The Story Behind The $1.5B Pornhub Curse

All right, Sam, I wanna play a game. I wanna start this with a game where I'm gonna read you. The t and you don't know this, by the way. You didn't know I was gonna do this. We have the I'm gonna read you the most trafficked websites in the United States. And as a simple test, you're a business guy, you studied The business world, I want you to tell you.

Do you know Who's the owner or CEO of these businesses. Okay. All right. I like this game. Number one. Google.com Sergey and Larry Page. Sergey something and Larry Page.

Correct. Uh next one, YouTube. Um Chad Uh H and Jared and one other guy. Steve Chen. Exactly. Correct.

Um Reddit. Huffman and Ohanian. Correct. Uh Amazon. Bezos.

Okay, number five. Now we're getting we're getting to the good stuff. Okay, so first this is I think you'll get this one. Easy. Facebook. Zuckerberg. Okay, number six, Pornhub. Uh Bastion something, a German guy. Incorrect, sir.

I feel like I can rule the world, I know I could be what I want to So this is the number six most trafficked website. In the United States. Three billion visits um in in like in a month. Is it called Mind Geek or Mind Freak or something?

Mind Geek is a name of a company that Owned it. Um However, the founding story is pretty crazy and I don't know if you're a sci fi guy or a fantasy guy, but in in many fantasy book series, there's this c there's like this

This concept like in Lord of the Rings, there's the ring. Or um And uh Harry Potter There's The elder one. And it's an idea that there's uh there's these assets that are so powerful. That people want to own it.

But whenever you own it. Your ownership's gonna be very short lived. Uh it's almost that the the the item is too powerful, it sort of corrupts you and Uh puts a target on your back and other people start coming for you. It's a real sticky situation, one might say. This is like it's game of thrones, right? Everybody wants to sit on the iron throne, but when you're on the iron throne, you're not gonna last very long. And so this is a game of thrones style story for tech that I went down a rabbit hole I want to share with you because I didn't know this story.

So let me tell let me tell you how it went down. Okay. So we're rewind the clock. We go back to two thousand and five. Up until then. Yeah, Internet's been out for roughly been been kind semi mainstream for ten years. And of course porn was popular right away.

But the way that all porn sites worked was it was like Yahoo. It was a directory of links. So you would go to um whatever. I don't know. jugworld.com and it would just it would just show you A hundred links to places where you could go watch videos.

Not the videos, but to the other websites. Links to other websites or links to other photos. Mostly photos at the time. Wasn't even that much video. So two thousand five, a big milestone happens, which is that YouTube launches. And YouTube launches with a pretty simple proposition, which is we'll make it really easy to host a video online. You don't have to host it on your own servers, we'll host it on our servers. And then also Instead of just sending somebody that file, you send them a just a link.

And they can watch it here. And we'll just have all the videos here in one place. Which was mind blowing. Sounds so obvious now, but at the time was different. And if you haven't read it, go read the Sequoia memo of his investment uh role of uh both as investment in YouTube. If you want to see

How like Uncertain and how like small and non obvious this was at the beginning. So YouTube launches, it starts to get popular. Now there's copycats that come out in the porn version of this.

Red tube. Right, just off of YouTube, Red Tube. Um, you poor, whatever. Bunch of bunch of these come out. And they're all flooded with pirated content. So they're just like kinda like lime wire back in the day. They just take

You know, stuff that you're supposed to pay for and then we're just uploaded for free on here. And they would have, you know, banner ads to make money. And even though these were Um kind of sketchy websites.

They were Tenet's better in every way. So it was more private, right? You didn't have to go anywhere, you could just have it in your bedroom. Um It was instantaneous, right? The the distance between the craving and the fulfillment of the craving were were, you know, one click away. There was infinite variety. So you didn't have to pick and choose. You could just keep going until you find what you like. There's infinite niches. And so people discovered that people were into all kinds of weird stuff because now there was a long tail of content.

And it was free. Whereas most important at the time was paid. Uh because at the time There was Somebody who was called the King of Porn.

He's the guy who was sitting on the gate on the iron throne at the time. And this was the CEO of Vivid Entertainment. What is V and what was Vivid Entertainment? They're like a Hollywood studio. They're making like, you know, porn or normal movies? No, they're making more porn, but they're making it like in the Hollywood way where there's like an actress and there's a set and there's cameramen and there's like And people buy DVDs. Yeah, buy buy the DVD. And so Vivid at the time was the king.

This guy was known as the King of Horn. He was written up in all these articles. In fact, the year that he was written up in all these articles is the same year these New disruptive websites came out. And revenue starts to fall and it falls fifty percent and it falls eighty percent and it just basically goes down the drain. How big was it?

Uh, it was doing tens of millions in revenue. Um Uh but there were many studios like this. So they were they were the biggest one, but there was like, you know, just like in Hollywood, there's many studios. All right. So I don't know if you remember Google uh Google bought YouTube because YouTube was getting a h had a huge lawsuit from Viacom. These are like Parallel stories. YouTube was also flooded with pirate content. Because of that, they were getting sued like crazy.

