Unlikely innovators: Adult industry perfected online technology.

Byline: Doug Bedell

DALLAS _ Yahoo may have pulled out of the sex business, but adult entertainment and the Internet are entwined in a love embrace that shows no signs of slipping.

The Web's dirty little secret is not that sex sells, but that online adult entertainment has turned profits by creating technologies and business models that are the envy of the e-commerce world.

As dot-coms bomb, many X-rated Web companies say they're suddenly finding suitors from mainstream media companies that previously shunned them.

"Companies are finally willing to admit to themselves that the adult part of the Internet is where the money is," says Kathee Brewer, researcher for Adult Video News Online. "They're starting to say to themselves, `We really need to approach these people.'"

Yahoo, a huge online portal facing sagging profits, had planned to expand its 2-year-old adult entertainment selections until publicity caused it to back off earlier this month.

But the cash flow from delivery of soft-core and hard-core content continues to tantalize.

Last year, for example, AT&T began distributing the Hot Network to its digital cable customers. General Motors now offers adult content through DirecTV. On the Web, eBay's section for "mature audiences" offers auctions of more than 40,000 sex-related items every day, contributing in large measure to the company's success.

Mainstreaming of successful adult site innovations will undoubtedly continue as unprofitable "straight" e-commerce efforts shrink into oblivion, says Danni Ashe, a former…