The Story Behind The $1.5B Pornhub Curse

Episode 548: Shaan Puri (https://twitter.com/ShaanVP) and Sam Parr (https://twitter.com/theSamParr) tell you the greek tragedy behind the Pornhub empire. If you like stories about nerds taking over, arson, secret billionaires and….foosball tables, you’re going to like this episode. No more small boy spreadsheets, build your business on the free HubSpot CRM: https://mfmpod.link/hrd — Show Notes: (0:00) Intro (2:00) Who's the new king of porn? (16:00) Bill Ackman vs Pornhub (24:00) Pornhub's $77M exit (29:30)The reality distortion of entertainment businesses (35:30) Sam shrinks Shaan (38:00) DuckDuckGo in the top 10?!? — Check Out Shaan's Stuff: • Try Shepherd Out - https://www.supportshepherd.com/ • Shaan's Personal Assistant System - http://shaanpuri.com/remoteassistant • Power Writing Course - https://maven.com/generalist/writing • Small Boy Newsletter - https://smallboy.co/ • Daily Newsletter - https://www.shaanpuri.com/ Check Out Sam's Stuff: • Hampton - https://www.joinhampton.com/ • Ideation Bootcamp - https://www.ideationbootcamp.co/ • Copy That - https://copythat.com • Hampton Wealth Survey - https://joinhampton.com/wealth Past guests on My First Million include Rob Dyrdek, Hasan Minhaj, Balaji Srinivasan, Jake Paul, Dr. Andrew Huberman, Gary Vee, Lance Armstrong, Sophia Amoruso, Ariel Helwani, Ramit Sethi, Stanley Druckenmiller, Peter Diamandis, Dharmesh Shah, Brian Halligan, Marc Lore, Jason Calacanis, Andrew Wilkinson, Julian Shapiro, Kat Cole, Codie Sanchez, Nader Al-Naji, Steph Smith, Trung Phan, Nick Huber, Anthony Pompliano, Ben Askren, Ramon Van Meer, Brianne Kimmel, Andrew Gazdecki, Scott Belsky, Moiz Ali, Dan Held, Elaine Zelby, Michael Saylor, Ryan Begelman, Jack Butcher, Reed Duchscher, Tai Lopez, Harley Finkelstein, Alexa von Tobel, Noah Kagan, Nick Bare, Greg Isenberg, James Altucher, Randy Hetrick and more. — Other episodes you might enjoy: • #224 Rob Dyrdek - How Tracking Every Second of His Life Took Rob Drydek from 0 to $405M in Exits • #209 Gary Vaynerchuk - Why NFTS Are the Future • #178 Balaji Srinivasan - Balaji on How to Fix the Media, Cloud Cities & Crypto • #169 - How One Man Started 5, Billion Dollar Companies, Dan Gilbert's Empire, & Talking With Warren Buffett • ​​​​#218 - Why You Should Take a Think Week Like Bill Gates • Dave Portnoy vs The World, Extreme Body Monitoring, The Future of Apparel Retail, "How Much is Anthony Pompliano Worth?", and More • How Mr Beast Got 100M Views in Less Than 4 Days, The $25M Chrome Extension, and More

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Shaan Puri?

  All right, Sam, I want to play a game. I want to start this with a game where I'm going to read you. And you don't know this, by the way, you didn't know I was going to do this. We have the, I'm going to 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 me, do you know who's the owner or CEO of these businesses? Okay?

• 0:20Sam Parr?

  All right, I like this game.

• 0:22Shaan Puri?

  Number one, google.com.

• 0:24Sam Parr?

  Sergey and Larry Page, Sergey something and Larry Page.

• 0:28Shaan Puri?

  Correct. Uh, next one, YouTube.

• 0:31Sam Parr?

  Um, Chad H.

• 0:34Shaan Puri?

  Early, yep.

• 0:35Sam Parr?

  And Jared and one other guy, Steve Chen.

• 0:38Shaan Puri?

  Exactly, correct. Um, Reddit.

• 0:41Sam Parr?

  Huffman and Ohanian.

• 0:43Shaan Puri?

  Correct. Uh, Amazon.

