Discover more from Market Sentiment
OnlyFans: The P*rn Empire with no P*rn?
My take on why OnlyFans did what they did and the future of the company!
One of the biggest pieces of business news last week was that OnlyFans was going to bar sexually explicit videos starting from October.
After the initial uproar and wave of memes, there was a lot of discussion around why a company whose main income stream is from adult content decided to kill its golden goose.
Was it because they are idiots, or because of any new regulations, or is there something much larger at play here?
For this week’s analysis, I would be focusing on the company’s history and my take on why they did what they did and future implications for them. So, strap in while I take one for the team with my search history and ad recommendations going into questionable territory for the considerable future.
OnlyFans was launched by Timothy Stokely in 2016. His pitch was simple but effective.
Why not create a platform that allows these entertainers to conveniently and securely monetize their content? OnlyFans would be like a social media platform with a feed, similar to that of Instagram and Twitter, except that fans are required to pay a monthly subscription to view the content of these entertainers. And if they are willing to pay more, they could unlock paywalls for even more valuable services.
The company was extremely successful and now hosts more than 2 million content creators. It has a user base of 130 million. Even though the service is pitched as a website for content creators such as physical fitness experts, musicians, etc., it’s predominantly known for its adult entertainment category.
The company had explosive growth during the pandemic with its revenue rising by 540% to reach $400MM. As per a leaked pitch deck obtained by Axios (ironically, the company never mentions p*rn in its pitch deck), it’s expected to create a whopping $2.5B in revenue by 2022.
So, if the growth is great and the user base is becoming more and more engaged, why did the company decide to shoot itself in the foot?
As with most issues in a company, the problem lies with money! They are facing serious challenges in both the revenue stream as well as investor capital.
Even with the explosive growth, it’s not like investors are lining up for the fundraising. It would be a walk in the park to raise funding for any other company with its growth trajectory and profitability. But there are multiple challenges in the case of OnlyFans:
· Some VC funds are prohibited from investing in adult content as part of their partnership agreements.
· Even though OnlyFans has a verification process, the risk of minors creating subscription accounts is real and will do irreversible reputation damage for both the company and its investors.
Even if the investors could look past all of this as the company looks to raise new funding at unicorn valuation, OnlyFans has a reputation problem. Even if the brand could move on to a “safe for work” platform, the history associated with the brand is synonymous with adult content.
Given its history, it would be extremely difficult to attract brand partners and big names into the platform. The presence of big names is a must for a platform trying to become a more mainstream media site!
While brand imaging and raising capital might be a longer-term problem for the company, the more pressing issue is a BBC investigation into how the company handles illegal content and its ramifications. If you thought Google had monopolistic power, let me introduce you to
Visa and Mastercard combinedly process more than 90% of transactions and 75% of transaction volume of all Credit card purchases in the US. In Dec 2020, after a NY Times article about how P*rnHub monetizes illegal content, both Visa and Mastercard cut off payments to the site within 6 days! . This caused them to remove 70% of all content (unverified) on their website (aka The Purge) to try and get the payment platforms on board. Visa and Mastercard still won’t work with the company even after all the drastic actions taken by P*rnHub.
Given that the OnlyFans platform doesn’t show any ads, they would be dead in the water if their direct payment takes a hit. In April, Mastercard had announced a change to their policy  that requires this:
The banks that connect merchants to our network... to certify that the seller of adult content has effective controls in place to monitor, block and, where necessary, take down all illegal content.
The policy will come into effect on October 15th and OnlyFans is trying to be compliant by the time the policy is enforced  and it seems like they are going by the logic that desperate times require desperate measures !
The Billion dollar question is whether OnlyFans would go the way Tumblr went (Tumblr was once valued at $1.1B and was sold later for $3M) after they banned all adult content on their website.
It seems that OnlyFan’s aspirations of becoming a mainstream media company and increasing regulations by payment partners are forcing the company to abandon the adult segment. While we currently don’t have an insight into their revenue split, it’s safe to say that a majority of it would be coming from the adult segment which would make the pivot even harder to pull off successfully.
I don’t know a single company that has survived after throwing their most loyal userbase and revenue generators under the bus for greener pastures! Maybe they are just concerned about their short-term survival and were forced to make this decision. But dropping the same folks who made you popular in the first place is definitely going to leave a bad aftertaste.
After all, what do we know? Running a billion-dollar company is a very serious business!
Until next week!
 This would cause all normal credit card transactions to fail and then the only way for them to charge would be to directly get paid to their bank accounts or via crypto, both of which would be extremely difficult to process and scale.
 While there is a lot of chatter around how certain groups lobbied Mastercard to change their policy, I am not getting into that as it would inevitably take a political turn.
 To put this into perspective, if 4 companies (Visa, Mastercard, AmEx, and Discover) cut off your payment pipeline, you would effectively have no way to charge your customer!
 There is a lot of conversation around how this is a once-in-a-lifetime opportunity for crypto to shine with the decentralized payment system.
 Granted, they were already seeing reduced engagement prior to the ban, but the adult content ban was the final nail in the coffin! This is a hilarious parody video of Tumblr CEO explaining the ban!
Apologies for filtering out all the adult words as I didn’t want to get tagged in spam filters.
As always, please note that I am not a financial advisor. Hope you enjoyed this week’s analysis.
If you found this insightful, please share it with your friends :)
How would you rate this week’s newsletter?
PS: Some of you have reached out to me stating that this newsletter is going to the promotions tab instead of the primary inbox in Gmail after I have shifted to Substack. This is mainly due to the usage of $ symbols for Stock tickers and using the terms Buy and Sell for analyst recommendations. Google AI mainly classifies emails containing these words as promotional e-mails.
It would be awesome if you could mark this e-mail as important or move it to primary or just reply to this email with a “hi” or any questions you have so that it always comes to your primary inbox and you won’t miss out on the weekly posts. Thank you :)