Since an overview of billing in the online adult space could fill a novel, this article will focus on what arguably is the single most important element in the history of billing in this space: third-party processing. Most of us have accounts with one third-party processor or another. It is an important part of our space, and, in some cases, it has a checkered past.
Many consider billing a necessary evil and a distraction from business and wish it were somehow simpler. The following is my take on why that is, how we got here and what is coming next.
Our industry has profited and suffered from the volume it produces. We have led the world in many areas of the online space that most take for granted, including content delivery, affiliate marketing, digital rights management, search-engine marketing and billing, the backbone of all of this.
Webmasters have a lot to do, and it is difficult to become an expert in online merchant processing if that is not your forte. This is why third-party processing is so important. Our industry needed a place to safely process high-risk 5967 transactions, and Visa liked the idea that they could control all of that with three processors. The industry was forced to reach what initially seemed to be an impossibly high standard of a 1 percent chargeback rate for Visa. By developing the proper techniques and filters to reach that goal, our industry has muscled forward. Epoch is a great example of that, having been around for many years and battled ceaselessly to remain above water.
Processors can fail, however, and there is a history of that in this space.
When GloBill went down, it happened at record speed and merchants were asked to send request letters to an address in the Caribbean, and they sometimes heard back. On the other hand, iBill went out of business slowly and gracelessly - and then with a sudden rush - and it almost seemed as if the problems defined the company. PayPal left the adult space because it was acquired by eBay, which, as a public company, would not tolerate adult transactions. When DMR went down, it gave rise to CCBill, which now is largest adult third-party processor.
Several other billers proposing to save the industry came and went, along with their grand ideas, trade-show promotions and T-shirts. It proved that a company cannot just enter this space as a biller without already having many years of experience processing for webmasters.
For me, American Express leaving the space was the first real indication that we had to go along to get along, since the ability to process transactions is paramount to every aspect of the adult industry. Far from a necessary evil, it simply was necessary.
We learned many things from these failures.
First of all, we learned that you cannot "game" Visa. Visa is a gigantic brand, and the adult space is a very small percentage of its take. The company doesn't need to accept misuse or abuse of its product, and its means for dealing with that are powerful.
The second thing we learned is that you cannot simply jump into billing because you have a sponsor bank. The companies who have remained in the space do so because of their knowledge of processing and processing history. It takes time to understand this industry and all of its nuances. It also takes trial and error that a new company can't endure.
That said, Visa likes the third-party option for the adult industry because it provides an opportunity to monitor vast areas of the space through a few processors it knows are doing the right things. Visa keeps its eyes on things. If you need any proof, look at Visa's recent events involving DHD Media. Long a merchant services biller concentrating on unique fraud-scrubbing abilities, customer service and building unique solutions for its clients, DHD Media was approached by Visa, which asked the company to become a third-party processor, joining CCBill and Epoch as the third in the U.S.
I believe the future of billing is bright. Again, we have three third-party processors, each with 10 years of experience billing in this space. Each company has its strengths and weaknesses and will be around for years to come. I believe there is a happy ending for merchants in this space.
Johnny V is the president of I-Bridge International and handles business development for DHD Media's IPSP service.
This article initially appeared in the June 2008 edition of AVN Online. to subscribe, visit AVNMediaNetwork.com/subscriptions.