And because they were worried that they would go out of business, they sold to Google for like a billion and a half dollars. At the same time, vivid copies that playbook. They look at what Viacom's doing to YouTube, they start suing the crap out of all the the website. And so the first owner of the throne Vivid goes down. Then the second owner of the throne

Which was these like red tube and whatever, they they start getting hammered as well because they're getting sued. All right, so who's the third one to pick up the the the patana? Where does Pornhub come into this? Okay, so At the time there's three college students in Canada. And they realize that this is a um that like there's a lot of traffic uh to these websites. They meet of out of all things at a c competitive foosball tournament. And the guy who's the best foosball player, aka chief nerd, uh, right, like Sir Dork, um

He happens to be the best programmer of the bunch. And he creates a live streaming video website. To stream their foosball competitions. And there's not much of an audience for the foosball competitions, but he realizes as he's building all this video tech He's like, Hey, I think we could do the same thing.

For porn. Was the intention porn or was the intention something else and porn users used it use it most? So these guys made the link site. So that site I talked about, Jug World, that's their site. But they made like a hundred of these. Um they made like a hundred directory sites, just links to other websites. Then they see the YouTube thing. And they pick up this guy, Matt I think his name is Matthew Keyser or something. Keyser is the guy who built the video streaming site and he's the best programmer. So he's like, I think I can make

A YouTube. Four. for this stuff and we can instead of having these directories where we send the traffic away, we could just keep the traffic. And uh at the time they had already kind of like You know, started to discover things. They're like, Oh, people like you know, people like this, people like this. They were just creating other directories.

And eventually they w looked at Vivid, who was the king at the time, and they were like, We should make our own Vivid. And so In the same office. They created Pornhub, the website that was gonna host all this stuff, and they created a company called Brazzers.

Which is a oh yeah. Procer of content. So they created a content producer and they created the platform, the Netflix. Like Netflix making their own shows. Exactly. Or like You know, um FTX had the you know sister company that and by the way, nobody knew these companies were linked. So everybody thought these were two. Uh, not only unlinked companies, they thought they were enemies, because at the time, all of the studios were hated the platforms that were giving away the content for free. People didn't know that.

one of the biggest studios be you know was actually the owner of one of the biggest websites at the time. And so in the same way that there was FTX and Alameda. living in the same house, you know, kind of sharing funds. Browsers and Fortnite were doing the same thing. People just didn't know. In fact, the guy came out and was like quoted Uh he was like

That would be that would make no sense. Why would we do that? That would be a hundred percent against our core interest as browsers to do that. We hate the platforms. And meanwhile he was also the owner. So These guys start this thing. And it takes off like a rocket.

They uh they're like, dude, we have no idea what we fell into. We were Sleeping in the office, we worked every single day, every every weekend. We couldn't hire enough. This was now like two thousand and seven or eight, I think. So they weren't the first mover, but they were they ended up becoming the biggest mover. And here's why. So They basically scaled this thing better than anyone else could. And one of the keys was they had browsers, they had their own content. That was not

uh cut not pirated, or like it was pirated, but they owned it, so they didn't care. that they could use on the network. So even when other stuff got taken down, they still had more content than other people. And so they scaled up. They they go from basically like just three friends. to like eighty people, hundred fifty people, two hundred fifty people, and they're hiring friends and family, and they're like, dude, they're like, where do we we have an office? They're like, No, no, no, just they started buying houses next to each other, just created a neighborhood. And they're all just working out of that like that one area. Bootstrapped? Bootstrap. No no investors, no nothing. So just growing because w word of mouth traffic. And obviously it's uh uh people love what they're their product and they're just coming back over and over again. And the key is that this guy Keyser

was an SEO savant. He came out later and he goes, We were the number one rank for porn and sex on Google. He's like, Do you know how hard, how competitive that is? He's like he's like, that's what I did. I pulled that off. I became the number one search. That's how we defeated all of the other things, and then we had content that wasn't getting taken down. So they grow it to two hundred fifty. They make one of the guys brothers the CEO. They're like, You're the CEO, you have some business experience, you do this. So that guy starts doing a roll up, like a private equity roll up. So he starts buying up all the other ones who are afraid of getting sued. And so he's buying them up for cheap. And he's just consolidating power.

Um and just creating one big mega behemoth. 'Cause then he could fight. whoever was gonna sue them because now they owned all the traffic. So they had something, you know, they had something to to um To fight with. And so

He starts building this thing up. And by the way, there's this whole like industry is so funny because you think of it as a sketchy thing, but like one of the sites, for example, that they bought, it was called Homegrown. It was start as a a VHS tape. exchange for like swinger couples, right? Like the most like fringe of the fringe thing. But this g kid who's a Stanford NBA student. buys it. His mom helps him raise the money and they do a they do like a leverage buyout of this thing. Like it was actually kind of sophisticated under the hood, even though on the surface it looked like

You know, do these uh you know, really sketchy gray area things, but it's like Stanford NBAs are buying this stuff. So anyways. Fast forward to two thousand and nine, they've scaled it to two hundred fifty Employees. They're making millions and millions of dollars, right? They're making more money than they ever knew what to do with.

