The Dominator

The year 1993 was a seminal time for Ilan, CEO of the hugely successful online adult retailer, He'd been working in the hotel business, and as he puts it, "I was bored. That's a business where you're surrounded by people all day long."

Not that Ilan is a misanthrope, but he claims that dealing with the constant flow of complaints and requests from the hotel staff and guests left him stale. Everything changed when he stumbled across a Bulletin Board System (BBS), an early computer system from the 1980s which allowed users to dial in via phone line to a terminal program that enabled them to download software, upload data, read news and exchange messages.

"From there I went to CompuServe, which back then was the 900-pound gorilla of e-commerce," Ilan said. "There were 100 business- selling products online on CompuServe, including the entire J.C. Penney catalog. I called all the companies and interviewed them, because I wanted to understand how they do it. I was fascinated that you can have a business that does all the interaction in the world through the computer, without seeing or talking to anybody. Compared to what my life looked like, it sounded very attractive, so I registered GameLink as a merchant account."

Ilan guided GameLink through its baby steps in his free time, from the spare bedroom of his apartment overlooking Lombard Street in San Francisco. Initially, he sold video games, but quickly realized that he stood little chance to make a profit against conglomerates like Toys-R-Us.

So later that year, he switched to selling videotapes on the free access BBS, which he claims was the first time that was done on e-commerce.

"I looked for a product line where I could earn a living," he said, "and a friend of mine was in the adult business. One thing led to another, and I started selling adult videos online. I put some classified advertising on CompuServe, and within three days I knew I had a business. Nobody else was doing it then. We were getting business not only from the U.S., but from Hong Kong and Singapore, so it was beautiful."

At the outset, Ilan took on some credit card debt to make his new creation liquid, but in just a month, he was so sure it would be successful that he quit his hotel job to devote all of his attention to GameLink.

"Within six months, I started hiring employees," he said. "At the beginning of 1995, I hired a programmer to write me a database to run the site. That allowed me to have a dynamic site that year, with search, indexing and 30,000 different movies. This kind of set the tone for how we all run the business now."

And the business of GameLink right now is still booming — more than 50,000 movies and about 500 new titles are added every week to its bulging catalog. It's the new 900- pound gorilla of adult e-commerce.

The GameLink formula is deceptively simple. It sells movies in different formats, so the customer can buy in DVD, stream the movie on a computer, or download it. The key is how GameLink allows the customer to find the right movie in a preferred niche in as few clicks as possible. This is done through GameLink's state-of-the-art Beta Search engine.

"We include scene-by-scene data on the movies," Ilan said, "so if the customer is only interested in very specific sex acts, he can find the scene he wants in our movies and play it right there and then. You can choose any point in each scene to start viewing."

Andrew, GameLink's vice president of marketing, claims the factor that really sets the site's customer-friendly search feature apart from all others, is just old fashioned hard work.

"It's labor-intensive," he said, "because now we have to look at and tag every single scene with the proper keyword. Then we cut up the images to show you what that scene actually looks like. If you present people with a matrix of images, they'll respond to what image turns them on. And that is how customers give us information about what they want. Once they do that, we use our recommendation engines to show them similar things.

"We know whether they watched a movie for three seconds or 10 minutes, which tells you whether they liked it. So we use all these back-end analytics to cut the most optimal pathway through the catalog as quickly as possible for a browser. And when they come back, you've already got that information."

Andrew joined the GameLink staff in 1996, when he says Ilan came to his IT office and asked for help with a serious system failure the site had suffered at that time. With his background in technology — he brought Good Vibrations online — Andrew fixed the problem and forged a solid relationship with Ilan. He still is in lockstep with his boss on what the company priorities should be.

"We run this thing like a mainstream company," Andrew said. "You treat your customers like they're golden, and your job is to get them exactly what they want, and when they're not pleased, do something to rectify that. You want to maximize their time and the amount of money they're spending on our site.

"How much time do people have to consume porn? We saw some very interesting dynamics when we analyzed it. People would pay a premium price for a movie, and they'd watch it for 10 minutes. So now they buy a pay-per-minute package with 120 minutes for the same amount of money, and they get six times more value out of it."

Although most of GameLink's movie catalog is available in pay-per-minute format, Ilan has decided to offer large-budget premium movies only in their entirety, as with the recent exclusive deal he signed with Teravision. It's a strong gesture of how GameLink is not only customer- friendly, but producer- friendly, as well.