• 0:46Sam Parr?

  Bezos.

• 0:47Shaan Puri?

  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.

• 0:52Sam Parr?

  Zuckerberg.

• 0:53Shaan Puri?

  Okay, number six, Pornhub.

• 0:55Sam Parr?

  Uh, Bastian something, a German guy.

• 0:58Shaan Puri?

  Incorrect, sir.

• 1:09Shaan Puri?

  So this is the number six most trafficked website in the United States. Three billion visits, um, in, in, like, in a month.

• 1:19Sam Parr?

  Is it called MindGeek or Mindfreak or something?

• 1:22Shaan Puri?

  MindGeek 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, there's like this, this concept, like in Lord of the Rings, there's the ring. Or, um, in, uh, Harry Potter, there's the Elder Wand. And it's an idea that there's, there's these assets that are so powerful that people want to own it. But whenever you own it, your ownership's going to be very short-lived. Uh, it's almost that the, the item is too powerful, it sort of corrupts you and, uh, it puts a target on your back and other people start coming for you.

• 2:02Sam Parr?

  It's a real sticky situation, one might say.

• 2:06Shaan Puri?

  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 going to 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 you, let me tell you how it went down. Okay, so we rewind the clock. We go back to 2005. Up until then, you know, internet's been out for roughly been been semi mainstream for 10 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 whatever, I don't know, jugworld.com and it would just, it would just show you 100 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.

• 2:51Shaan Puri?

  They're mostly photos at the time, wasn't even that much video. So 2005, 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 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, roll up both his 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.

• 3:34Shaan Puri?

  Now there's copycats that come out in the porn version of this. RedTube, right? Just off of YouTube, RedTube, YouPorn, whatever. A bunch of these come out and they're all flooded with pirated content. So they're just like, kind of like LimeWire back in the day. They just take, you know, stuff that you're supposed to pay for and they would just upload it for free on here. And they would have, you know, banner ads to make money. And even though these were kind of sketchy websites, they were 10x 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. 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 till you find what you like. There was infinite niches.

• 4:19Shaan Puri?

  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 porn 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 ga- on the iron throne at the time. And this was the CEO of Vivid Entertainment. What is, 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. 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 porn. 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.

• 5:04Shaan Puri?

  And revenue starts to fall and it falls 50% and it falls 80%. 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, had a huge lawsuit from Viacom. These are like parallel stories. YouTube was also flooded with pirated 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.

• 5:48Shaan Puri?

  Then the second owner of the throne, which was these like RedTube 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 baton? And where does Pornhub come into this? Okay. So at the time, there's three college students in Canada. And they realized that this is a, uh, that like, there's a lot of traffic, uh, to these websites. They meet of, out of all things, at a 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.

• 6:33Shaan Puri?

  He's like, hey, I think we could do the same thing. For porn.

• 6:37Sam Parr?

  Was the intention porn or was the intention something else and porn users use it use it most?

• 6:42Shaan Puri?

  So these guys made the link sites of that site I talked about Jug World, that's their site. But they made like a hundred of these. 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 Matthew Kizer or something. Kizer 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 for for this stuff. And we can, instead of having these directories where we send the traffic away, we could just keep the traffic. And 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 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 going to host all this stuff.

• 7:27Shaan Puri?

  And they created a company called Brazzers, which is a

• 7:30Sam Parr?

  Oh, yeah.

• 7:31Shaan Puri?

  Producer of content. So they created a content producer and they created the platform, the

• 7:35Sam Parr?

  Like Netflix making their own shows.

• 7:38Shaan Puri?

  Exactly. Or like, you know, um, FTX had this, you know, a 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. Cause 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, 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. Brazzers and Pornhub 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 Brazzers to do that. We hate the platforms. And meanwhile, he was also the owner.

• 8:21Shaan Puri?

  So these guys start this thing and it takes off like a rocket. They, 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 2007 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 Brazzers, they had their own content that was not, uh, 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 go from basically like just three friends to like 80 people, 150 people, 250 people.

• 9:03Shaan Puri?

  And they're hiring friends and family and they're like, dude, 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.

