By David Lazarus

Now he's thinking about converting his site, Satin Girls, into an online retail outlet for satin sheets and lingerie.

"There's just so much competition," Clifford said. "I don't know whether it's worth it to keep trying."

If he does, at least he'll have some help. The increasing difficulty of cutting it in the adult-entertainment business has led to formation of a nonprofit industry group, Bay Area Adult Sites, intended to help local entrepreneurs get a leg up, so to speak, in one of the Internet's most crowded marketplaces.

Two dozen homegrown adult sites have joined the group since its creation in March. Members, ranging from the operators of Satin Girls and Naked College to the people behind Asian Cherry Network, meet every month or so to discuss industry trends and share experiences.

"The purpose is to get local people together, offline, to network and make connections," said Caity McPherson, co-founder of BAAS and operator of a site called Juicy Mango. "We're giving people the information and the tools to succeed."

BAAS also aims to conduct outreach activities to help legitimize the adult-entertainment industry, she said, and hopes to provide assistance in helping local firms go public - a feat that no online porn provider has yet accomplished.

The group also is organizing seminars to raise awareness about related issues. The first such gathering was held last month at San Francisco's Velvet lounge, with a panel of adult-entertainment experts discussing the opportunities and challenges posed by the Internet, as well as what McPherson termed "the tricks of the trade."

"Link exchange is so important," porn star Mimi Miyagi told the packed crowd (after sharing certain other insights with patrons of the Crazy Horse "gentleman's club" on Market Street). "You think you're sending away business, but what you're actually doing is helping a visitor find something they want and you don't have."

Mark Hardie, an analyst with Forrester Research who is one of the few to follow the Net's adult industry, estimates that the market for online porn is now worth about $1 billion in yearly sales.

While much of that market is dominated by a handful of heavyweight players earning as much as $150 million annually, Hardie estimates that at least 40,000 smaller sites still manage to earn anywhere from a few thousand to a few million dollars a year.

"There's a lot of folks making a ton of money," he said. "But you really can't survive if you're not part of a network."

That's where Bay Area Adult Sites comes in. The group aims to fulfill networking needs by helping members share paying customers - the lifeblood of the online porn business. Merchandise sales remain relatively small, accounting for about 3 percent of the industry's profit. Subscription fees for premium services ranging from image archives to video feeds are everything.

Typically, a free site will be created offering R-rated images or a few glimpses of a particular model. Once a customer's interest has been piqued, he (or, to a considerably lesser extent, she) will be steered toward a related site charging $5 to $20 a month for access.

Porn star Danni Ashe helped pioneer this business model after embracing the Internet five years ago. Today, Danni's Hard Drive is one of the most profitable adult sites on the Web, averaging 7 million hits a day and boasting more than 27,000 paying subscribers.

Ashe, whose business is based in Los Angeles but who keeps her Internet servers in San Jose, is projecting revenues this year of $5.5 million. Not bad for a 31-year-old former stripper.

"There's a lot of opportunity out there," she said. "It's just not as easy as it once was. Now that people are getting better Internet connections, it's incumbent on site operators to provide better content."

Ashe foresees an industry shakeout as demand grows for high-speed video services. But others, including Forrester's Hardie, insist that demand will remain strong for the cheap-to-produce "amateur content" that is a staple to most mom-and-pop porn sites.

Such uncertainty poses an additional challenge for adult-site entrepreneurs, who may have a hard time keeping up with industry trends.

"People feel like they're lost and alone in this market," said BAAS' McPherson, who worked her way through San Francisco State University by dancing at the Lusty Lady club on Kearny Street. "Having a professional organization helps provide guidance and support."

Rouze, which debuted this week, is the brainchild of Allen Blankenship, a former vice president at San Francisco's Montgomery Securities, and his wife Lauren, who received an MBA from Yale. It mixes weekly pictorials of nude women with more mainstream editorial fare.

"We're the highest end of the adult-entertainment industry," Allen said. "We're like Maxim magazine. We're a men's lifestyle destination that just happens to include pictorials of gorgeous women."

"Sort of like Playboy in the '70's," Lauren added.

Rouze better watch its back. Both Maxim and Playboy are now preparing to unveil "men's lifestyle" portals capitalizing on the exact same sex-and-stuff formula.

These sites - expensive to produce, even more costly to maintain - seek to extend their reach well beyond the traditional market for adult content. Does this imply more difficult sailing ahead for smaller niche players unable to mount such formidable operations?

Not as far as Micah Jericho is concerned. His Passion Productions in Pacifica, a BAAS member, is one of the most successful online porn businesses in the Bay Area, and Jericho sees no need to mess with tried-and-true approaches.

"Our biggest trouble is managing the growth," he said. "This is a good, solid business. It's customer service, follow-ups - all the things that make a business successful. We could be selling ice cream cones."

He's not selling ice cream, though. Instead Jericho's sites include Naughty Cards, Fetish Society and Adult Toy Chest. He's expecting to gross about $1 million this year.

And this raises a crucial point. For the thousands of entrepreneurs who aren't just profiting but are profiting wildly from online porn, there's a growing sense of frustration that, to date, not a single one has managed to cash in on the mania for Internet stocks and go public.

"It's simple," said BAAS' McPherson, "No one wants to invest in a company that has anything to do with porn."

That's a bit of an overstatement. Playboy, after all, is publicly traded, as are other companies that publish or broadcast adult materials. But so far no "pure" Internet porn company has found its way to the market.

Seth Warshavsky aims to change that. His Internet Entertainment Group in Seattle, which operates its own adult Web sites and provides content to numerous others, has finally lined up a willing underwriter and is looking to go public within the next few months.

"We plan to raise capital and expand distribution," a hectic Warshavsky said by cell phone while driving to the airport for a business meeting. "I think our IPO will be very successful."

He said his company saw revenues of about $50 million last year and has been profitable since 1997. No less important, Warshavsky stressed, "We have as strong a brand as Penthouse, Playboy or Hustler in new media."

Still, he said it was no easy feat finding a financial institution willing to join hands with an online porn merchant. "A lot of the Grade-A underwriters wanted to do the deal," Warshavsky said, "but stayed away because they were afraid of offending other clients."

The underwriter that agreed to the deal, National Securities Corp. in Seattle, still seems to be coming to terms with its new client.

"You could position I.E.G. as an Internet business, a media business or an adult-entertainment business," said Craig Gould, the brokerage's vice president of corporate finance. "Wall Street will be looking at the fundamentals."

No date or price has been set for the IPO. But if Internet Entertainment Group succeeds in its share offering, other adult-industry firms can be expected to follow suit. For many, though, the harsh spotlight of being publicly listed holds no attraction.

"The companies that go public will definitely have to tone things down if they want to get investors," said Jane Duvall, who runs an online guide to adult sites called Janes Guide.

And Danni Ashe, who arguably built up both the brand and the business for a successful Internet IPO, said that while she's exploring "options for raising money," she has no intention to take her company public.

"I'm too much of a control freak for that," she said.