"We believe that to maintain the integrity of some premium movies, we offer them only in their entirety," Ilan said. "This helps studios to get premium prices, so they can continue to make premium movies."

The process certainly is not lost on the production houses, which routinely rave about GameLink's online stores. Ilan feels that the sophisticated platform used by the online stores is the reason behind their success.

"It's the same kind of platform that's used by Nieman-Marcus and Bloomingdale's," he said. "This allows us to give better customer service, by helping to find the right movies for them much faster. Consequently, we get them to buy faster."

Andrew sees another factor in the stores' popularity.

"I think it's just the conversion rate," he said. "Our stores are awesome converters. Even when people leave us because somebody strong-armed them into some DVD deal, they call us back a few months later complaining about it, and that conversion drops through the hole.

"We focus on converting the customer by giving them what they want. There is a crowd out there that just wants the lowest price, and that's not really our market. We've spent years and millions of dollars building an infrastructure that nobody in the industry comes close to. We use the same kind of algorithms that Amazon uses in delivering a massive catalog to an audience."

Conversion is the key to GameLink's popularity with its affiliates, too. Ilan believes it all comes down to experience.

"We've been doing e-commerce for 14 years, and we know how to do it," he said.

Ilan constantly updates GameLink's technology, to keep ahead of the pack. This month, the site rolled out a new and improved Beta Search service. A new version of the site premieres every month, and according to Ilan, upgrade plans are in the works for the rest of the year. And technology upgrade isn't the only news GameLink will release in the course of 2007.

"We have a lot of partnerships in the works with some premium studios that will give us better content," Ilan said. "We're working on better ways to merchandise movies. One thing we're aiming for is to get premium studios to release a movie simultaneously on the Internet and in DVD. People often think that if I start selling movies in video-on-demand, that it will hurt my DVD sales. Our experience is that every time we sign up a premium studio and get behind it, not only does the movie do very well on VOD, but usually the DVD sales go up. We think it's because it gives the studio and the movie more exposure."

Another initiative GameLink plans to launch is "Try Before You Buy," where a customer can use a pay-per-minute ticket to sample a movie. After finding the right movie, the customer will pay to view it on VOD, and that money can be used as a credit toward purchase of the DVD.

As to the future of the industry on the whole, GameLink stays ahead of the curve by staffing online marketing professionals who understand e-commerce, and who are committed to customer service.

"We've been fortunate to hire some people who cut their teeth in bigger mainstream businesses," Ilan said, "and wanted to work in an environment where they get more creative freedom. I'm very proud of my team. It's fun to come to work."

But even with these advantages, Andrew still sees challenges ahead.

"I think we hit one of those VHS-type thresholds with digital distribution," he said. "Now we have to figure out how to guard against the music industry problem of content getting out everywhere. The people coming out of college now are used to free content, delivered in different ways. It's very different from the DVD world. We have to figure out how to appeal to that market, and how to transition the old school buyers into this new medium.

"The industry didn't have its eye on the ball, and allowed models for distributing its content to move out into the consumer space to deliver premium content at extremely low prices. Those models no longer support production costs. We have to figure out what business model to use in the age of digital distribution that will meet all the needs of the spectrum, which delivers high-quality, low-cost product to the consumer while allowing the producers to maintain margins that will support their production facilities.

"GameLink is differentiating itself by saying, 'We're going to take the lead here. We're going to do things that involve creative pricing, and creative content delivery that supports the studios, while providing much higher quality product at very competitive rates to the consumer.'"

Ilan has a much less complicated take on what's in store for the industry.

"When I try to figure out the future, I always look at my kids," he said. "I have two very young ones, and my daughter is 7 years old. A month ago, I walked into her room, and she was watching her favorite cartoon show on her computer screen. She said, 'Hey, I don't need a television anymore. The computer is better, because I can choose whatever episode I want, and click on it, and I can see it right away.'

"This is the future for customers. Young people are very used to consuming their entertainment online, so that's where it's going. Between streaming and download, I'm very convinced that the future is in streaming, just because it's instant."

Whether the future will prove him right or wrong, Ilan certainly is enjoying the present, which is light years from his dull days in the hotel business. But he kept one lesson he learned back then, and he believes it's the key to GameLink's great success.

"For us," says Ilan, "it's all about the customer, and we try to give the customer whatever he wants."


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