(FORTUNE Magazine) – It sounds like business as usual for online pornography peddler Internet Entertainment Group: Hot live flesh on the Web! Amateurs take it all off! But trust us: You've never seen hot live subcutaneous tissue on VoyeurDorm.com, SlutTV.com, or any of IEG's myriad other sex sites. Netcasting live tummy tucks to the curious masses at OnlineSurgery.com, IEG sees a future in unsexy offerings.

According to IEG president and CEO Seth Warshavsky, 50 to 60 visitors a day pay $5 apiece to apply for free plastic-surgery procedures--valued from $2,000 (liposuction) to $6,000 (breast augmentation)--for possible broadcast. The shows do involve extended surgical nudity, and like other IEG not-principally-porn sites--the stock-erotica site SexQuotes.com and online casino GoldenOasis.com, for instance--Online-Surgery.com gets a soft-core sell: A bikini-clad model lounges on pages that describe abdominoplasty and mastopexy. But Red Shoe Diaries this is not. Broadcast in streaming video (footage is jerky over a typical modem, whereas audio--cartilage crunching, suction, and all--can be too good), the procedures are eros-killingly captured as surgeons dryly narrate the operations ("It's a bit like being a tailor") and take questions by E-mail ("Is there any loss of nipple sensation?" Answer: generally not).

The site is the latest splash from a company that has gotten into high-profile tangles over nude pictures and videos with Pamela Anderson and radio personality Dr. Laura Schlessinger. And the 25-year-old Warshavsky himself is a media darling--a cherub-faced, nasal-voiced Webpreneur straight from central casting. He's been featured in Wired and the Wall Street Journal, and on MSNBC. The headlines practically write themselves: HE'S THE CYBER GUCCIONE! HE'S DOOGIE HEFNER! Unlike his print antecedents, though, Warshavsky entered the trade not on a sexual-liberation kick but simply because that's where the money was. But today, he says, a Net-porn glut makes nonadult ventures more attractive. "It's a lot harder to make money [on adult Websites] than a year ago, two years ago," Warshavsky says. "We want to be the Viacom of new media." To that end, IEG has essentially built an E-Vegas--sex! gambling! implants!--and like the real one, IEG's is expanding into more Main Street-friendly ventures, from discount golf gear to mortgages to vitamins; it even plans a "virtual zoo" for the kids.

Whatever the family-values implications of IEG's PG-13 offerings, in cold business terms they amount to diversification, which, Warshavsky hopes, will arouse investors. One might expect they would be double-parked at IEG, which hopes to make an initial public offering "around April" 1999. Not only does the company have "Internet" in its name, but it's actually making a buck, a rare, unexpected plus among today's Net IPOs (it projects profits of $15 million for 1998 on revenues of $50 million). However, it has had trouble seducing underwriters because of adult-content stigma; IEG is talking with two "larger banks that don't really want us to announce their involvement" unless they commit. Warshavsky claims that the company would be valued "in the $200 million range, but if IEG got the same kind of multiple other companies are getting, it'd probably be worth $500 million or more."

IEG has had no problem recruiting surgeons, who can also buy directory listings at the site for $1,500 a year. OnlineSurgery.com is also seeking advertising, initially giving away ads to health-care companies to stimulate interest. (Roger Morris of Du Pont Pharmaceuticals public affairs was "totally nonplussed" to hear that IEG had put up a free banner ad for Du Pont without permission; the ad has since been removed.) And Warshavsky plans to expand his spectator surgery business into new (and even creepier) areas: "We have a children's hospital that's interested in having us do heart surgery on the Web." Dr. Boris Ackerman of Newport Beach, Calif., admits he had qualms about working with the proprietor of Buttsville and Sex Fifth Avenue, but he considers OnlineSurgery a public service. IEG is not above sexing up surgery at its other sites, though. IEG's porn flagship, ClubLove.com, is running an I Wanna Look Like a Star contest, inviting viewers who want "a face like Brad Pitt or breasts like Pamela Anderson" to vie for a free operation broadcast at ClubLove. Which only suggests further cross-promotional possibilities for those heart-surgery broadcasts: "Click here for GoldenOasis! We're giving five-to-one odds on this triple coronary bypass!"

JAMES PONIEWOZIK writes about media and culture for Salon, an online magazine.