The short answer we are told is banks and the reputational risk associated with being affiliated with OnlyFans.
So one example of a bank getting involved, was when BNY Mellon specifically “flagged and rejected” every wire transaction involving OnlyFans, threatening its ability to pay creators. Another example is JPMorgan Chase, who is “particularly aggressive in closing accounts of sex workers” or any business that supports them. And Metro Bank closed OnlyFans’ account on short notice in 2019.
Bloomberg later reported that banking partners pressured OnlyFans into banning the promotion of sexually explicit material starting October 1st, 2021. The proposed restriction affected anything showing, promoting, publicizing or referring to real or simulated sex and body fluids. Although nudity will still be allowed, an email to developers of OnlyFans cautioned that zooming in too close to body parts would break the regulations.
Pornhub dealt with the same issue. In December 2020, Mastercard and Visa prohibited the use of their cards on the site, following an investigation in New York Times that revealed photos of rape and child sex abuses on the platform.
OnlyFans has had some scrutiny. For example the Canadian Center for Child Protection told Forbes their office often receives notifications about OnlyFans’ models potentially being underage. And describes OnlyFans’ efforts to protect underage performers as minimal.
Despite the efforts made by OnlyFans to prevent a similar fate to Pornhub, the company apparently struggled to raise funds at a valuation north of $1 billion from external investors.
Anyways, I digress….
On August 25, OnlyFans declared they would cancel the new proposal on explicit content. They stated via Twitter that, “We have secured assurances necessary to support our diverse creator community and have suspended the planned October 1 policy change.”
While OnlyFans can continue to sell users sexually explicit content, many sex workers who reported that they lost subscribers after the news were upset by the actions of the corporation. Despite assurances from OnlyFans, many sex workers believed that it had abandoned its main creative base seeking some sort of capital market play, to raise money under a legitimate operation.
The events stressed the hurdles that many sex workers face when trying to create online content. Although Pornhub now relies on bank transfers and crypto-monetary payments, OnyFans will continue to pay for sexually explicit content via credit card – for the time being at least.
There are two areas of this story we find perplexing. One, the company uses CCBill for its payment processing. And as competitor AVNStars pointed out on Twitter, blaming credit cards is questionable, because CCBill specializes in dealing with credit card companies for adult entertainment companies.
Secondly, in an article published by the Financial Times, the company claims to be sending users $300M in fees each month. This would work out to user-generated revenue of $4.5B, or commission fees of $900M annually (less referral fees). How does a company with this growth profile that grosses $900M with over 130 million users struggle to raise funding at a $1B valuation? We get it, it’s porn. But being able to invest in a company that generates that much cash flow, at a valuation that likely equates to less than a 2 year payback period, sounds lucrative enough that Buffett might throw some chips on the table.
After reading this, we can’t help but wonder if the recent news has everything to do with Tim and Leonid being turned down by mainstream investment bankers while seeking a go public campaign.