But they're getting paranoid. Because they know you're sitting on the on the throne that people are gonna come for you. And so uh they start seeing some bad stuff, right? The government seizes nine million dollars out of one of their bank accounts just Just takes it. And they're like shit, what do we do? They start trying to move money around, they hire security.

twenty four seven, they're followed by you know black tinted SUVs. The Kieser guy, the SEO guy, he just quits. He's like, I I can't take this anymore. It's too stressful. They're like, dude, you're walking away from so much money. He's like, I don't care. I can't handle this. So they finally just decide, look. Too stressful. We can't do this anymore. Let's cash out.

Now there's not a lot of buyers for this thing, right? Because in institutional investors can't really buy this type of asset. And now it's big. How big? Like was worth over a hundred million dollars. So they sell it to that guy you were referring to. This guy Fabian Tillman.

Hundred so a hundred forty million is what they sold it to him for. When what was what was his background? Fabian's background was I think he had also he was already um in this space. So what he did was this guy was like a programming. So at 17, He basically started he created a website that was just for internet traffic. So it's like Alexa, right? Like internet traffic sites. Uh just stat statistics, sorry. He's just a nerd, he loves the internet. So he creates a site that tracks

um successful internet uh companies, which which ones are growing the fastest. However. You know how I started this by reading you like what's the sixth most popular website in in the United States. He sees that the most popular websites are all porn websites. And so he's like huh.

What if I create software for them? So he goes to them, he's like, What do you need? And they're like, Well Yeah, one of the hard things is we Uh we make money off of affiliates, but our affiliate tracking sucks. So he builds an affiliate tracking tool. That becomes the number one most used uh piece of code for affiliate tracking. On the internet.

And it's being used by these porn websites. And he builds that company up. He's super young. He's like, you know, twenty years old or something. He sells it. He's super rich now.

He's got hundreds of millions of dollars. And so he then goes and he buys Pornhub. For hundred forty million dollars. And then he just like

Grows it like crazy. So he in th uh I think in I think in like three to six months, he doubled the profits of the business. Cause he's this guy's just a better better operator. He knew how to monetize better. And he also knew how to like um To solve the problems around the content licensing. So he spends a million dollars buying content licensing rights so that they don't get uh sued anymore. He changes the name. He launches like a PR campaign around safe sex and he starts like, you know, getting in with politicians and all this stuff, right?

And he's doing he tries to do other stuff too. He cre he buys celebs.com and tries to create a TMZ. He tries to create like a bigger media empire. But nothing nothing can keep up with the growth of the core asset. And so he's thirty you know, he he ends up uh Thirty two years old. This you know, the company has five hundred employees.

And he's the biggest porn tycoon on the planet now. And this guy has sort of made it. However There is one problem. And this problem is that

Like I said, this the great power corrupts. And people st puts a target on his back, people start coming after him. And he's hard to find, too, right? If you look for photos of this guy at Google, like you actually can't see that many pictures of him, right? Well, he did a couple of interviews at tech conferences later when they started to try to like branch out. So similar to how OnlyFans has tried to branch out and hire like Musicians be like, Hey, show behind the scenes content content of your music process or whatever. They're trying to branch out. Um he tried to do the same thing. Kind of hard when your name is Pornhub, though. Well, he created other websites, right? So he created separate websites altogether that he wanted to use the same team and cache to to to start.

But crazy stuff is happening, right? So like He uh he's on one hand he's figuring out how to monetize it way better. And he's like Oh like and then by the way, he's hiring like data scientists. And the data scientists are like Sir, we've found it.

the best way to get a free user to pay for content. Is a video that is two minutes and fifty nine seconds. And that is the point where a man is most committed and is willing like, you know, to impulsively buy something. If we try to put a paywall before that or after that, it's not going to work. Two minutes and fifty nine seconds is what we've found is the optimal time in order to like increase revenue. And they do. They increase revenue a lot. Oh, there's one other thing I didn't mention, which is Along the way, people start to get

Curious. They're like okay, he's building this huge empire. He's rolling up all these sites. He's buying more and more sites. Like how much cash does this guy have? How did he generate so much cash? And what later comes out Is that he got a three hundred and sixty two million dollar loan.

From Uh unknown secret investors, and it turns out that basically there was two guys who he went to all the big banks. And the big banks were like, Look, we can't do this, we can't lend the money. So he goes to private. It turns out he raised from 125 secret lenders. They never their names have not been revealed, except for one group, their names have been revealed. It was a bunch of X

I don't know if it was JP Morgan or Morgan Stanley, whatever. Some some big bank. Two bankers from there spun out, created their own Like lending firm. specifically to lend just to this one play. They're like, this is gonna be so lucrative.

