The operating cost of adult and gambling startups

Stigma is a tax on every operational decision

If you are planning to create an online casino or a copy of OnlyFans, you most likely want to get in quickly, make money fast, and get out. You are unlikely to stick with it for 10 years. Just as many criminals hope to pull off one last heist, earn a living, and never do it again. The idea of one last job sounds heroically romantic.

Working on an 18+ project feels like being a rock star. You work with 18+ content, see the audience, see the performers, and get access to what feels like something secret. Some see it as excitement, risk, drama, and a feeling of being alive. And then it turns out that stigma is built into almost every operational decision: hiring, advertising, payments, investments, social circle, and reputation. Stigma is the price you pay for permission to exist.

You may have a cool product in the field of sports betting, casinos, or lotteries. But almost all social networks and search engines won’t let you advertise without a license from the required jurisdiction. Finding investment for such projects is far harder than for conventional niches. Do you want to build an AI-powered 18+ video generator? When posting job openings, you will always have to beat around the bush, without using direct language. And only then, when the candidate has already agreed to an interview or even after it, do you tell them what kind of content they will be working with every day.

Employees join such projects for various reasons. Some realize that the pay is better than in legitimate projects. Others come because they couldn’t find a job where they wanted to, or because they are simply interested in working on something forbidden. And then a good company saving the world will come along and offer them a job, and they’ll leave. Building a stable team from people with this kind of motivation is hard.

Payment providers, including Stripe, do not work with 18+ and gambling. You will have to look for others. A regular provider charges a regular commission but will not work with you, while another will want a commission 10 times higher and will agree, but may stop working with you at any time. These are often unreliable providers who are willing to work with risky categories. Or you will have to give up payment providers altogether, accept only cryptocurrency, and set up the processing yourself, because even many crypto processors prohibit these categories. Your creatives won’t pass moderation on ad networks. Accounts will be blocked for advertising prohibited projects. You need constant account warming, proxies, anti-detect browsers, moderation bypasses, and cycling through accounts. All of this takes a lot of time and money. Venture investors refuse to fund such projects, so they are often financed with personal money or money from friends. There are few who want to hedge their portfolio or just dabble in this space because it gets their blood pumping too.

Formal rules and legal protection mechanisms, which are common in legitimate projects, do not work well here. Many companies in these areas are not registered at all. They operate through nominees, without an office, without official salaries, and without paying taxes. When the business itself is illegal, the courts and police no longer seem like a natural means of protection. So competitors resort to spam, DDoS attacks, data leaks, hacking, fake reviews, and reputation damage. If your company also operates unofficially and your competitors want to eliminate you, they will not be able to do so officially and will look for other ways. And they may find them.

This kind of business can’t make you proud if you’re not in an environment that appreciates it. If all your friends go to church on Sundays or your wife is an elementary school teacher, they’re not likely to approve of a webcam studio business. Your other half will feel uncomfortable talking about what you do. She won’t talk about it with her friends or at work parties. This will constantly weigh on you, even if you don’t notice it at first. Your religion or the religion of those around you may also disapprove. Life is not what happens to you, but what you are able to talk about. But if the product becomes successful, how will you talk about it to your friends? If you built the best casino site, it feels like you are participating in the decay of society and are proud of it.

Or you have a traffic arbitrage project: you buy traffic on Google and use cloaking to direct it to casino sites via referral links. You find an excuse: if it weren’t for you, someone else would be doing it. You’re not stealing money from a card, you’re just connecting a Google search to a casino site, and then the person loses tens of thousands of dollars themselves. You don’t force the person to make a deposit, you don’t take money from their card, you don’t gamble their money away. It’s like you’re not to blame. People gamble at casinos, but society shifts the blame onto those who build a business on it. When a person tries to find excuses for their actions, it means they feel uncomfortable but keep going. In niches without stigma, such rationalizations are unnecessary.

Success in a stigmatized niche rarely translates into reputation beyond it. You’ve built a product with a million users, but you can’t always add this project to LinkedIn without damaging your reputation. You spent 5 years, achieved significant revenue, somehow assembled a team and pay them well above market rates so that people don’t leave for a more legitimate project, made contacts in related projects, analyzed your competitors, and know this market well. And the better you made the product, the more you are tied to a niche that is difficult to leave.