+ Consumer Startups Collaboration
Hello folks 👋,
First of all, I would like to welcome the 731 new members to our little family 👨🏽🍼. Today is a special day, it is my first collaboration with one of my favorite newsletters Consumer Startups and human beings Leo Luo.
Today, we’re diving deep into OnlyFans. If creator economy, micropayments or Beyonce are part of your daily vocabulary, you have probably heard of them. If not, let us briefly try to explain.
The “official” pitch is helping creators monetize their content, but in reality, they allow creators to monetize thirst traps (and more 💦 ). The concept is that you take that same content that would get you banned on other platforms, and put it behind a paywall on OnlyFans. It’s like a private Instagram account that can make you some real 💰.
When the pandemic hit last year, OnlyFans took off in a big way. Cardi B took to the platform to promote her 2020 hit songWAP. H.E.R name dropped the company in her latest collaboration with DJ Khaled We Going Crazy and even Beyoce took to the platform.
Hips TikTok when I dance/On that Demon Time, she might start an OnlyFans (OnlyFans)
It is not everyday that Beyonce name drops a company, especially one with so much stigma (still) around it, so we decided to dive (really) deep into the story of OnlyFans and it’s fascinating founder Tim Stokely. This one is going to blow your mind 🤯.
Fun fact 👀: OnlyFans is actually a family business, Tim’s father Guy (ex-investment banker at Barclays), who is 77, is technically a Co-Founder and the Head of Finance, and Tim’s older brother Thomas is the Chief Operating Officer.
🎬 Let’s start from the very beginning
To understand how Tim Stokely came about founding OnlyFans, we need to rewind the clock just a little bit (10 years to be exact). The year was 2011, when Tim, your typical son-of-an-investment-banker, was dividing his time between half-consciously partying around the globe and blowing off daddy’s money on “business-ideas”.
One of those ideas was Glamworship. Glamworship is a tube website that differentiates from all the other 1.3m websites by focusing exclusively on “financial domination.” Financial domination is the fetish in which a submissive client offers up gifts or money to a dominant partner. Tim’s aha moment came from “stumbling” (wink wink) upon subreddits about financial domination and realizing how much money people were paying for these experiences….yet no one was building content specifically for them.
Tim reached out to his family for some seed money (in the tens of thousands of dollars) and aggregated those videos from every corner of the internet to create the ultimate Financial domination tube site - Glamworship. The comments section of Glamworship evolved into a mini-Ebay with viewers offering some serious money, in exchange for acting out their wildest financial domination fantasies. Many of the performers jumped on the opportunity to add a new revenue stream, and a whole Cameo-for-financial-domination economy started to shape.
🏃♂️ Going after customers pull
The sad reality was this new mini-economy powered by Twitter + Venmo took place right under GlamWorship’s nose. The site turned into a distribution channel to these performers and the real money came in from those special video requests.
You come into GlamWorship, you see something you like, you reach out to the performer on Twitter, put in your request, pay them on Venmo/Paypal, and they send you the video. Rinse and repeat.
Tim, understandably, was not too happy about that. He folded Glamworship and started an entirely new company to capture some of those economics.
The name of this company was Customs4u. The premise was simple: it was the Cameo for adult entertainment before Cameo existed. Instead of going through this dance of finding the performer on Twitter, reaching out and arranging payments, Customs4u did all the legwork and sprinkled in a little bit of trust in an industry, which was/still is not very well known for its trustworthiness.
In a sea of 1.3m competitors, getting customers was not the easiest endeavor even with such a compelling value proposition:making money. The performers on one side did not want to promote Customs4u, because while they made it easier to get paid from customers, they also made it easier for people to discover their competition - other performers.
Partnerships was the way to go, he rallied up several adult industry talent agencies and production studios, which have set up white-label websites for the performers they have under contract. Under the mercy of the gate-keepers of the industry, Customs4u was never able to achieve the mass-scale that Tim had always dreamed of.
Tim took a hiatus, after two hits and misses in the industry, and switched gears to the tradespeople industry. The next company he founded was 121with. This idea here was that tradespeople — such as plumbers or real estate agents — could sell their expertise via an audio or video call. The common thread between 121with and Customs4u was that the entire business was built around understanding and monetizing the creator-fan relationships.
121with didn’t really work out, but it was the right business model in the wrong industry. After a year with little to know success, Tim made his comeback to the adult entertainment industry that some may even argue is the second greatest business comeback, falling just short of Steve jobs’s return to Apple in 1997 (damn it's been a minute).