That we have to just Leave our jobs, quit our jobs, raise money, and just lend it to this guy. They've lended it at a twenty percent interest rate. And so even though he was growing and making all this money, he had huge like monthly commitments because he raises Three hundred sixty million. At twenty percent interest. Yeah. So his his his his debt payment or his interest payment is eighty or a hundred million dollars a year. Sixty million a year, exactly. And and they're and they they're also under attack. Like the CEO, he owns a sixteen million dollar house, it gets burned down by arsenis.

And uh Bill Ackman comes into the fray. Do you want to know how Bill Ackman comes into this into this uh story? So in the game of thrones, now Bill Aquin comes in from Westeros and he's like He's reading an article one day. This is the story. I don't know how true this is, but the story is he's reading an article in the New York Times. And it's about a girl A a teenage girl

Whose sent nude photos to her boyfriend. The boyfriend then leaked it onto one of these websites. And Ackman's like that's so wrong and she couldn't get it taken down. And he and she's felt so bullied and whatever. He's got daughters, he's like, This is terrible. And so he's like how he's and so you know how right now he's on a crusade to take down Harvard, take down Business Insider.

He goes on a crusade to take down porna. And so he's he tries to find him. He's like, dude, this is like some offshore company by this German you know, single owner. I can't pressure him. He's not a public stock. I can't Become an activist, what can I do? He's like So he thinks about it. He's first he's stumped.

Then he's like Wait a minute. What if I like, you know, when the US government sanctions Russia, he's like, What if I sanction Cornhub by cutting off their flow of money? So he's like, Hey, they need payment processors. And so what Bill Ackman does is he goes and he t he immediately texts the CEO of Visa. And he sends him the article. He's like your company is enabling this. These guys are making money off of this. You better do something.

uh about this and the CEO of E sa like, dude, I don't want any trouble from Bill Ackman. agrees that it's the wrong you know it's wrong it's not a huge portion of Visa's revenue. And he text them back. I'm on it. Like within five minutes. I'm on it.

One day later, Visa cuts off uh born up. So does MasterCard. So does you know they they lose their ability to actually process payments. Until they later w like, you know. Um Had to change all their policies. They like now verify everybody with their license and shit like that in order to And Bill Ackman has this old tweet, he goes, If you've been victimized by Pornhub or any of their affiliates, you may be eligible for a large amount of compensation and I encourage you to email this person who consuls seventy plus victims who can help you pursue your claim. So he like puts all his weight behind this thing. This is this is pre Israel, pre Harvard, pre business inside. Yeah.

Pornhub is is is is who he's going after. Hell hath no fury like Bill Ackman scorned, right? Like yeah, the the he is cra he is he goes after you. So The crazy part is The story doesn't end there. So you I thought and you thought That porno was owned by a company called Mind Geek.

And Mind Geek is run by this guy, Fabian Tillman. However, a few years ago. Uh sorry, three three or four years into owning it, he's grown the company like crazy. However, he gets in trouble trouble for tax, uh Tax fraud or tax like evasion or something like that. He and he's in Germany. I don't know all the details around the tax thing, but I know that he gets a trouble around taxes. He's forced to sell on a fire sale.

He sells it. For seventy seven million dollars. Oh wow. So the value has gone down somehow. The sixth most trafficked website in America sells for seventy seven million dollars. That's how much Morning Brew sold for. Like come on, do this. This is the only time where I'm allowed to go on Pornhub on my work computer so I can look at their stats. So according to Similar Web, Pornhub gets two billion visits a month.

Average uh visit duration, ten minutes, which is a lot. And Ten pages per visit. So they just get a ton of traffic. So it's just huge. And by the way, now let me tell you so this is a choose your own adventure story.

Aren't you curious what happened to those original founders who sold it for the hundred forty million? What are they doing now? I'm I'm curious about them and I'm curious about who Who bought Pornhub? to for seventy seven million dollars. Wha so which one do you want? Do you want to know about the shadowy businessman who bought it? Or do you want to know about the original founders? Choose your own adventure. Let's I'm gonna go on both, but I'm gonna go with the original for for now. So if you go look at their LinkedIns now. Which I'm gonna do.

So one guy's name I mean the say so one is Stefan Manos, another one is Usam Yusuf and then there's the guy Kizer. Um All of them. If you go to their LinkedIns now. There is a No mention.

of uh of any of this. They they're like, Yeah, we uh it's all about their philanthropy, it's whatever. But here's the interesting thing. So the guy used it. He sells and he's like Okay, I just want to get away from all this. That was too stressful, too sketchy. It became way bigger than we started. Like we didn't intend to do that. It just sort of one thing led to another.

I need to reset. And in his reset year. He's like, Well, what do I how do I invest all this money I have? And so he starts reading and he reads 150 books about investing. And he comes away a Warren Buffett disciple. And he's like, You know what?