• 9:14Sam Parr?

  Bootstrapped?

• 9:15Shaan Puri?

  Bootstrapped. No, no investors, no nothing.

• 9:17Sam Parr?

  So just growing because word of mouth traffic? And obviously people love what their, their product and they're just coming back over and over again.

• 9:24Shaan Puri?

  And the key is that this guy, Kiezer, 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 250. 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. And just creating one big mega behemoth. Cause then he could fight whoever was going to sue them because now they owned all the traffic.

• 10:07Shaan Puri?

  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. And it was started as a, a VHS tape exchange for like swinger couples, right? Like the most like fringe of the fringe thing. But this kid is a Stanford MBA student, buys it, his mom helps him raise the money. And they do a, they do like a leveraged 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, you know, really sketchy gray area things. But it's like Stanford MBAs are buying this stuff. So anyways, fast forward to 2009, they've scaled it to 250 employees. They're making millions and millions of dollars, right?

• 10:51Shaan Puri?

  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 going to come for you. And so, uh, they start seeing some bad stuff, right? The government seizes $9 million 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 24/7, they're followed by, you know, black tinted SUVs. The Kiezer 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 institutional investors can't really buy this type of asset. And now it's big.

• 11:32Sam Parr?

  How big?

• 11:33Shaan Puri?

  Like, it was worth over $100 million. So they sell it to that guy you were referring to. This guy Fabian Tillman. Hundred, so 140 million is what they sold it to him for.

• 11:42Sam Parr?

  Well, what was, what was his background?

• 11:43Shaan Puri?

  Fabian's background was, I think he had also, he was already in this space. So what he did was, this guy was like a programming genius. 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, just that statistics, sorry. So he's just a nerd. He loves the internet. So he creates a site that tracks successful internet companies, which, which ones are growing the fastest? However, you know, 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 him, he's like, what do you need? And they're like, well, you know, one of the hard things is we, we make money off of affiliates, but our affiliate tracking sucks.

• 12:27Shaan Puri?

  So he builds an affiliate tracking tool that becomes the number one most used 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, 20 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 140 million dollars. And then he just like grows it like crazy. So he, and I think, I think in like three to six months, he doubled the profits of the business. Because he's, this guy's just a better, better operator. He knew how to monetize better. And he also knew how to like, to, to solve the problems around the content licensing.

• 13:10Shaan Puri?

  So he spends a million dollars buying content licensing rights so that they don't get 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, and he tries to do other stuff too. He, 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 30, you know, he, he ends up 32 years old. This, you know, the company has 500 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 great power corrupts. And people puts a target on his back. People start coming after him.

• 13:54Sam Parr?

  And he's hard to find too, right? If you look for photos of this guy, Google, like you actually can't see that many pictures of him, right?

• 13:59Shaan Puri?

  Well, he did a couple of interviews at tech conferences later when they started to try to like branch out. So similar to how only fans has tried to branch out and hire like musicians, be like, hey, show behind the scenes content of your music process or whatever. They're trying to branch out. He tried to do the same.

• 14:13Sam Parr?

  Kind of hard when your name is Pornhub, though.

• 14:15Shaan Puri?

  Well, he created other websites, right? So he created separate websites altogether that he wanted to use the same team and cash to start. But crazy stuff is happening, right? So like, he, he's on one hand, he's figuring out how to monetize it way better. And he's like, oh, like, and 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 59 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 59 seconds is what we just found is the optimal time in order to like increase revenue.

• 14:55Shaan Puri?

  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 $362 million loan from 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 privates and it turns out he raised from 125 secret lenders. Their names have not been revealed, except for one group, their names have been revealed. It was a bunch of ex.

• 15:34Shaan Puri?

  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 going to be so lucrative that we have to just leave our jobs, quit our jobs, raise money and just lend it to this guy. And they've lent it at a 20% interest rate. And so even though he was growing and making all this money, he had huge like monthly commitments because he raises 360 million at 20% interest.

• 16:02Sam Parr?

  Yeah. So his, his, his debt payment or his interest payment is 80 or a hundred million dollars a year.

• 16:07Shaan Puri?