🌱 The birth of OnlyFans
Around that time, Instagram was gaining a ton of steam and many adult entertainers would be using it to post pictures and videos to promote themselves. However, Instagram has been censoring and taking down nude or pornographic content. Tim had an insight - why not build a paid social feed, similar to Instagram and Twitter, that allows these creators to safely capture the value of their content.
What if you could build a platform where it’s exactly [the same] or very similar to existing on social media, but with the key difference being the payment button.
Tim said in his interview with GQ.
In 2016, Tim launched the MVP of OnlyFans with 10 creators. The business model was simple - fans had to pay a subscription fee (ranging from $5 to 50 a month) to view a creator’s feed. OnlyFans took 20% of the cut and the rest went to the creator. It was the culmination of all his previous work. It got the industry insights of customers wanting to directly pay performers for special video requests from Glamworship, the initial customers from his Customs4u mailing list, and the business model from 121with.
The platform didn’t create a splash when it was first unveiled to the world. One of the creators in the OG squad, Dannii Harwood, made $257 in the first month. Naturally, she didn’t think much would come of it in the beginning.
A few features that changed the game for OnlyFans in the early days centered around enabling creators to create custom content. These customization features helped elevate the experience for both creators and customers. For example, Harwood introduced themed days like mistress Mondays and Dare Dannii Tuesdays, during which her subscribers could bid to watch her drive in her underwear. Creators were empowered to make more personalized content based on the preference of their audience and build a closer relationship with them.
🧐 Making people share the unshareable product.
What made OnlyFans...OnlyFans was that Tim built distribution right into the product.
I worked on previous platforms prior to OnlyFans and one of the mistakes I made was to focus on building what I felt was a great marketplace. But I didn’t, through inexperience, give enough consideration to the growth plan: how was I going to get users onto this marketplace? [That problem was] solved, in the case of OnlyFans, by creating a referral programme, which incentivised third parties to bring creators onto the platform.
Tim Stokely - Cofounder and CEO of OnlyFans.
Building a referral program is one thing, building a successful referral program in a taboo industry is a whole other game. We are obsessed with referral programs and just couldn’t skip the opportunity to dissect how Tim and the team at OnlyFans managed to pull this off.
Before tearing down the OnlyFans referrals program, we first need to establish what makes a successful referral program in the first place? Why do some products go viral? What separates a shareable product from an unshareable one?
Psychologists have spent a lot of time trying to answer these questions. After blowing through millions of dollars of endowments money on behavioural studies, researchers in this domain (more or less) agreed on the factors most likely to influence the shareability of a product and it boils down to these four:
Social Capital: Confidence of being socially rewarded
Social Risk: Risk of being socially ignored or worse how they will be perceived or judged for recommending your product
Referral incentive: How strongly does the person desire the reward your are offering
Effort Required: How easy/hard is it to refer and get the reward?
The referral dilemma is solving for the tensions between Social Capital vs Social Risk and Referral Incentive vs Effort required.
Sharing the upside
Tim and the team at OnlyFans did not want just anyone aboard, they wanted people who make them a lot of money. The more money creators made, the more money OnlyFans made. And to get users to put in the effort to recruit the right people on the platforms, they needed an incentive structure that would align with just that.
The OnlyFans referral program was built to incentivise quality over quantity. That meant the higher the quality of your referral, the more money you should get paid. To productize that concept of quality over quantity OnlyFans decided to structure its referral program to reward its referees based on the amount of money their referred members make on the platform; giving them an unlimited upside and incentive to get people on the platform that would have the potential to make a lot of benjamins.
To be specific the OnlyFans referral program was a 5%lifetime revenue share with the referrer. This is 5% of the total revenue (and 20% of the OnlyFans cut).
To put it into context, if you recruit someone who makes $100,000 a year on OnlyFans and stays on the platform for 5 years, you will earn $25,000 just for referring them.
This incentive structure has not only encouraged creators to use the referral program but also served as a selling point to encourage others to join the platform all together... It is kind of an MLM program and the economics actually work.
Removing the sharing stigma.
Revisiting the 4 key pillars from our psychologist friends mentioned earlier, the biggest hurdle for sharing OnlyFans would appear to be the Social Risk.
This is nothing to brush off, encouraging people to join OnlyFans in a way that does not risk your social capital is not an easy feat, especially when the 5% lifetime referral fee is front and center in all the company’s messaging. Having so much to gain from your friend joining this new emerging obscure platform can leave a bad taste.
To address this dilemma, Tim came up with an ingenious way to shift the burden of explaining the genesis of OnlyFans and promoting it from the creator to the company.