I'm gonna go into value investing. And he creates In a Berkshire Hathaway for internet companies called Valsef. And Valsef is basically like constellation software. Uh, they're just buying up profitable cash flowing uh internet companies. Dude, and they're killing it. They're killing it. They're now they're now uh it's a billion dollar company now. They have over a hundred million in EBITDA every year. Uh just from the they've acquired like whatever, fifty companies or so. They have like five hundred million in revenues, and then they have like twenty to thirty percent at profit margins.

And just listen to the guy. So they create this thing called the Valcef group. And they're like, All right. We're going to uh you know, first they start buying up like other content websites'cause that's what they know. And then they start studying constellation software, which is the same thing that Andrew Wilkinson did and several many other people have done because constellation is like What are the OGs of this?

And he's like Huh. I read the stuff that Warren Buffett was doing on the stock market. But there's private Private software companies is even better.

He goes It's ten times better because there's only th there's like thirty thousand of these companies and there's no competition to buy them. What year? What year is this? Two thousand sixteen. Well and so he um he starts copying their playbook.

And he's like, look, this market is opaque, it's inefficient. Um I think you could deploy a high rate of capital. And get economic similar to what, you know

the moguls of the previous times where he's so he's like Murdoch, you know, he rolled up cable and newspapers back in the fifties and sixties. He's like, that's what I think I'm gonna be able to do with these uh you know, profitable software companies. Example of the companies are Nevatar, a cloud based car rental software company designed to automate a bunch of the stuff. Or it's like a construction software business. Just like things that you don't even know exist, but like this one has been around, that's called Malp. Mac practice. Since two thousand four, it started in Lincoln, Nebraska. It's created best in class software for Kyle Practors. Exactly. So the first company they bought, twenty sixteen is Something that sells software to small hotels.

Then the next year they buy three. The next year they buy eight. Now they're buying twenty to twenty five a year. And they're just buying them that are like they're small. And the same thing that Constellation does. So I think Constellation bought like thousands of companies during the last few years. I think the average size constellation software business is three million dollars in revenue, isn't it? Exactly, exactly. And so uh I don't know if it's revenue rebuttal, but it's it's small. They're not like it's not huge P E deals. It's the same thing. These guys are looking for companies that are five to ten million in revenue.

And so they go, uh And they're they're just studying constellation. They're like it's great. Basically, you buy them, you need them to run on their own individually, so that it doesn't add more bloat to headquarters. And they're just buying stuff all over Europe. He's like uh He goes right now my problem is I'm trying to decide between a great opportunity and a good opportunity.

Dude, this guy's great. Did he partner and I think he partnered with s some of the other the other founders, right? Yeah, yeah, yeah. It was two I think two or three of them that I know it was uh the two of abusive and uh the Manos one. I don't know what the Kezer guy does next. They don't even mention Pornhub on so if you go to valsoft.com, R history Like th that that word's not even mentioned anywhere. Yeah, there's parts of my history I don't mention either, right? Like we all we get it. Um These guys are planning to go IPM, which is pretty pretty crazy. So that's where these guys went.

Which is insane. Now what happened to the site? Who bought it? So the story that came out was That the you know, who's the next person on the throne, they said that actually the employees bought it out for 77 million. Like they had two executives. uh bought it out.

But That didn't smell quite right. Where did these ex where do these employees get seventy seven million dollars to buy this, right? Like how much were these employees making? And it turns out that there was actually somebody who was the money behind it that didn't want their name associated with it. And it was this guy, I don't even know how you say his name. It's like the word Bernard.

But it's missing some letters. It's just burned. Bergamere. Okay. is an Austrian businessman which is just already Sounds fucking like sick.

And he's uh now he he owns the majority of this. He worked at Hong Kong and London and blah blah blah. He bought Red Tube in twenty thirteen. He sold it to Mind Geek originally. And then now he bought the whole company back. And so he is the principal owner this thing.

And nobody saw it. And most people Kind of thought it's a kind of a dead asset because when you look at the reported financials Ornum makes almost no profit. And they're like, Jeez, how are these guys making hundreds of millions of dollars in revenue with no profit?

One of the reasons why is This guy basically lends money to the company and takes out two million a month. In just debt payments himself, plus they shift revenue around all these subsidiaries. So there's all these shell companies. So you don't actually they they've completely obfuscated how much money this this entity makes. And so that's who currently owns it.

But even he's going down. Now he's getting a divorce. His wife has came out and is like she wants him to cut ties with the company, blah, blah, blah. And I think it's about to exchange hands again because. Now a private equity group bought it. And do you want to know the name of the private equity group that bought Pornhub? Yes, I do. Ethical capital partners.

Do you want to know how many companies they own? One. This is the only they formed just to buy this. They named it. Like Ethical capital partners is I mean

That's the uh the subway eat fresh of uh of uh of private equity. And so these guys are Uh now the owners of this thing and who knows where it'll go next. First of all. Great story. That was a great story. I was in thrall the whole time.

