The Economics of the New Amateur Sex Industry

The Tale of The Beauty and The Whale.

Readership: All
Reader’s Note: This post continues discussing The Rise of the Amateur Sex Industry (2021 January 4).  Readers may like to read this post first before continuing.
In this series, prostitution is defined as the sale of either (1) sexual services, (2) faux relationships (calculated by the hour, number of messages, etc.), or (3) personalized, self-produced, sexually titillating media content — for cash.
Length: 2,670 words
Reading Time: 9 minutes

In this post, we’ll briefly examine the microeconomic theory behind internet-based aggregate marketing, to explain how internet queens can rake in thousands of dollars a month.

Introduction

In The Rise of the Amateur Sex Industry, I described the dynamic whereby the internet’s ability to disintermediate — or to remove the “middle-man” in any given distribution channel for a specific good or service — has permitted women and their customers to create a new, amateur online sex industry that does not involve the traditional “middle men” of the “brick and mortar” sex industry — that is, pimps and madams, strip club owners, and pornographers.

In addition to its inherent ability to disintermediate, the internet, by its nature, has the power to aggregate things into large numbers that would normally, without the presence of the internet, be present in any one place in only small numbers.

“A Thousand Points of Light” … or, er, rather more like 104 million of them, but we’ll get to that shortly …

The Internet Expands Aggregate Marketing

In the business world, the internet’s power of aggregation has created new business models, with new pricing schemes, that are designed to take advantage of the new, extremely large, potential market size created by an internet that is literally present in the pockets of billions of people.

While traditional business models have focused on both growing the customer base and increasing revenue and profit generated per customer, the assumption behind traditional business models was that there were certain “realistic caps” on the market size, arising from the inherent limitations on the ability to reach people everywhere, due to geographic spread. Marketing tended to be more targeted, with a smaller market size being the focus, and therefore the business plans and economic models tended to focus on maximizing revenue and profits per customer, in light of the presumed limitations, at some point, on the ability to continue to grow the potential market reach.

The internet fundamentally changed this by providing businesses with the ability to access a market that was extremely larger, in potential size, than had ever before been the case, thanks to the number of people who were connected to the internet all the time after the rise of the smartphone in 2011 and thereafter. This had the effect of reducing marketing costs, and increasing market size, which somewhat changed the approach to economic modeling in certain industries. Specifically, in markets where the product or service could be provided virtually or electronically, the sheer size of the new internet market made it possible for business models to begin to be developed which were based around the size of the market, and leveraging that size itself, rather than focusing on maximizing the revenue and profit generated by each customer.

Case Study 1: The QTπ Conglomerate

Some of the more salient manifestations of this have related to the rise of the “LGBT” movement, that was largely facilitated by the growth of the internet, which took a group which is relatively small in any one place (outside of certain outlier concentrations like San Francisco and Manhattan), and aggregated it into a not small number, overall, by means of the internet drawing every LGBT person, wherever located, into one movement, with one face, and one voice. This amplifies political power considerably, as we have seen, in a way that would simply have been unthinkable for this group, and especially for certain parts of it (like the “T” wing), which have dramatically benefited from the power of aggregation.

How Aggregate Marketing Works — Freebies and Whales

In a business model that is based on aggregation, the general approach is to provide free or low-cost access to a product or service as a baseline, and then to provide selective upsells that are priced very much to the profit-fat upside. The core idea is to provide an attractive enough baseline “free” (or “low cost”) product so as to have a large market penetration and a large group of people that can then be directly marketed for upsells, which are more aggressively priced and drive almost all of the profit generated by the business activity.

These models tend to generate 80%+ of their total profits from these upsells, which are often made to less than 5% of the total customer base. These customers are known as “whales”, because they are the “big fish” in the customer base. They spend a LOT more than the average customer does, and therefore can provide most of the profit for a given business, even where 95% of the customers are paying nothing or a small access fee.

Case Study 2: A Hypothetical Example of Aggregate Marketing

Let’s suppose a company provides access to a video game for free. And let’s say it attracts 100,000 customers to play for free. At the same time, it creates a “pay shop” in the game that contains various items that either may speed up the advancement of the players in the game, or give the players a certain, limited and distinctive cosmetic appearance in the game, or additional “quality of life” options during gameplay, or what have you, and prices these in such a way that every player who uses the shop spends at least $10. And let’s suppose that, on average, 10% of the total number of the game’s players ever buy anything at all from the shop, and that the average spend of these players at the shop is $20.