When people shared their referral link, instead of having a cutesy image preview, OnlyFans utilized this space to explain the value proposition of the company. Doing so meant the person that shared the link doesn’t actually have to promote the product, just drop the link and the image preview will do all the talking. The cherry on top was that your social capital is less at risk because you “didn’t say anything” but it was the company speaking
Of course if you are like Stevie Lix, and have no problem aggressively promoting OnlyFans...you can always do that as well 😉.
👼 Helping creators acquire customers
Shifting gears a little bit here from the creators, to the users. Helping creators build an audience is the only way for OnlyFans to make money. The main acquisition engine, as with any new social platform, was to piggyback off of other social graphs. In OnlyFans's case, its primary victim was Twitter. In hindsight, it is easy to rationalize such a decision.
Twitter had a more “liberal” moderation than facebook or Instagram. Part of it is because Facebook spends more on moderation than Twitter makes in revenue every year. But other part is that it is run by Jack…seriously though, if anyone is to give performers a safe haven on the internet, it would be this guy👇🏽.
Performers have flooded Twitter with free adult content — from naked selfies to explicit gifs to full-blown minutes-long clips — in an effort to, as the unbearable phrase goes, build their brand, so a big part of the heavy lifting was already taken care of, all OnlyFans had to do was help those performers convert their audiences into paying OnlyFans subscribers.
Twitter as an acquisition machine
The first product OnlyFans built to help creators capitalize on their Twitter audience was fanscope. They released it just 3 months after launching the MVP and getting their payment infrastructure in order. So what exactly is Fanscope?
You can think of Fanscope as a live version of Cameo
Creators start a fanscope session from their OnlyFans profile
OnlyFans autoposts to your twitter account (which is what you used to sign up)
A tweet goes out to your tens/thousands of followers with a link to the live session
Your twitter followers press the link and are required to sign up to OnlyFans to access your live stream.
You got one new follower
Fanscope acted as a successful top of the funnel for OnlyFans creators, because it lowered friction for new joiners. It was a way for new users to get to see a preview of what they can expect from a creators OnlyFans page without putting your dollars at risk.
What was arguably more important to its success though was that it added authenticity, doubling down on the value proposition of OnlyFans of creating differentiated content than the hundreds of terabytes of free content out there.
In addition, Fanscope eased people into the core product; it bridged the unfamiliar user behavior of paying for OnlyFans with an existing behavior: “camming” (tipping people to perform live on camera).
Layering in a sense of urgency was just the cherry on top that made this product release one of the best performing acquisition channels for creators on the platform.
Going live was in no way novel, but it worked extremely well for OnlyFans. While other live platforms saw performers as a liability, OnlyFans saw them as an asset. Instead of banning them, they empowered them. Instead of demoting their content, they celebrated it. If you think about it, it's not so dissimilar to what AWS did to infrastructure engineers.
To put it all together we created the ultimate OnlyFans flywheel:
👴🏼The story continues
2018 would mark the end OnlyFans as a family business😥. The Stokely family decided to sell 75% of the company to a Ukrainian-American internet entrepreneur, Leo Radvinsky, who made a massive fortune founding MyFreeCams (we didn’t know about this site previously ofc).
With help from Radvinsky, OnlyFans continued to grow steadily; however, the growth picked up exponentially after celebrities started to shout out the platform towards the end of 2019.
There were definitely events that accelerated that growth, whether it be the Beyoncé name-drop or Cardi B joining the platform. One of the first things she did was drop the official behind-the-scenes video for “WAP” onto her OnlyFans. That’s a really great example of how celebrities are using the platform.
Tim mentioned in an interview.
Future of OnlyFans
As of early 2021, there are more than 120 million people that subscribe to its millions of creators. OnlyFans has paid more than $3B to creators. The growth story has been phenomenal, completely outpacing other creator platforms.
Today, the overwhelming majority of creators on the site are still adult entertainers. Nevertheless, Tim doesn’t just see his most cherished project as Customs4u on steroids. In fact, OnlyFans has been heavily invested in its rebranding effort to try to appeal to a broader
audience. For example, they started a creator fund this year to give four aspiring music artists £20,000 to help them kick start their career.
If history is to teach us anything, it is that adult entertainment has always been on the forefront of innovation. They are the dark horse of early adaptors. For better or for worse, the thing that made OnlyFans work is that they catered to those who had no other place to go. If they are to become serious for the broader creator economy, their product has some serious catching up to do and whether they can pull that off, is a story for another day.
That’s it for today, see you next Sunday 😉,