Second. Look up this guy. Bernard. He has a w really weird spelling. There is only one photo of him that I can find and he's smoking a SIG. Badass shut up. Yeah, he's just smoking a SIG. He looks like Like if you told me that he was part of the mob, I'd believe it.

It looks like either a mob guy or like a soccer co like a you know, the Manchester United coach after a loss. It's like one of the two. Uh yeah, he just he just just ripping a SIG uh in this in this photo. And he uh worked at Goldman, so he's also uh uh an acquisitions guy. Like he's a deal maker, that's what he does. This is insane. First of all I I would never trade places with any of these people.

Maybe the original owners. That is kinda cool. But the last two and the new owner, I would not trade places with any of them. For any amount of money. I would not want to go through this. If you Google this guy's name, it's pictures of his wife and them fighting over this stuff. This sounds miserable. Can you imagine being married to someone who runs this company? What I want to know is what is it like to work there? How do you stay professional? Like and be trying to be objective about certain stuff. Like, you know, when you're talking about um uh at uh Shepherd or one of your companies

And you're like, hey, this SKU is doing a little bit better. Maybe we should try it in red and blue. You know, we have black. Let's just do it in red and blue as well. What are the conversations like at at Pornhub or or Mind Geek when they're like talking about like, Oh, this category's doing well. Let's explore that one a little bit further. Do you know what I mean? It's uh it's the Chuck E Cheese tokens thing. So like If you ever just had to take cash out of your wallet and keep putting it into Chuck E Cheese machines, you'd be like, What am I doing? This is terrible. But what they do is when you walk in, they exchange money for these fake tokens and then they rename everything and it feels like it's all like you know fake, you know, it's just it's like abstracted away. That's what happens'cause I felt this even when

We were at Twitch. Twitch is a lot more reputable than this, obviously. But the end of the day. We were in these meetings that felt like Life or death.

high stakes. Everything is on the line. Like the world is gonna end. And I'm like This is like 21 year olds playing video games in their bedroom. Like who cares? Like none of none of this matters. And like you hire people from Harvard and MIT, like The brightest of the bright and they're optimizing like You know the The mid roll ad pop up.

Of you know, stupid energy drink in the middle of this stupid video game stream. But none of it stu feels stupid once you're in there, because it becomes abstracted away and you're playing with the data, the numbers, and the revenue and it. And it and you come up with all these terms for community and content and whatever. And nobody uh is I feel like nobody looks at the fact that we're all just making hot dogs anymore. You lose sense of it. I uh my wife worked at Facebook out of college. So she went to this Ivy League school. It's a smart woman. She had all these to mate job job offers, whatever. And she starts working at Facebook and I'm like, Oh, Sarah what are you working on?

And she started explaining to me in a really complex way. I'm like Oh, you're just trying to come up You're just you guys just created like a little sticker emoji that you could put on photos so more people share photos. And it was like it was like looking down, it was like Yeah.

Yeah, that's it. You know what I mean? Like you you go through that moment where you think of like Facebook is this amazing thing of which it is, but then you like start talking to individual people. It's like oh you create a thing that when I stick my tongue out, like The cartoon's tongue goes out. That's cool. Uh in in reality you're doing it just to get people addicted more to posting and sharing stuff. Yeah, you know, that's all right. It happens w when we were at Camp MFM and we're talking to Mr. Beast team and he's given us a tour of the facilities and our group is like billionaires and philanthropists and and we're walking through and we're like, wow, this is

This is incredible. These people are geniuses. Tell me, how do you get people to click the thumbnail and they're like, You know, we increase brightness and saturation by fourteen percent. And look at how many thumbnail tests we do, and we're like, ah Incredible work. And we're so wrapped up in it. And it all feels so real. And then you come home and you click on his video and it'll be like Train versus pit. And it's like this train is gonna drive into this hole or is it gonna jump over? We don't know. It's like Oh wait, dude, I had a friend named Ty who used to do this shit in his backyard. Ty like Oh, you're locking yourself in a room for seven days? Like I actually know an idiot named Jake who did that without you two. Like he just did that. And we were like, dude, is fucking Jake still in his room? And he's like, Yeah, that's what he's doing. But like when you're in it

you could get in this reality distortion field where you feel like you're doing God's work out there. And I that's what happens at all these companies, dude. It is still cool. Like like I remember Elon Musk uh Elon Musk gave this talk and he's like, you know, you're doing so someone was like, you're doing all these amazing things, uh you're sending people to Mars, you're building cars, saving a plane, whatever, and he's like Yeah, but it's also cool just to make a game that like entertains people. Like that's cool too. So I don't want to dis discount this stuff, but it is fun to put perspective on this and be like, I think you just can't take yourself too seriously, right? It's cool to do do a do your best. It's cool to try to win a game. How many people are gonna watch the Super Bowl next Sunday and it's you know, a bunch of guys chasing around a ball and then the arbitrary rules, right? Like if you had if you look like It's cool to be into it. It's cool to be great at it. But let's also not take ourselves too seriously. Let's remember, like, you know, what this what this is. It's a game or it's something fun or it's something lighthearted.

