The Story Behind The $1.5B Pornhub Curse

The Story Behind The $1.5B Pornhub Curse

Intro (00:00:00)

  • Sam and the speaker play a game where the speaker reads the most trafficked websites in the United States, and Sam tries to guess the owner or CEO of each business.
  • Sam correctly guesses the owners or CEOs of Google, YouTube, Reddit, Amazon, and Facebook.
  • Sam incorrectly guesses the owner or CEO of PornHub.
  • PornHub is the sixth most trafficked website in the United States, with three billion visits per month.
  • The founding story of PornHub is described as being similar to the concept of powerful assets in fantasy book series, such as the ring in The Lord of the Rings or the Elder Wand in Harry Potter.
  • Ownership of PornHub is said to be short-lived, as the item is too powerful and corrupts the owner, putting a target on them.

Who's the new king of porn? (00:02:00)

Bill Ackman vs Pornhub (00:17:00)

  • MindGeek, the parent company of Pornhub, secured a $360 million loan at a 20% interest rate from 125 undisclosed lenders, including two former bankers who left their jobs to facilitate this specific deal.
  • Pornhub's CEO endured personal attacks, including an arson attempt on his $16 million residence.
  • Bill Ackman, renowned for his campaigns against entities like Harvard and Business Insider, became involved after learning about a teenage girl whose explicit photos were leaked on Pornhub. Consequently, he pressured Visa and MasterCard to cease payment processing services for Pornhub, resulting in substantial revenue losses for the company.
  • Pornhub's previous owner, Fabian Tillmann, faced legal issues related to tax fraud and was compelled to sell the company for a mere $77 million, despite its significant traffic and revenue.
  • The original founders of Pornhub, Stefan Manos, Usam YF, and Keer, sold the company for $140 million and subsequently transitioned their focus to philanthropic endeavors.
  • Usam YF, one of the founders, became a disciple of Warren Buffett and established Valf, an internet company inspired by Berkshire Hathaway. Valf specializes in acquiring profitable, cash-flowing internet companies.
  • Valf has flourished into a billion-dollar enterprise with over $100 million in annual EBITDA. It has acquired approximately 50 companies, generating $500 million in revenue with net profit margins ranging from 20% to 30%.
  • Valf's strategy entails acquiring content websites and studying successful private software companies like Constellation Software. They recognize the potential for substantial returns in the obscure and inefficient market of small software companies.
  • Valf primarily focuses on acquiring small software companies with revenue between $5 million and $10 million. These companies are allowed to operate autonomously, preventing excessive overhead at the headquarters.

Pornhub's $77M exit (00:25:00)

  • Pornhub was sold to Ethical Capital Partners, a private equity group formed specifically for this acquisition.
  • The previous owner, Bernard, an Austrian businessman, acquired Pornhub after buying and selling RedTube.
  • Bernard is currently going through a divorce, and his wife wants him to cut ties with the company.
  • Working in the tech industry, including at Pornhub or MindGeek, can be challenging in maintaining professionalism and objectivity.
  • The speaker criticizes the tech industry for hiring highly educated individuals from prestigious universities to optimize trivial things, leading to a loss of perspective and a sense of disconnection from the real world.

The reality distortion of entertainment businesses (00:30:30)

  • Max Levchin, co-founder of PayPal, founded Slide after PayPal's success.
  • Initially, Slide created virtual pets for Myspace but later shifted its focus to adtech, developing slideshows and music video tools for social media profiles.
  • Despite its popularity, changes in platform capabilities and increased competition led to Slide's eventual sale to Google for a relatively small amount compared to the funds raised.
  • Levchin's experience taught him the importance of careful project selection, as even seemingly simple concepts can require endless optimization, potentially resulting in years of effort without significant financial rewards.

Sam shrinks Shaan (00:36:30)

  • Sam discusses the existential crisis he faces when considering the potential futility of optimizing every aspect of a product or business.
  • He questions whether the pursuit of constant optimization is the best use of time and creative energy.
  • Sam suggests that a product's value can extend beyond world-changing ambitions and instead focus on providing jobs, a positive work environment, and fulfilling basic human needs.
  • He emphasizes that not all products need to be life-changing to be valuable and that there is room for a variety of creations, including entertainment and simple pleasures.
  • Sam finds solace in the idea that his podcast, despite its occasional silliness, can still inspire people and provide value.
  • He highlights the importance of recognizing the worth in different types of products and experiences, rather than comparing them solely based on their potential for world-changing impact.

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