The trajectory of the modern internet economy did not begin in corporate boardrooms or tech hubs like Silicon Valley, but in the warehouses of Canada and the strip clubs of Toronto. A new examination of the adult entertainment industry reveals that the platforms which revolutionized how we consume media, track behavior, and generate online revenue were born out of the illicit and lucrative world of pornography. At the center of this shift is a figure who transitioned from spinning tracks at a strip club to becoming the public face of Xtube, the first major tube site targeted at gay men, and ultimately, the architect of an empire that would acquire its fiercest rivals.
Kurtis Potec’s journey serves as the primary lens through which this transformation is viewed. Before he was managing the day-to-day operations of a burgeoning online startup, Potec was working as a DJ at Caddy’s, a classic strip club in Toronto. By 2017, when Caddy’s closed, the landscape of Toronto’s nightlife had shifted dramatically; of the nearly fifty clubs that operated at the turn of the century, only twelve remained. The closure of Caddy’s was emblematic of a broader crisis in the physical adult entertainment sector, a crisis that Canadian activist and stripper Valerie Scott attributed directly to the rise of the internet. As Potec recounted, when anyone sought an escape from reality, they no longer needed to leave their homes—they simply had to turn to their phones. This shift rendered the physical strip club obsolete for many consumers, pushing the industry toward a more accessible, digital frontier.
Potec’s entry into the digital realm began with a serendipitous job application. Spotted a newspaper ad for a desk job at an online startup located not far from his workplace, he applied out of curiosity. The interview process itself was indicative of the raw, unregulated nature of the industry at the time. After briefly reviewing his curriculum vitae, the interviewer proceeded to recite a series of vulgar, sexual-related terms, checking to see if Potec was psychologically prepared for the world of online pornography. Potec later described the encounter as “one of the most unique interviews of my life,” noting that the lack of internet gatekeepers meant the company wanted to ensure he was ready for “the worst.” He secured the position at Xtube.
Xtube’s origins were humble and chaotic. The startup’s initial office was housed in a warehouse on the outskirts of the city, cluttered with boxes piled to the ceiling and wall-to-wall, leaving only a narrow, two-foot-wide passage for employees to navigate. Inside these towers were countless pornographic DVDs awaiting digitization, along with branded merchandise such as mouse pads and socks. The team consisted of three founders and their main financier, a Chinese man referred to internally only as “Mr. X.” There was also a video encoder who seemingly lived in the back room, working and chain-smoking in isolation. Despite its size, the company was ambitious. When one of the co-founders left due to escalating threats from porn producers angry about their films appearing on Xtube, Potec stepped in. He effectively took over the daily operations and became the public face of the company, even though he was technically still a junior employee. His image was plastered in the corners of the site for user complaints, while his associates remained anonymous.
By 2008, business at Xtube was thriving. The site was generating hundreds of thousands of dollars monthly through advertising. Traditional media outlets like television and magazines had long claimed the ability to target specific demographics, but the internet offered a precision that was unprecedented. Online platforms could drill deeper into user profiles, gathering intimate details about lives without ever asking a single question. Potec noted that users rarely resisted this level of surveillance, often not grasping its scale or distracted by the free content provided, such as pornography. However, the industry reaction was hostile. While users loved the site, industry professionals hated it. Potec’s days were spent fielding calls from studios threatening legal action. Despite the rhetoric, these threats were largely toothless; internet free-speech laws and the classification of Xtube as a user-generated platform meant the company bore little legal responsibility for the content uploaded by its users.
This legal ambiguity created a power vacuum. As studios watched their films being stolen, re-uploaded, and circulated freely by fans and, insiders alleged, by the tube sites themselves, their powerlessness became apparent. This dynamic attracted investor interest. User-generated platforms appeared legally untouchable and incredibly popular, making ad space on these sites highly desirable. Although Potec was instructed to fend off buyers, his persistence led to a breakthrough in 2008. A caller insisted on speaking about an acquisition, refusing to take no for an answer. When Potec asked the company owners what price would make them sell, the reply was a facetious thirty-five million Canadian dollars. Potec relayed the message to the buyer, who immediately agreed to send someone to finalize the deal the following week.