I've met three guys who run porn site. Some are popular, some aren't popular. One of them is very popular. Imagine running a not popular porn site. All of the downside with none of the upside. Whoever is your friend who's running the unpopular porn side. Imagine how bad you have to be in execution. If you can't sell movies, you can't sell anything, dude. Like this guy launched one and then like within three or four days it was doing like eighty or a hundred thousand Views a day. But he was like

Yeah, we don't make any money because the ads are horrible. Like there there's no way to make money on this shit. And so they had like so they had traffic. And all three of those guys I knew who did it. They're all Borderline autistic.

Probably on the more autistic And they were like I remember like thinking and talking to them, I'm like, Yeah, but doesn't this make you feel weird, this, this, and this? And they're like Yeah, but the spreadsheet said this number and tomorrow it's gonna say this bigger number. And so all I'm just trying to I'm just looking at that spreadsheet. Yeah, I that just and try to make that number bigger, and it just so happens that it's on this website. They were all pretty black and white about that. You know what I mean?

Yeah. Yeah, exactly. Yeah, you once you get in, you start operating and by the way, I remember reading once uh So Max Levchin. Who is one of the most you know Brilliant people in Silicon Valley. This guy you know, one of the co founders of PayPal.

Without Max, you know, there is no PayPal, which you could probably say for a couple of people, but specifically Uh anybody at PayPal will tell you that Max's technical brilliance in fighting the uh Fraudsters? kept PayPal alive when any other money transmitting service

just died because the fraudsters had too much to gain and they were too sophisticated and as a young company, it's really hard to defend against it. And Max like went to war with them and actually like fended them off enough where they succeeded. It's a brilliant programmer, right? Chess whatever master Brilliant programmer.

Blah blah blah. creates PayPal, this like monumental thing. Is the next act. was a company called Slide. And slide.

Basically made like Virtual pets from MySpace. It was like what? It's like yeah, you know, like on your MySpace profile, your Facebook profile, we're gonna make little apps like So you can You know.

Engage with your friends and interact. It's like interact how. It's like Well, we just invented this app called Bitch Slap, where you can bitch slap any one person a day on your on Facebook. It's like what? Yeah, but only one. And so they're not going to be able to do it But then it got even lamer, didn't it? It like became an ad tech company. Well, how do you monetize, right? Like with all these things, how do you monetize his ads? And so they were creating slideshows and music video tools, but anyways, it was stuff to go on your MySpace and Facebook profiles. And they go, you know, Max, you built Slide, it got really popular, then the platforms kind of shut it shut down some of the capabilities. And I think they ended up selling to Google for some small amount and and they were like, Max, what'd you learn from Slide? Small for him. It was still a multi hundred million dollar exit.

But I think they had raised a lot of money, so I don't think that anybody really made too much. So I from I'll never forget this. I read this quote and I realized oh shit, this describes my life. So I've read this like fifteen years ago, I've still never forgot it. They go, What did you learn from Slide? And he said.

What I he goes, I realize you gotta be really careful what you what projects you pick. Because Anything can be in uh optimized to infinity. And he is like what do you mean? He goes. You know, we picked that we were gonna do these like widgets on top of profiles, and guess what? Like

The smartest people in the world can spend every moment of every day Optimizing that to make that more Engaging, more viral, more addictive, higher monetization. And that's what we did. We spent years of our lives doing that. And I think that was like his big takeaway was like

He didn't say it but the implied thing is like Kind of like what a waste. Like be careful because everything can every knob can get optimized to infinity. He he became like the best pogo stick player in the world. And I felt this many times in my life. And I I don't really even know how to deal with it, to be honest, because When you have the realization you're like, shit, should I just stop? Or I don't know, I don't want to stop. This is like my job. This is success successful business. Should I Like with my e com store, I feel this like

You know, you change the color of this and then you run this A B test. You do It's like, dude, what are we doing? Like is this Like Is this what we should be doing with our time and our life and our creative energy? And and I do have that like kind of existential crisis, you know, every few years. Just think about this quote.