This game would then be producing, in revenue, $200,000. From that $200,000, it would need to pay for its development cost, and the cost of producing new virtual products for sale, but let’s assume that this provides comfortable profitability (or that the numbers are adjusted to do so). The critical point is that the game company is managing to do this while monetizing only 10% of its players, and with 90% of them not paying a dime to play the game.

If the game company had decided to charge an access fee of, say, $10 per month, let’s assume that its customer base would have dropped by 90%, to 10000 customers. At that point it would be making $100k. That sounds like a drastic drop in customers, and therefore unrealistic, but in fact this is precisely the degree of difference between participation rates in things that cost a baseline fee and things that have free access. The free access spikes participation rates dramatically — humans really, really like free stuff!

What this does is permit the company to focus on growing the overall market size and penetration, knowing that even without monetizing a higher percentage of its customer base, it will still increase its revenues and profits substantially simply by growing the size of the overall customer base. So in our initial example, if the number of players rises from 100k to 200k, the total revenue of the game similarly doubles in lockstep from $200k to $400k, without making any assumption about increasing the monetization rate at all or doing anything other than increasing the total number of players.

Based on this baseline concept — making most of your revenue and profits from a small percentage of your customers, your “whales” — a number of variant models can be utilized to optimize the overall ROI of the business. These can include charging a nominal fee, or even a larger fee (if the market demonstrates it can bear it), which mixes the kinds of revenue streams together, providing both a baseline “floor” of revenues per month, as well as more variable, and more profit-rich, sales to whales at the same time. A clever and perceptive, and adaptive, proprietor will be able to adjust the model to optimize what they are seeing as demand, in order to generate the most efficient rate of return and reach their profit and revenue goals more effectively, adjusting pricing as needed to address over or under-shooting the actual demand, and the price sensitivity of that demand, in real time.

Applying this to OnlyFans

One of the interesting things about OnlyFans is that the women who participate in it as “content creators” are generally unabashed by what they are doing and are remarkably open about it. Many of them are participating under their real names, and are connected to a broader social media presence on Instagram and YouTube under the same names. In addition, a number of them are quite open about what they are earning from the OnlyFans activities, and seem quite proud of their accomplishments in this regard. This relative openness sheds a remarkable degree of light on the economic practices of OnlyFans content creators.

Case Study 3: Makayla Samountry — a Representative Case

In his recent post Why is the Online Sex Industry Attractive to Women, Jack, in his discussion of the amount of money available to women who choose to participate in OnlyFans, described the situation of Makayla Samountry. Samountry, currently 25, is a college grad and a minor social media personality based in Minnesota, with a social media following that is comfortably above average for a non-celebrity (70k followers on YouTube, 15k on Instagram, and on down from there) but not spectacularly sky-high.

In January 2020, Samountry began an “experiment” by trying her hand at OnlyFans, and vlogged about it on her YouTube channel, in the video that Jack linked in his post. As Jack mentioned, in her first month on OnlyFans, Samountry did fairly well for a newcomer, earning around $1100 that first month.

Samountry continued with her “experiment”, as a review of her YouTube channel reveals. In June 2020, she disclosed on YouTube that she had earned, by then, around $30k, and her monthly take was up to around $4500 (an annualized level of $54k). By late October 2020, she relates that she had earned around $70k on OnlyFans year-to-date, which means that she had increased her take, after June, to around $10k per month (annualized $120k).

How does she earn this money? What is her business and pricing approach?

She actually describes this in some detail on her YouTube videos in response to questions received from her readers/viewers, and as assistance to aspiring would-be “content creators” on OnlyFans. Samountry charges a fairly high access fee of $26 per month (many OF sites are free or have a nominal access charge of $5 or $10), but she makes a large portion of her money from her “upsells”.

What are these? According to one of her YouTube videos, Samountry packages sets of racier images — which she insists are not pornography! — in sets of 3-6 images for prices that range from $50 to $150, with a few choice options retailing for $200. She helpfully explains that her pricing escalates based on how “explicit” she thinks the image is, how customized it is, and so on, with the higher price tags attaching to more titillating material, but all off it is apparently solo pictures — no “hardcore” images or videos whatsoever — which is probably why she claims it is “not porn”.

Readers can judge for themselves the relative beauty of Samountry. In fact, she jokes in one of her YouTube videos about how she gets notes from men criticizing her for not being attractive enough to be on OnlyFans — a criticism she dismisses with a laugh and a handwave. And, to be honest, since she has earned a substantial amount on OnlyFans, I have to agree with her dismissal of the criticism — whatever one may think of Samountry, she is making a good deal of money selling pictures of herself on OnlyFans, regardless of what some men think of her beauty level.

