The case for an OnlyFans IPO

OnlyFans was birthed by the natural voyeuristic impulses of men, and by decades of hinting to young women that their body and what they do with it defines much of their worth. This belief creates (artificial) scarcity. And scarcity is good for business.

Good enough for an OnlyFans IPO? The platform has a lot to gain from going public : raising funds, more borrowing power, better recruitment opportunities and an improved public image. Below are the arguments the managerial team could (and should) make to potential investors.

Significant growth over the past year

OnlyFans is a social platform which allows women to share explicit content against tips. Because the COVID-19 pandemic forced everyone home and left millions either jobless, dateless, or both, the platform grew rapidly in 2020, and continues its growth in 2021.

In fact, once the word came out that some young women were making up to $30,000 a month on the platform, searches for “what is OnlyFans?”, and “How does OnlyFans work?” skyrocketed. And as more content creator came in, yet more users followed. Thanks to shrewd advertising from models on Reddit, Instagram, Twitter, TikTok, Whisper… OnlyFans went from having 90,000 creators in 2019 to 1 millions in December 2020, for a total of 85 million registered users at the start of 2021, against 50 million in August 2020.

The math behind the amount an active contributor can make is fairly straightforward. If a model has 100,000 followers on social media and converts 1% of them to monthly paying subscriber status, the money quickly adds up.

This means that OnlyFans stands to indirectly benefit from the success of other social platforms, a great place to be in for a company looking for growth.

Much like other platforms promising to democratise access to content creation, payments from OnlyFans heavily favour a small minority : the top 1% of accounts make 33% of the money. This has led to the creation of an entire industry (marketing experts, art directors…) to support women wishing to break into the top of the pack. This, too, creates a virtuous circle.

Now in its 4th year of operations, OnlyFans will generate more than $2 billion in sales this year, of which it keeps about 20% (less than other such platforms), for a total of $400 million in revenues in 2020.

In comparison, 8-years-old Patreon, which uses the same principles as OnlyFans but has banned sex work, has 6 million subscribers, more than 200,000 creators, and about $35M in revenues (for a $1.2B valuation). Another such service, Cameo, sold 1.3M videos from celebrities last year, generating around $100M from those transactions. The company takes a 25% cut of that spending, for $25M in revenues in 2020, a year in which Cameo’s headcount grew to 200 people.

Though Cameo is too “young” to consider going public, Patreon is considering a public listing in 2021. With it’s much larger firepower, why wouldn’t OnlyFans do the same? However hard influencers and journalists want us the bet on its competition, I look at the graph below, and know where I’m putting my money in 2021.

Many strategic advantages

Customers, creators… they don’t make or break companies in the 21st century. Venture Capitalists do. And this is where OnlyFans truly has an edge over its competitors, having built moats few could cross, and thus putting itself in an ideal place to attract further investment.

Copying Twitter

Not only does the platform have a solid financial foundation (as mentioned above), it also has far fewer drawbacks than other players in the adult industry. The company’s profit structure is well organised and simple to understand, bad actors can be flagged and punished quickly, and the platform has a respectable appearance since it does not need to rely on male-enhancement adverts to prosper. Its techy look-and-feel, reminiscent of Twitter, is something venture capitalists would be intuitively attracted to.

Free press is good press

The platform gets continued press attention, which is surprising given the media’s usual aversion for adult content. In 2019, people found other such websites because they were specifically looking for adult content. In 2021, you can read about OnlyFans in the New York Times and in Forbes. Because of that, many models have migrated from other platforms, or have joined even if they had never done this type of work before. The press attention makes the platform feel safer, and removes part of the taboo associated with sex work. Yet, OnlyFans doesn’t do any marketing themselves. They’re not running ads, they don’t have affiliates to send traffic to the platform… the amount of free media attention received is the stuff of dreams for Wall Street.

Beyond nudity

The platform’s attractive business model has caught the attention of a wide variety of content creators. Cooking, fitness, beauty… anything that can be visually shown through photos or videos is (now) welcomed on OnlyFans. This, in turn, attracts a new type of users. Since the adult industry is highly cyclical, building a solid base of users looking for different things is a great strategic move. In facts, OF’s CEO Tim Stokely is on record saying that he sees this new type of content as the future of his company.

Substack, Patreon, Twitch, Cameo, Etsy, TikTok… Venture Capitalists have invested billions in platforms that do away with gate-keepers and connect creators directly with their audiences (the famed “dispersion of creativity”). Further funding OnlyFans would not only be logical, it would also pave the way for an IPO, as is often the case for such unicorns.

Room to improve

The key reason I believe OnlyFans is worthy of a public listing is because the site has managed to grow quickly and profitably while still having major flaws. Fixing them with money raised through an IPO could unlock its potential, leading it to grow even more rapidly.

Smarter algorithms & SEO

From a usability perspective, OnlyFans is… not great. Users who go directly to the website have a hard time looking for a specific model, being instead offered to follow some pre-approved, high ranking accounts. There is no directory and no algorithm to make recommendations based on user habits. As mentioned above, followers come almost exclusively from a variety of social media. Promoting Amazon-type recommendations would boost growth, as it would be easier for users to find more accounts the cater to their specific likes and preferences.

Leaks

Despite the company’s “best efforts”, some of the content created for paying users regularly gets leaked to external websites dedicated to this sort of shady practice (watermark your pictures & videos, y’all). Though OnlyFan’s public policy specifies that it will deal with this within weeks, many users remark that it takes months for this type of issue to be resolved, if they ever are. Being more proactive to protect users would create good publicity and increase customer loyalty.

Network effects & social aspects

One key tool to unlock further growth would be to strengthen the website’s social aspects. Though it has “stories” and ways to interact with users, there are very few ways to allow different creators to collaborate on content creation through cross-promotions. This certainly would allow the platform to boost its already naturally occurring network effects.

Conclusion

The above is just a cursory look at all the reasons a public offering would be a good idea for OnlyFans. It’s easy dismiss such arguments because of the nature of the services the platform offers. If we do away with childish arguments, however, there are plenty of positives to look at.

Bumble and Match.com had hugely successful IPOs. Why not OnlyFans?