If you're a U.S. or Canadian-based webmaster, so-called "alternative" billing applies to myriad payment options that aren't credit cards. However, it certainly doesn't apply to the rest of the world.
When talking alternative billing, one should also keep in mind that before the Web made them a dominant payment method, credit cards were also considered an alternative billing method.
"In the old days, when you had brick-and-mortar retail merchants and the credit card companies tried to get you to take credit cards, they always said if you accept credit cards, you'll get a lift in sales," says ElectraCash CEO Lee Falls. "That usually came across because the consumer had more purchasing power and spent more—whether it's $10 more or $100 more, merchants saw that as a truism. It's kind of ironic that credit cards used to be the alternative billing."
The lift in sales that brick-and-mortar merchants once got from credit cards is now occurring on the Web through things like ACH processing, SMS billing, Euro debit, prepaid cards, and a number of other billing methods.
Potentially, adding another payment method could translate into a 20 percent increase in profits. Geo-targeting your payment methods could bring even more benefits.
But because credit cards remain the king of the hill for the U.S. and Canadian porn-loving public, merchants based in this part of the world often ignore other methods and, therefore, other revenue streams. Credit cards alone are not enough.
"You want to add something that's not going to take away from credit cards because they are your most viable solution. You want to add payment methods that will expand global acceptance. Or, even if a credit card gets declined, you want to be able to bounce a credit card to a different payment method, so you can try to capitalize on that without losing a sale," says Netbilling's president Mitch Farber. "Anything you can add that's widely accepted, you're going to do well with it. Even if you're picking up 5 percent in sales, that can be a lot of money."
The upper tier
Farber, along with most of those who have tried numerous alternative billing options, will tell you that ACH processing, also commonly referred to as eChecks, and Euro debit solutions are the top moneymakers in the altbilling market.
ACH allows U.S., and in some cases Canadian, consumers to enter their checking account numbers to make a purchase, which is where the funds are withdrawn. This payment method takes longer to clear than a credit card transaction, but a 20 percent increase in profits is feasible, according to both Farber and Falls, whose companies both offer ACH.
"The drawback to ACH payments is that authentication of the account is not done in real time, which has prompted some programs to drop the payment type or to significantly change the affiliate commission structure as compared to Visa or MasterCard sales," says Epoch communications director Rand Pate, whose company also offers ACH.
Returns, which are largely due to insufficient funds, but do not affect chargeback ratios, range from 10 to 15 percent. Most still believe ACH is easy money.
"No question," Farber says, "especially for membership sites because if a check gets returned, you're only losing a little bandwidth."
Euro debit solutions are the most popular payment form for online transactions in Europe, where a large percentage of the population doesn't even own a credit card.
Essentially, Euro debit is pretty much what it sounds like—Europeans using pin-based debit cards to make purchases. The hottest markets are Germany, Spain, the Netherlands, Austria, and France, with the UK climbing steadily, according to Matthew "Chipmunk" Sclier, marketing manager of SEXMoney.com North America, whose program is multinational.
Epoch, for instance, offers the Switch and Solo direct debit solutions as payment methods. The cards have a combined 29 million users in the UK.
Since they process much the same way as a credit card, the drawbacks are … well, Epoch has yet to find any, viewing Switch and Solo much the same as Discover or American Express—another payment option.
For site owners, it's simply access to 29 million new potential clients.
"Websites now have marketing opportunities to millions of customers which may not have been previously accessible," Pate says.
Euro cash
A lot of online adult companies, it seems, don't pay much attention to the European market. On the other hand, you have companies like SexMoney.com, which has a clear strategy—the company's 200-plus sites are translated into 20 languages and all have country-specific billing options.
"The European market is a thriving market. There's a lot of money to be made if you can offer the right products to the European market and that includes the proper billing," Sclier says."If you can harness more traffic from more places, it's going to put you over the top. If a German surfer comes in —they may like your content more than somewhere else, but if they can't pay for it then you don't make any money."
For SexMoney, Europe is a three-fold approach: right language, right billing option, right content.
"A lot of people translate their sites, but that doesn't really help unless you can bill that user. It's kind of pointless to do one without the other," Sclier says.
Moreno Aguiari, who runs site-translating service TranslationsXXX.com, agrees.
"People don't understand that foreigners don't feel comfortable paying for something if they don't understand what they are paying for," he says. "You have a nice site, cool pics, [and the visitor thinks] 'I am horny, I want to join,' and it comes down to the point that the membership page is in English ..."
The third aspect, the right content, involves a bit of research and common sense.
"In Europe, they're not into the silicone tits and lips, so why would you target them with that?" Sclier asks. "It's hard to target and entire culture, but you know generally what a culture likes or dislikes. Spain, for instance, loves blonds. They're not so much into Spanish girls, but they love blonds."
All well and good, until you get to the marketing aspect, right? Well, don't forget that it's porn, and therefore more or less markets itself.
"It comes down to the fact that users are going to find you through the search engines. You're going to get that international traffic," Sclier says.
As an example, he points to one of his TGPs. Following the U.S., its second largest traffic stream comes from Germany, and that's strictly via search engines and trades.