The buyer was Fabian Thylmann, a German entrepreneur in his early thirties who would come to dominate the adult industry. Thylmann was a self-described nerd who had developed one of the earliest pieces of software capable of tracking user clicks. This technology allowed website owners to earn commissions when a link redirected a visitor to make a purchase elsewhere. Thylmann’s ambition extended beyond simple affiliate marketing; he recognized that successful adult enterprises could do more than tap into existing demand. He aimed to bring pornography to users who had not actively sought it, utilizing pop-ups, ads, and search results to make adult content a ubiquitous part of the internet’s background noise. This strategy lowered the barrier to entry, allowing individuals who might never have visited a physical sex shop or erotic cinema to stumble upon porn with a single click.
Thylmann’s business model, known as affiliate marketing, relied on funneling attention. Long before influencers sold supplements or skincare, porn sites paid webmasters to drive clicks to their content, offering a cut for every paying visitor who arrived via tracked banner ads. This logic mirrored early thumbnail galleries and foreshadowed the affiliate programs that would later become foundational to giants like Amazon. Just as Amazon leveraged affiliate marketing to become the default place for online shopping, forcing manufacturers to be present on the platform, Thylmann understood that attracting and retaining a massive user base was key to profitability. This concept, known as the “network effect,” posits that a service becomes more powerful as more people use it. Tube sites like Xtube cultivated this critical mass, allowing them to dictate terms to struggling studios.
The relationship between tube sites and traditional studios grew adversarial. With free content flooding the web, studios attempted to upload clips to tube sites, hoping to lure viewers to pay for full films via affiliate links. Revenue from these conversions was typically split fifty-fifty. However, as noted by Potec, “We put a lot of studios out of business; they couldn’t afford to get traffic from us.” Tube sites learned to control user navigation, steering millions of potential customers toward paid sites or advertisers that the tubes themselves controlled or benefited from. This dynamic was not limited to pornography. News outlets soon found themselves relying on posting stories to platforms like Facebook, TikTok, and X, hoping to lure readers back to their own sites. Similar to porn, news became a product many expected for free, leading to a collapse in independent newspapers and a rise in conglomerates that profit from advertising and affiliate links.
Thylmann’s vision was expansive. He aimed to take over the adult industry entirely. As traditional studios buckled under the tube-site model, their vast libraries of content became cheap acquisitions. For Xtube, buying studios and their subscription platforms made strategic sense: it granted access to more content and allowed the company to funnel its massive traffic toward paid sites it now owned. Whether users paid for porn or consumed it for free, Thylmann’s empire profited. Renamed Manwin, the company expanded its reach. Thylmann’s most significant rival was located in nearby Montreal: Pornhub. Founded in 2007 by three Concordia University students—Matt Keezer, Steph Manos, and Sam Youssef—Pornhub operated alongside Mansef, which ran the influential production studio Brazzers. Publicly, Youssef positioned himself as a defender of the industry, railing against tube sites on forums, but internally, Pornhub and Mansef were part of the same entity.
The trajectory of these relationships shifted in 2010. In a 2023 interview regarding his most recent venture, Youssef stated that he and his co-founders decided to sell Pornhub to Thylmann for approximately $140 million. Youssef cited discomfort with the direction the company had taken as his motivation. He expressed surprise at his own presence in the sex industry, despite having built his fortune on sites like JuggFuckers and RacksAndBlacks. Attempts to contact Keezer and Manos for further commentary yielded sparse responses; Keezer noted he had no involvement in the “industry” beyond building the site with friends, while Manos did not respond. This detachment was characteristic of the internet entrepreneurs who profited from the adult sector. While the workers in the physical industry were forced to bare all, these digital architects preferred anonymity or distance. Thylmann’s acquisition of Pornhub solidified his control, transforming the fragmented adult industry into a consolidated digital empire that mirrored the structures of the broader internet economy.
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