This again serves to emphasize a core truth: a woman does not have to be a consensus, world-class beauty or famous personage to make a good amount of money on OnlyFans. She only needs to be smart about what she is marketing, and aggressive in her pricing, and it appears that Samountry is both.

On the Internet, the Sky Really Is the Limit

It is one thing for a smart and enterprising young woman to hustle her way to $100k on the internet, but really — how high can this get for girls who are on OnlyFans? Isn’t this just an example of an outlier-type level of return?

Well …. the internet is a really big place. Really big.

As Jack pointed out in the comments under his post last week, OnlyFans has surpassed 100 million users — currently the OnlyFans online tracker lists just under 104 million user accounts, and as of late 2020 there were just over 1.5 million content creator accounts. For comparison, Twitter has 330 million users. This means that OnlyFans, a site focused on monetized private pornography, has about 1/3 of the users that Twitter, one of the largest internet communication platforms, does.

By any measure, OnlyFans is a truly massively sized market. It is an outstanding place to execute a business strategy based on some form of aggregation — either by providing a free site, or by charging a nominal price (60% of OF sites charge between $5 and $15 per month), and taking in a lot of additional revenue by means of upsells, tips and the like. And some women who have already very large followings, like certain professional porn actresses, can command a lot of revenue based on subscription fees alone — onlysearcher.com reports that the single highest earner of subscription fees is a professional porn actress who has earned, to date, $460k on subscription fees alone, leaving aside tips, upsells and the like, which are not reported.

But it can get higher than that.

Case Study 4: Belle Delphine, Whale Huntress Extraordinaire

Belle Delphine is a 21-year old British/South African young woman who came to prominence as a streamer of video games on the Twitch gaming livestream service, because she managed to sell her bathwater to her followers for a great profit. She recently disclosed to media that she is earning around £1 million per month on OnlyFans (which is around $1.36 million).

Delphine, who, despite her celebrity from Twitch, seems to appeal to a niche market, appears to earn her money through a hybrid model. She charges $35 as a subscription fee, which is very high (top 5% of all pricing for OF subscription fees), but she isn’t on the top ten list of subscription fee generators — almost all of the women on that list charge a low subscription fee to generate a large number of subscribers and benefit from the aggregation effect I describe above. Rather, Delphine must earn her extraordinary OnlyFans income mostly by means of upsells and tips — to the tune of something close to £1 million per month! And this is from people who are already paying a $35 monthly access fee!

In other words, Delphine is a whale hunter — and an exceptionally good one at that.

Essentially, what Belle Delphine is doing is hunting the whales in the entire user base of OnlyFans, rather than trying to maximize the size of her own subscriber base — because she would certainly have a larger subscriber base if she charged a more typical access fee.

In effect, Delphine is instead leveraging the aggregate marketing potential of the entire user base of the OnlyFans site, and is hunting for the whales in that entire base, to assemble a subscriber base comprised almost entirely of whales! Regardless of what one thinks of Delphine and her brand of anime/fetish-schtick, she has one heck of an intelligent strategy, and one that has been nearly flawlessly executed.

And that, gentlemen, is truly the power of aggregation in the hands of a skilled operator!

Conclusion: Money, Money, Everywhere!

On the internet, the sky really is the limit, and OnlyFans, by virtue of the enormous size of its market, provides a large pool of money for a large number of women to draw on, to a greater or a lesser extent — dipping in for a few thousand dollars, or a hundred thousand, or even more, on an annualized basis, depending on how hard they are willing to work the site. Notably, Delphine herself admits to working the site very hard indeed on a daily basis, making as many as 30-40 interactions daily on her OF site. (What can you say? The girl knows how to take care of her whales!)

Finally, what’s in this for OnlyFans itself? Why does OnlyFans provide this menacing, corrupting den of iniquity that is silently rippling through our culture currently?

Twenty percent!

OnlyFans takes 20% of all revenues from all content creators, bar none. Simply put, the owners of OnlyFans are getting very, very rich at the moment. In an industry where the actual profitability has been dwindling for years due to the ubiquitous availability of “free” porn, OnlyFans stands in marked contrast. And it’s growing like wildfire.

My next post in this series will take a deep dive look at one specific case of how the new landscape of the online amateur sex industry can impact a marriage in a way that was simply not possible even 5 years ago.

Related

• Σ Frame: DTFCupid (2017 December 17)
• Σ Frame (Novaseeker): Exploiting Online Attention (2020 December 9)