We are witnessing an unprecedented shift in the digital landscape, driven by the incredibly rapid advancement of artificial intelligence. AI video generators, like the latest version three, are producing content that is becoming nearly impossible to distinguish from real videos. We predict that by this time next year, or maybe in two or three years, AI content creators will not only be more popular than human ones, but some could even reach ten million subscribers.
This technological tsunami is poised to hit certain industries particularly hard. We are talking about the website we often refer to as “Oaf” (OnlyFools), a site where, as we see it, people are paid to engage in self-deprecating acts. This site is doomed, and the owner has seemingly admitted it by reportedly trying desperately to sell it right now. He knows what we know: the people creating content on this site are likely to be replaced by AI, potentially by the end of next year, maybe even sooner.
According to Reuters, citing three sources familiar with the matter, Oaf’s parent company, Phoenix International, is in talks to sell the platform to a US-based investor group at a potential valuation of around $8 billion. Sources indicate the group might be led by Forest Road Company, an LA-based investment firm, which had previously explored taking Oaf public via SPAC in 2022. Talks have reportedly been ongoing since at least March, with a deal potentially being reached within the next week or two, although sources caution there’s no certainty of a deal.
While the Oaf website itself might retain some value due to the infrastructure required to handle payments for its specific type of product, we believe whoever buys it will likely start replacing the human “talent” with AI. Here’s why: AI models don’t require revenue splits. They are, effectively, slaves for the owner. Some are already suggesting that AI models are among the top earners on the platform.
The owner, Red Vinsky, who acquired Oaf in 2018, has paid himself handsomely from its success, reportedly raking in at least $1 billion in dividends since buying the company. Just last year, in 2023, he reportedly pulled in an eye-popping $472 million in dividends, with the company reportedly generating nearly $485 million in profits and operating with only 40 employees from 2021 to 2023. Oaf surged in popularity during lockdowns, allowing individuals to monetize subscribers. The company reported $6.6 billion in revenue in 2023, a massive leap from $375 million in 2020. Reuters noted that the company takes about a 20% cut of creator earnings.
Despite these massive profits, finding a buyer is proving tricky. We call it a “booming smutside struggling to find a buyer”. The fundamental nature of the business makes it “untouchable” for many big banks and investors due to due diligence potentially uncovering illegal content. This “filth factor” generally limits the price for such businesses to a relatively modest three to five times their EBITDA (Earnings Before Interest Taxes Depreciation and Amortization). A source familiar with the space pegs Oaf’s value significantly lower than the asking price, between $1.46 and $2.42 billion based on this metric. Other private equity firms are simply not interested, partly because they raise money from state pensions and other investors who are not allowed to invest in these types of companies. Media businesses also want to avoid the “taint”. We’ve seen this before with payment processors like Visa and Mastercard cutting off payments to similar sites due to claims of illegal content, highlighting the significant risk.
We believe the “horror economy” is completely bottoming out. While such content may always exist, we just don’t think human creators will be able to keep up with AI. AI is going to destroy this industry. The owner knows this business is going to collapse, and that’s why he wants out. No one wants to buy what he’s selling because they know it will all be replaced by AI. We anticipate a huge shift in this space. Ultimately, the individuals who have relied on this platform for income may need to get “real jobs” or learn to utilize AI in their own content to survive. We are personally happy to see this site potentially destroyed and these individuals lose money to computers. We think it’s great.