"They're coming. Check your stats. You'd be very surprised at what traffic is coming," Sclier says.
The second tier
While ACH and Euro debit solutions are currently the top dogs in the alternative billing space, there are other viable options. Not long ago, the dialer was the king of this space. Stupidity ended that reign, but the ever-changing billing landscape allows for certain openings and niches in which other solutions can make a home for themselves.
After ACH and Euro debit, there are solutions ranging from prepaid, "buy now and pay later," and the vaunted SMS billing. Said solutions aren't as popular as ACH and debit because they come with questions.
Take prepaid cards for instance. Gamma Entertainment tried it several years ago and has since scrapped it, despite having a solid distribution deal.
Since not many programs have thus far embraced prepaid cards, the question the surfer usually asks is, what can I access with this thing? For the webmaster, the problem is no recurring billing. Beyond that, can the cards get in front of enough consumers to be recognized?
Greg Moss thinks he has the answer to those questions. Moss is pushing PPPCard.net as a way for the surfer to remain anonymous and a way for the webmaster to generate extra revenue. It's not a new strategy, but he seems to be making some inroads.
PPPCard is already integrated into the programs of PornDollar, GammaCash, and Banking Bucks, with promises of more to come. While the no-recurring feature isn't particularly in the site owner's best interest, it is a way to sell the card to the consumer. Make that trade and you don't have to worry about chargebacks.
One of the biggest things PPPCard has going is its distribution network.
"Nearly everyone in the past lacked the distribution experience and resources. More importantly, they also put the cards in the wrong retailers. Merchandising this product in the backs of video stores and adult shops will not work. This is not our customer. Our customer wants to remain anonymous," Moss says.
PPPCard has three master distributors that reach 400,000 retail outlets (convenience stores, liquor stores, etc.) across the U.S. Of those, Moss says 80,000 are prospects for the card.
On top of that, he's also planning mainstream advertising to build brand awareness.
"Branding and building general market awareness is assumed. The key to comfort is the convenience store. They are everywhere – on your way to work, the gym – it needs to be accessible outside of the customer's neighborhood where they are a John Doe," Moss says.
Time will tell if he's right, but he's definitely moving in the right direction.
As for buy-now-pay-later solutions, there are options like 123bill.com and Stephane Touboul's ChargeMeLater.com, which he created in the aftermath of the battle between the Federal Trade Commission and his company Alyon.
Solutions such as these allow consumers to create an account by submitting a valid address and social security number, which gives them instant access to a participating site and then sends them an invoice.
The big positive is that merchants can convert traffic declined by credit card and ACH. However, the merchant also receives a lower percentage of its site's membership fee than they would with other payment methods.
Finally, there's SMS billing, which seems to have become a buzzword recently. In Europe, where mobile phones with greater capabilities than those in the U.S. have been commonplace for the last five years, SMS billing is extremely popular. In the states, it's still something of a novelty.
Allen Ingram, the owner of M Squared Productions, has had an SMS presence in Europe for three years and bills via SMS through Opera Telecom. He's had so much success using SMS as a payment method that he's recently developed sites and branded them as solely payable via SMS.
Other than the fact that SMS hasn't made much of a dent in the U.S., the downside is clearly the payout. After the carrier takes its cut, the merchant is left with somewhere around 50 percent. If a distribution service or content provider is factored into the equation, that percentage drops even further.
In light of that, Ingram is developing a solution that cuts out the carrier entirely. The consumer registers at a sort of online call center, sending an SMS message via his or her mobile phone to the merchant that tells the merchant what the consumer wants and what he's paying. The merchant sends a pin to the consumer and the consumer is billed by what is essentially a wire push. After the solution provider takes its cut, the merchant gets back more than 50 percent of the sale price.
"It's a huge opportunity for the adult market, especially for large companies who are getting to the market now, to save a massive amount of money," Ingram says.
Dialers aren't dead … entirely.
Despite what you might have heard, dialers aren't dead. While they most certainly aren't the top alternative billing method anymore, in light of strict regulations placed on them around the world after scam artists found they could bill people who weren't actually online.
"The dialer was able to bill anonymously and was able to bill users who didn't have credit cards, but people abused them," Sclier says. "It's not the dialer itself, it's what people did with the dialer that's made it what it is today and it's really shunned."
But Sclier says SexMoney still does very well with dialers in the UK, where they remain a popular form of payment. Meanwhile, TopBucks still uses dialers as one of its alternative payment methods. It's not what it used to be, but it's still added revenue.
"Dialers are still viable as a way to get additional revenue, but I don't think they are featured like they used to be. Many companies used to feature dialers heavily on their sites and most now only offer it as an additional join option on their join pages," says Alison Vivas, TopBucks vice president of operations.
As many as possible
So you say you came to the game not because you love porn, but because you want to make boatloads of cash? Well, first of all, shame on you.
Secondly, it behooves merchants focused on the bottom line to look past credit cards to increase their revenues.
"It's very important to offer as many payment methods as possible if it's feasible to do it within a program," Farber says.
The downside really is minimal, maybe even nonexistent.
"There's no downside when you can bill a user. If you think about it, you're just going to lose the traffic," Sclier says.