Let me be your therapist for a minute, as well as anyone else's in this situation, which is Your product doesn't have to change the world. Your product actually as a CEO or owner could be I create jobs for wonderful people and I give them a great place to work. And like most people just want a nine to five and they want to play softball on the weekends and they want to make sure they've got good health insurance and they want to see their kids raised and be healthy. You don't need a life changing thing all the time to have a badass thing. And I don't think that it's fair to compare

all these products to the Teslas or whatever, or like these existential crisis things. Because like just having a piece of clothing item or an item of clothing that you can give to someone or that uh makes you feel good about yourself or a game just to play time. I mean, we just have a podcast that uh I you could say, Oh, we inspire people. Uh sometimes we we just jerk around and it's just funny. Like that is also awesome. It's not the right thing to say this compared to this other thing is so stupid when it's like, No, you can have all those things and like I get inspired listening to music and then there's a lot of music that's just silly dumb stuff, and there's some music that actually changes me. There's some movies that change me, and then there's stupid vine skits. Like it's all in the same category. And that's okay. We can have all of that. And my product could be creating a workplace that people love coming and I inspire. Or it could be

Uh I just have created a future for my daughter. You know what I mean? Like it so I don't think that your product necessarily has to be the thing you're selling, but the thing you're building. I mean okay, I feel better. Thank you. That was good. Uh I feel better now. I'm creating jobs out here, dude. No, the but the that is the truth. Or like, you know what I mean? Or you're providing for your family. This is great. Yeah. We have created literally half a dozen jobs this last quarter. I might have to become the governor of the Philippines because I've created all my jobs in in the Philippines, but that's all right. Um

Can I just show you one thing off this list though? Cause I had this list pulled up of the internet sites. Dude. Look at this list. Tis tell me the first thing that stands out to you. And I bet you it's the same thing that stands out to me. I'm looking at the list. Of the twenty Most popular

Most visited, most used websites. In the United States. Well, the first thing, but this is not what you're referring to. Duck Duck Go is number seven. That's what I'm referring to, dude. Is that what you're referring to? It's more popular than Yahoo and Wikipedia and Twitter.

So here's the background on DuckDuckGo. So Duck DuckGo was started probably twenty years ago, I think. I mean, or maybe maybe more, but like it's not new. Started by this guy named Gabe. I think Gabe was a s a mildly successful entrepreneur, successful by any means, but like amongst Silicon Valley, it was all like a base hit. I think he wrote this book called Traction with Justin Mares, our friend. And then he had this whole premise of privacy search, where he said privacy is going to be important to people. We brought this up on the pod in the very first. fifty episodes. We're like, this is so cool because what they used to do is duck duck go dot com slash like stats you could see all their web traffic. And it was small at first. It's basically Google

But you But for some It's it's Google. But somehow they don't show you targeted ads. So I don't actually know how they make money or what the promise is entirely.

But it's it's just ads. That are targeted. I think it's ads that are either not targeted or it's ads that are targeted only on what you search, like the term you just search for, but nothing to do with you as a person. So they're not it cooking and collecting info on you and hyper personalizing it to you. It's just

Here's an ad because you're searching, or here's an ad about you know, you're searching for a car, here's a car ad. But we it doesn't have to be Sam, you know, that that that we're tracking info on. And we talked about these guys a while ago'cause It it's kind of weird, which is like this is a significantly less good Google, or at least that's like what it appeared to be. And but we're like, their traffic's growing like crazy. What the hell's going on?

And now apparently they're huge. I didn't realize they were this big. I knew the trajectory was really, really good. I had no idea that they'd be the fifth so it was starting in two thousand eight, by the way. I am blown away by this. I I might have to go read that damn book then. Wh which book? traction. This is real traction. Okay. I I'm in I'm in. I believe you. Uh this is crazy. Yeah, it it is pretty wild. And

I've been I've been interested in Duck Duck Go, but I never uh ful it'cause I was like, this is just an inferior uh Google, but This is amazing. So they say DuckDuckGo is an independent privacy company for anyone who's tired of being tracked online and wants an easy solution. And actually recently, They raised a hundred million dollars in funding, or maybe two hundred million, but it was over a hundred million. And I heard that none of the money

actually went to the company. It was simply early employees selling some of their stake, meaning the company does not need cash. They're very profitable, which makes sense because Google is like, If you know, I don't know how many employees Google has, uh Uh a hundred thousand. They but like if you fired everyone but fifty or a hundred or two hundred people, it probably could work pretty great. I mean, their main thing is like the most efficient best business model of all time. So it makes sense why Duck Duck Go is so uh such a good business. But this is amazing that they're

What is it? Number seven? Number seven most popular website. Ten years. They went from point oh one percent market share. To now?

Is that insane? They're still tiny, according to their own. you know, uh measurement of of market share. Um Which I don't know exactly how they measure that,'cause if you look at the the uh you know election rankings or the SEM rankings, they're

getting 10 times less traffic than Google or a little bit less than 10. Uh um But they're saying they're only point six percent of search, so I don't know. They had a hundred billion searches in Q three of two thousand twenty two. I'm gonna go on the street and I'm gonna ask a hundred people, do you use DuckDuck Go?

I need to know what's going on here. This is crazy. I think we should I'm not gonna go through my other topics I think that this this'll the you did a wonderful job. You had me enthralled the whole time. What's the title of this one gonna be like uh for ninety four minutes straight? That's every episode. This one's gonna be uh this one's gonna be uh the story behind the fifth most popular website in the world. Um all right, that's the pod. I feel like I can rule the world, I know I could be what I want to I put my all in it like my days off On the roadless travel, never looking back

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