  60 million a year. Exactly. And, and they're, and they're also under attack. Like the CEO, he owns a 16 million dollar house. It gets burned down by arsonists and Bill Ackman comes into the fray. Do you want to know how Bill Ackman comes into this, into this story? So in the game of thrones, now Bill Ackman 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 teenage girl who's 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, and she's felt so bullied and whatever. He's got daughters. He's like, this is terrible. And so he's like, and so you know how right now he's on a crusade to take down Harvard, take down Business Insider?

• 16:53Shaan Puri?

  He goes on a crusade to take down Pornhub. And so he's, he tries to find it. 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. 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 Pornhub 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 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 about this. And the CEO of Visa is like, dude,

• 17:36Shaan Puri?

  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 texts him back, I'm on it. Like within five minutes, I'm on it. One day later, Visa cuts off Pornhub. So does Mastercard. So does, you know, so they, they lose their ability to actually process payments until they later, like, you know, had to change all their policies. They like now verify everybody with their license and shit like that in order to use the website.

• 18:01Sam Parr?

  And he's got this, 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 consoles 70 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 insider.

• 18:17Shaan Puri?

  Yeah.

• 18:18Sam Parr?

  Pornhub is, is, is who he's going after.

• 18:20Shaan Puri?

  Hell hath no fury like Bill Ackman scorned, right? Like, yeah, he is crazy. He goes after you. So the crazy part is, the story doesn't end there. So you, I thought, and you thought that Pornhub was owned by a company called MindGeek. And MindGeek is run by this guy Fabian Tillman. However, a few years ago, or sorry, three, three or four years into owning it, he's grown the company like crazy. However, he gets in trouble, trouble for tax, tax fraud, or tax, like evasion or something like that.

• 18:48Sam Parr?

  He, and he's in Germany.

• 18:50Shaan Puri?

  I don't know all the details around the tax thing, but I know that he gets in trouble on taxes. He's forced to sell on a fire sale. He sells it for $77 million.

• 18:58Sam Parr?

  Oh, wow.

• 18:59Shaan Puri?

  So the value has gone down somehow. The sixth most trafficked website in America sells for $77 million. That's how much Morning Brew sold for. Like, come on, dude.

• 19:10Sam Parr?

  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 SimilarWeb, Pornhub gets 2 billion visits a month, average visit duration, 10 minutes, which is a lot, and 10 pages per visit. So they just get a ton of traffic. So it's just huge.

• 19:26Shaan Puri?

  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 140 million? What are they doing now?

• 19:34Sam Parr?

  I'm, I'm curious about them and I'm curious about who, who bought Pornhub for $77 million.

• 19:40Shaan Puri?

  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.

• 19:46Sam Parr?

  Let's, I'm gonna go both, but I'm gonna go with the original for, for now.

• 19:50Shaan Puri?

  So if you go look at their LinkedIn's now, which I did.

• 19:52Sam Parr?

  What's their name?

• 19:54Shaan Puri?

  So one guy's name, I mean, so one is Stefan Manos. Another one is Usam Youssef. And then there's the guy Kizer. All of them, if you go to their LinkedIn's now, there is a no mention of of any of this. They're like, yeah, we it's all about their philanthropy. It's whatever. But here's the interesting thing. So the guy Youssef, he sells and he's like, OK, 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.

• 20:39Shaan Puri?

  He's like, you know what? I'm going to go into value investing. And he creates a Berkshire Hathaway for internet companies called Valsif. And Valsif is basically like Constellation Software. They're just buying up profitable, cash flowing internet companies.

• 20:55Sam Parr?

  Dude, and they're killing it. They're killing it.

• 20:57Shaan Puri?

  They're now they're now it's a billion dollar company now. They have over 100 million in EBITDA every year. Just from they've acquired like whatever 50 companies or so. They have like 500 million in revenues and then they have like 20 to 30% net profit margins. And just listen to the guy. So they create this thing called the Valsif Group. And they're like, all right, we're going to, you know, first they start buying up like other content websites because 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 this private private software companies is even better. He goes, it's 10 times better because there's only there's like 30,000 of these companies

• 21:42Shaan Puri?

  and there's no competition to buy them.

