells his audience that there are 50 employees in his company devoted solely to optimizing ads and websites on the Internet. Not even the background color of his websites is left to chance.

This enthusiasm for technical details is foreign to most other porn producers. Of course, some try to improve their websites, but they see this purely as a means to an end. Thylmann is interested in technology and technical perfection, which is another reason he is a new type of pornography entrepreneur. He isn't interested in the old industry rule: Sell what turns you on. Instead, Thylmann often asks himself who his customers are.

His path to success began when Internet connections became fast enough to smoothly transmit videos, not just photos. The fury he encounters in Internet forums today is partly attributable to the fact that he, as the owner of Pornhub and YouPorn, helped create a dog-eat-dog environment in which many businesses in the industry could no longer compete.

His ad-funded sites distributed pornographic material around the world, providing free access to photos and videos. They were uploaded by users who said to themselves: If we keep the stuff that's stored on our computers to ourselves, we'll remain small. But if we feed it to a worldwide community, we'll be big. And eventually we'll be so big that no regulatory authority in the world will be able to do anything about us. As a result of this approach, huge numbers of bootleg videos are now circulating on these websites. The flood of free images has led to the bankruptcy of many pornography businesses.

Responding with Brutality

At first, the industry responded to the new competition, which Thylmann played an important role in creating, by offering new products. Reality porn became popular and dozens of production companies devoted themselves to this genre, in which generally unknown beginners appear as ordinary housewives or students. A man with a camera approaches them on the street, in a park or at a party, and the dialogue usually goes something like this:

Man: "Hi, you're really sexy."

Woman: "Thanks."

Man: "Will you show me your tits?"

Woman (hesitates): "I don't know."

Man pulls out a wall of bills: "I'll give you $100."

Woman: "Okay."

By the end of the video, the woman is naked and performing oral sex on the man.

In the long run, however, the production of new material wasn't enough to offset the loss of paying customers. Bootleg videos were being placed on the Internet too quickly, and it was too difficult and tedious to have the stolen material deleted. And even if it was deleted, it would only pop up on the Internet again a few days later.

At a loss, the producers began dreaming up new trends and changing their porn films. The more successful Thylmann's methods became, and the greater the role of the laptop became, the more important the ability to easily view pornography anywhere in the world became, while the brutality the films produced by the overwhelmed hardcore industry also increased. The industry no longer had any anecdotes up its sleeve, just unconditional aggression.

The Last Resort

Jeff Stewart, the oral sex aficionado from California, long considered an extremist in the industry, suddenly found himself back in the mainstream. Stewart hadn't changed. He was the same incorrigible tormentor of women, but other producers had come to resemble him.

Gonzo porn, "eccentric" pornography in a literal sense, was a new trend: Films without even the suggestion of any activity other than the sexual act, shaped by practices that were constantly pushing the limits of the tolerable, and the limits of what a female body could endure, including brutal oral sex, anal sex and anal fisting without lubricant. The difference between gonzo porn and classic pornography is like the difference between heavyweight boxing and playing tag. Injuries are common and include, according to a list compiled by the Adult Industry Medical Health Care Foundation, rectal prolapse, tears in the tissue of the vagina, throat and anus, and many other conditions.

Gonzo porn is no passing trend, nor is it a niche product. It is the last resort of the industry and, therefore, the foundation on which porn films are now based. Elements of gonzo porn are present in almost every porn film nowadays. It is the preliminary outcome of a business model that depends on the breach of taboos. It's also a reaction to Thylmann's success.

He recently began offering porn makers his company YouPorn as a marketing tool, suggesting that they upload video clips to the site themselves. The more sex the clips show, the more prominently they are positioned on the website. It looks like he is accommodating the industry, but in fact Thylmann has the most to gain. Since he began taking steps to have bootleg material deleted from his sites and prevented from resurfacing, he has been losing money. He is trying to offset the losses by renting YouPorn to porn makers as a platform for their videos.

Another New Trend

The porn king from Germany has also been making money with other business models. He has created sites that don't show canned, profession pornography, but live sex with someone who looks like a neighbor. Sometimes all it takes is to have a woman sit in front of a webcam and fulfill the requests of men staring at their computer screens. It's call "camming." For a long time, this type of pornography was nothing but a tiny niche product. It was only when people became tired of canned products that camming became more popular. With the help of webcams, women who want to make money with sex can now do this at home, as a side job, without running the risk of producers coercing them into sexual practices they oppose.

One of the most successful German performers calls herself Lara Love. She lives in Hamburg, had breast augmentation surgery when she was 17, and is under contract with mydirtyhobby.com, an amateur site that's part of Thylmann's empire.

Two days before Thylmann's arrest is made public, Love is sitting in front of her laptop, topless and wearing high heels. She lights a cigarette and talks about her day, which went well. She sat in front of her webcam for three hours, until 10 p.m., and she helped three men who had logged onto the site achieve orgasms. At his request, she berated one of these men as a slut and a filthy swine, and then she ordered him to howl like a wolf. At the end, she sold a pair of panties she had been wearing.

She made €50 with the panties, and €150 for her three hours in front of the webcam. The numbers are neatly listed on her computer screen, and the amount of money she has made appears as soon as Love closes a video session.

She can see on her monitor how many men have entered her video chatroom in the last three hours. Today it was 16. She can also see how many minutes each man stayed in the chatroom, as well as how much money was transferred from his computer to Love's laptop.

For a group session, each man pays €1.99 a minute. In return, the men can see her, write messages and hear her. But they can't talk to her. That, says Love, would be "too stressful, you'd have 10 horny guys jabbering at the same time."

If a man wants to be alone with Love, it costs him €3.99 a minute. But the men are hardly ever completely alone. When she can, Love allows a voyeur to listen in: a paying customer for whom it's a turn-on to be included as an invisible observer. "It doesn't hurt anyone," she says, referring to the voyeurs.

Offices Around the World

When she's finished, Love opens a second window next to the list of visitors. It allows her to see how many men transferred money directly to mydirtyhobby.com during the chat. This time it's about €450, for three hours.

Mydirtyhobby.com keeps 75 percent of the revenue, leaving 25 percent to the performers. "And then another 17 percent in Cypriot VAT is deducted from that amount," says Love.

It's the most complicated word Love utters on this evening, and she says almost reverently: Cypriot. Cyprus's tax authority receives the taxes paid by this company in Thylmann's empire, a company that's as inscrutable as a multinational bank. The porn corporation's office building, an inconspicuous glass-and-concrete structure, is in Luxembourg on the illustrious-sounding Boulevard Royal. Thylmann also has offices in Los Angeles, London, Montreal, Hamburg and elsewhere.

Perhaps all of this won't be do him much good anymore, especially when prosecutors start asking him questions. They are trying to nail him for tax evasion -- a petty charge for a man who makes money off the world's orgasms.

Translated from the German by Christopher Sultan

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