While not exactly a household name, his (former) porn empire has practically penetrated every household around the world
For someone who built an empire as “the ruler in the realms of lust,” founder and (former) CEO of Youporn and Pornhub Fabian Thylmann is notoriously private. He rarely gives interviews and despite being the most influential figure in the online adult entertainment industry, he is largely unknown outside of porn. Or at least he was until he was indicted (and convicted) on tax evasion in the early 2010s. While he continues to be a controversial figure inside and outside the industry, there is also no denying the impact he has had on the internet—both in and beyond the porn industry. We had a chance to sit down with the former “King of Porn” and talked about his former business, how sheer carelessness brought about his fall and how a money-hungry hedge fund (and not the mafia) fueled his rise to the top.
When you speak to Fabian Thylmann, a controversial figure within porn, both hailed as a genius for making porn free and lambasted as a destroyer of the adult industry for… making porn free; regarded in Germany as one of the country’s first successful digital entrepreneurs, while also convicted of tax evasion in the same and someone who’s business activities have irked Christians and Parmesan cheesemakers alike, there are plenty of things to talk about. Not atop that list when sitting down with the former “King of Porn” is, oddly enough, porn. Instead, the thing people are most curious to find out from former coder turned kingpin turned convict Fabian Thylmann is how he got his hands on USD 362m from Wall Street.
Rumors of mafia involvement in funding the spree
Originally from Aachen, Germany, Thylmann was 32 at the time he hit up Wall Street looking for an injection of cash for his newly acquired company Manwin. His initial goal was funding in the range of USD 100m. After more than tripling that figure to, you guessed it, USD 362m, he went on a porno shopping spree, gobbling up any and every high-traffic “Tube” site, amateur porn platform and adult portals—no matter how nichey or fetishy. The end result was a company with 1200 employees, 55 million unique visitors a day and a complete overhaul to the porn industry.
But since that influx of capital, he’s been dogged by speculation that the mafia funded the shopping spree, and thus his subsequent porn empire. However, in the German-language OMR Podcast with Philipp Westermeyer, Thylmann had a very boring, see plausible, explanation for OMR CEO Westermeyer: “It’s standard practice in the industry to agree to very strict non-disclosure agreements, because most investors are loathe to speak about their investments. That uncertainty lends itself to a litany of rumors, including involvement of the mafia and the like,” Thylmann said in the OMR Podcast.
While he declined to divulge any investor names to Philipp, he did provide additional context to the genesis of the deal. “Initially, I sought out the advice of an international law practice, who informed me that running a company across several countries, I could run into tax trouble. These lawyers advised me due to my financials at the time to seek out a loan or run the risk of going bankrupt.”
“They then began searching for suitable banks and other investors. After three years of searching, they finally found a hedge fund, who was very interested in the loan,” says Thylmann, “because the returns would be exceptional, provided that the KPIs remained in place. That’s why they ended up funding the project.”
Dream scenario for every hedge fund manager
As Thylmann approached Wall Street bankers for funding, he quickly realized that they were thinking bigger. Much bigger. “They approached us and asked us to play around with the numbers a bit and see how big we could scale it. They were eager to see how large I could conceive it, what I would buy and how much I would spend. That’s how that ridiculously high figure came about,” recalls Thylmann.
Before the deal, Thylmann’s company consisted of a hodgepodge of amateur and niche sites. Once he secured the line of credit in April 2011, however, Thylmann took the USD 362m and went on a global shopping tour with the goal of expanding Canadian company Mansef, which he purchased the year before and promptly renamed it Manwin. His acquisitions included video-sharing site Youporn as well as the online and TV products from Playboy. Coming on the heels of those moves were the acquisitions of additional sites and content catalogues.
Downfall and exit
Most were completely unaware of the rapid rise of Thylmann and his Manwin empire. At least, until an investigation by German daily Die Welt raised serious questions about how the company was set up and laid out an array of questionable constructs with regard to tax purposes were discovered.
Formal investigations into Thylmann’s practices were initiated in 2012, when he was extradited from Belgium to Germany, where he spent 20 days behind bars and was given a suspended sentence in 2016 for tax evasion. Thylmann, though, appears to hold no grudges and understands why they convicted him. “Tax code in Europe and around the world is incredibly complex. I ran a bigger company and totally get why I was targeted. Initially, I invested a lot of my own money and looked the other way too often when it came to tax issues. And that’s my fault and something I own up to,” admits Thylmann.
Shortly after proceedings were brought against him, Thylmann sold his shares in Manwin in 2013, as part of a management buyout; the company still exists to this day under the name Mindgeek.
First forays into the porn industry
Thylmann’s career in porn came early. When he was 17, he coded stat tools for websites. In order to properly use these, however, he needed access to websites that had heavy traffic. In the early 90s—just like today—that meant sex. “When you’re 17, you’re already interested in porn, which makes it pretty easy to get into the scene if you meet the right people,” says Thylmann.
These “right people” ended up being his first clients in pornography. He gradually learns the ins and outs of the industry and sees just how inefficient many of the digital aspects are set up. “It’s impossible for me to let things go when I see that they’re being done incorrectly. That’s just the worst for me,” says Thylmann.
Instead of remaining idle, he eventually snatched up some amateur porn platforms and began optimizing them. “It’s not my style to sit down and create something entirely new and build up a platform. I don’t have the patience,” says Thylmann. With the exception of a couple of niche sites Thylmann founded to round out the portfolio, Manwin primarily rode a slew of M&A deals to the peak of the adult entertainment content online.
The key to Manwin’s success lay in linking affiliate models with paid sites—something Thylmann laid out in detail in the OMR Podcast. “We pretty much invented every kind of online advertising—pop-unders, pop-overs, blind-links that redirected away from free content to paysites and so on and so forth. All that nonsense came from us,” says Thylmann.
In order to convert a sufficient number of free site users into paying subscribers, Thylmann says that they employed a wide range of trial models and experimented with limited content. “We tested repeatedly and further developed a great deal as well,” says Thylmann, who before his time at the helm of Manwin was involved in affiliate tracking in addition to working as a website statistician. Today, Thylmann frequently comes across models combining free and paid content he helped develop at Manwin, like paywalls on websites for legitimate news outlets.
The porn amateur goes pro
Despite the fact that for all intents and purposes, Thylmann has vacated the adult industry, he still has a soft spot for his former sector. One development that he’s keeping his eye on is the impact the increasing presence of amateurs in porn has on the industry, “because when you look at marketing on social media, you have scores of marketing people who want to do the marketing for you because they can make money off of it. And you simply have 2000 or 3000 amateurs who are constantly active on social media in one form or another to get people on these amateur platforms,” says Thylmann.
Since his exit, Thylmann has been keeping busy as a club owner in Cologne and an angel investor for numerous startups, including cannabis startup Cannamedical. “After getting out, I spent a long time travelling before I decided to invest in things I enjoy, like clubs and restaurants, and in things where I can add valuable input. I got into cannabis, not because I am a huge cannabis aficionado, but because the business model in cannabis is similar to porn in that it takes place in a legal grey area and many are not as willing to openly invest in such enterprises.” The other primary factor for his weed endeavors: location. “Cannabis is huge business in Canada and from my time in Canada with Manwin, I have an extensive network of connections.”