• 21:44Sam Parr?

  What year? What year is this?

• 21:46Shaan Puri?

  2016. And so he he starts copying their playbook. And he's like, look, this market is opaque. It's inefficient. I think you could deploy a high rate of capital. And get economics similar to what, you know, the moguls of the previous times where he so he's like Murdoch, you know, he rolled up cable and newspapers back in the 50s and 60s. He's like, that's what I think I'm going to be able to do with these, you know, profitable software companies.

• 22:11Sam Parr?

  Example of the companies are Nevitar, 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's been around, this is called Mal Mac Practice. Since 2004, it started in Lincoln, Nebraska, it's created best-in-class software for chiropractors.

• 22:30Shaan Puri?

  Exactly. So the first company they bought, 2016, 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 20 to 25 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.

• 22:48Sam Parr?

  I think the average-sized Constellation software business is $3 million in revenue, isn't it?

• 22:52Shaan Puri?

  Exactly, exactly. And so, uh, I don't know if it's revenue or EBITDA, but it's small. They're not like, it's not huge PE deals. It's the same thing. These guys are looking for companies that are five to 10 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. And he's like, uh, he goes, right now, my problem is I'm trying to decide between a great opportunity and a good opportunity. Which is just a great.

• 23:22Sam Parr?

  This guy's great. Did he partner? And I think he partnered with some of the other, the other founders, right?

• 23:27Shaan Puri?

  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 man has one. Because I don't know what the Kizer guy does now.

• 23:34Sam Parr?

  They don't even mention Pornhub on, so if you go to vowsoft.com, our history, like that, that words that I even mentioned anywhere.

• 23:42Shaan Puri?

  Yeah, there's parts of my history I don't mention either, right? Like, we all, we get it.

• 23:47Shaan Puri?

  These guys are planning to go IPO, 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 the two executives, uh, bought it out. But that didn't smell quite right. Where do these, where do these employees get $77 million 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 Bernhard Bergemere.

• 24:29Shaan Puri?

  And he's an Austrian businessman, which is just already sounds fucking like sick. And he's, uh, so now he owns the majority of this. He owns the majority of this. He worked in kind of like finance for a long time, Goldman Sachs. He worked at Hong Kong and London and blah, blah, blah. He bought RedTube in 2013. He sold it to MindGeek originally. And then now he bought the whole company back. And so he is the principal owner of 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, Pornhub makes almost no profit. And they're like, geez, 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 $2

• 25:13Shaan Puri?

  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'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 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.

• 25:46Shaan Puri?

  Do you want to know how many companies they own? One. This is the, 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 private equity. And so these guys are now the owners of this thing. And who knows where it'll go next? First of all,

• 26:08Sam Parr?

  Great story. That was a great story. I was enthralled the whole time. Second, look up this guy Bernard. It's he has a really weird spelling. There is only one photo of him that I could find and he's smoking a cig.

• 26:22Shaan Puri?

  Badass photo.

• 26:23Sam Parr?

  Yeah, he's just smoking a cig. He looks like, like if you told me that he was part of the mob, I'd believe it.

• 26:28Shaan Puri?

  He looks like either a mob guy or like a soccer, like, you know, the Manchester United coach after a loss. It's like one of the two.

• 26:36Sam Parr?

  Yeah, he just, he just, just rip it a cig in this, in this photo and he worked at Goldman. So he's also an acquisitions guy. Like he's a dealmaker. 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 kind of 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 in be, try to be objective about certain stuff. Like, you know, when you're talking about

• 27:18Sam Parr?

  at a shepherd or one of your companies and you're like, hey, this skew 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 Pornhub or MindGeek when they're like talking about like, oh, this category is doing well. Let's explore that one a little bit further. Do you know what I mean?

• 27:35Shaan Puri?

  They do, right? 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 because I felt this even when we were at Twitch and Twitch is a lot more reputable than this, obviously. But at 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 going to end and I'm like, This is like 21 year olds playing video games in their bedroom. Like who cares?

• 28:16Shaan Puri?

  Like none, none of this matters. And like you would 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 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 you come up with all these terms for community and content and whatever. And nobody, uh, I feel like nobody looks at the fact that we're all just making hot dogs anymore. You lose sense of it.

• 28:49Sam Parr?

  I, 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 amazing 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 to 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. And then reality, you're doing it just to get people addicted more to posting and sharing stuff.

• 29:34Sam Parr?

  Yeah, you know, that's all right.

• 29:35Shaan Puri?

  It happens. When we were at Camp MFM and we're talking to Mr. Beast's team and he's giving us a tour of the facilities and our group is like billionaires and philanthropists 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 increased brightness and saturation by 14% and look at how many thumbnail tests we did. 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 going to drive into this hole or is it going to 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. That's

• 30:16Shaan Puri?

  oh, you're locking yourself in a room for seven days? Like I actually know an idiot named Jake who did that without YouTube. 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 that's what happens at all these companies, dude.

• 30:34Sam Parr?

  It is still cool. Like, like, I remember Elon Musk, Elon Musk gave this talk and he's like, you know, you're doing, someone was like, you're doing all these amazing things. You're sending people to Mars, you're building cars, saving the planet, 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 discount this stuff. But it is fun to put perspective on this and be like,

• 30:53Shaan Puri?

  I think you just can't take yourself too seriously, right? It's cool to do, do, do your best. It's cool to try to win a game. How many people are going to watch the Super Bowl next Sunday? And it's, you know, a bunch of guys chasing around a ball than the arbitrary set of rules, right? Like, if you, 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.

• 31:15Sam Parr?

  I've met three guys who run porn sites. Some are popular, some aren't popular. One of them is very popular.

• 31:21Shaan Puri?

  Dude, imagine running a not popular porn site.

• 31:27Shaan Puri?

  All of the downside, but none of the upside.

• 31:30Sam Parr?

  You love that joke that you just made.

• 31:32Shaan Puri?

  Whoever is your friend who's running the unpopular porn site, imagine how bad you have to be at execution. If you can't sell movies, you can't sell anything, dude.

• 31:45Sam Parr?

  Like, this guy launched one and then like, within three or four days, it was doing like 80 or 100,000 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 part of that line. 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 going to say this bigger number. And so all I'm just trying to, I'm just looking at that spreadsheet, I, that just, and trying 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?

• 32:30Shaan Puri?

  Yeah, yeah, exactly. Yeah, you once you get in, you start operating. And by the way, I remember reading once. 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 and without Max, you know, there is no PayPal, which could probably say for a couple of people, but specifically, anybody at PayPal will tell you that Max's technical brilliance in fighting the fraudsters.

• 32:54Sam Parr?

  Fraud, yeah.

• 32:55Shaan Puri?

  Kept PayPal alive when any other money transmitting service just died because the fraudsters just 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. His next act was a company called Slide and Slide basically made like virtual pets for MySpace. It was like, what? It's like, yeah, you know, like on your MySpace profile, your Facebook profile, we're going to make little apps like so you can, you know, engage with your friends and interact, like interact how it's like,

• 33:36Shaan Puri?

  well, we just invented this app called bitch slap where you could bitch slap any one person a day on your, on Facebook. It's like, what? Yeah, but only one. And so they were.

• 33:44Sam Parr?

  But then it got even lamer, didn't it? It like became an ad tech company.

• 33:47Shaan Puri?

  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 they were like, Max, what'd you learn from Slide?

• 34:07Sam Parr?

  Small for him. It was still a multi hundred million dollar exit.

• 34:11Shaan Puri?

  But I think they had raised a lot of money. So I don't think anybody really made too much. So I, I'll never forget this. I read this quote and I realized, oh shit, this describes my life. And so I've read this like 15 years ago, I've still never forgot it. They go, what did you learn from Slide? And he said, what I, he goes, I realized you gotta be really careful what you, what projects you pick. Because anything can be optimized to infinity.

• 34:36Shaan Puri?

  And he was 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.

• 35:06Sam Parr?

  He became like the best pogo stick player in the world.

• 35:08Shaan Puri?

  Yeah, like, and I've felt this many times in my life and 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 a successful business. Should it? Like with my e-comm 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 I do have that like kind of existential crisis, you know, every few years, just think about this quote.

• 35:39Sam Parr?

  Let me be your therapist for a minute, as well as anyone else is in the 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 have got good health insurance, 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, an item of clothing that you can give to someone or that makes you feel good about yourself, or a game just to play time. I mean, we just have a podcast that you could say, oh, we inspire people. Sometimes we just jerk around and it's just funny.

• 36:24Sam Parr?

  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 could 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 them. Or it could be, I just have created a future for my daughter, you know what I mean? Like, so I don't think that your product necessarily has to be the thing you're selling, but the thing you're building.

• 36:55Shaan Puri?

  I mean, okay, I feel better. Thank you. That was good. I feel better now. I'm creating jobs out here, dude.

• 37:01Sam Parr?

  No, that is the truth, or like, you know what I mean? Or you're providing for your family.

• 37:05Shaan Puri?

  I'm running for office with the number of jobs I've created. This is great.

• 37:08Sam Parr?

  Yeah, we have created literally half a dozen jobs this last quarter.

• 37:13Shaan Puri?

  I might have to become the governor of the Philippines because I've created all my jobs in the Philippines, but that's all right. Can I just show you one thing off this list, though? Because I had this list pulled up of the internet sites. Dude, look at this list. Just 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 20 most popular, most visited, most used websites in the United States.

• 37:40Sam Parr?

  Well, the first thing, but this is not what you're referring to. DuckDuckGo is number seven?

• 37:44Shaan Puri?

  That's what I'm referring to, dude.

• 37:46Sam Parr?

  Is that what you're referring to?

• 37:47Shaan Puri?

  DuckDuckGo? What is, it's more popular than Yahoo and Wikipedia and Twitter.

• 37:51Sam Parr?

  So here's the background on DuckDuckGo. So DuckDuckGo was started probably 20 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 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 Mayer, 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 50 episodes. We're like, this is so cool, because what they used to do is duckduckgo.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 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.

• 38:36Shaan Puri?

  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 searched for, but nothing to do with you as a person. So they're not 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 we're tracking info on.

• 39:00Sam Parr?

  And we talked about these guys a while ago because 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 is 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 started in 2008, by the way.

• 39:23Shaan Puri?

  I am blown away by this. I might have to go read that damn book then.

• 39:26Sam Parr?

  Which book?

• 39:27Shaan Puri?

  Traction. This is real traction. Okay, I'm in. I believe you. This is crazy.

• 39:35Sam Parr?

  Yeah, it is pretty wild. And I've been, I've been interested in DuckDuckGo, but I never fully got behind it because I was like, this is just an inferior Google. But this is amazing. So they'd 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 $100 million in funding, or maybe 200 million, but it was over 100 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, 100,000, but like if you fired everyone but 50 or 100 or 200 people, it

• 40:18Sam Parr?

  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 DuckDuckGo is so such a good business. But this is amazing that they're, what is it, number seven? Number seven most popular website?

• 40:31Shaan Puri?

  10 years, they went from 0.01% market share to now 0.63.

• 40:39Sam Parr?

  Is that insane?

• 40:40Shaan Puri?

  They're still tiny, according to their own, you know, measurement of market share, which I don't know exactly how they measure that because if you look at the, you know, Alexa rankings or the SEM rankings, they're getting 10 times less traffic than Google or a little bit less than 10. But they're saying they're only 0.6% of search. So I don't know.

• 41:02Sam Parr?

  They had 100 billion searches in Q3 of 2022.

• 41:07Shaan Puri?

  I'm gonna go on the street and I'm gonna ask 100 people, do you use DuckDuckGo? I need to know what's going on here. This is crazy.

• 41:12Sam Parr?

  I think we should, I'm not gonna go through my other topics. I think that this, you did a wonderful job. You had me enthralled the whole time. What's the title of this one gonna be like?

• 41:21Shaan Puri?

  Sean talks for 94 minutes straight.

• 41:24Sam Parr?

  That's what it felt like. 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.

• 41:34Sam Parr?

  All right, that's the pod.