Saying recession, government regulation, and accelerated pressure from credit card companies especially have "combined to make the adult industry a more challenging place to do business," Cybernet Ventures is backing away from third party billing and keeping Adult Check doing what it does best - age verification and adult Webmaster affiliate programs.
Cybernet is selling standalone Electronic Gateway Services (also known as AC Pay or EGS pay), while Adult Check will do its own in-house payment processing, according to Umbreit. Adult Check also plans to phase out current versions of AC Free and Gay Mega Sites programs "to focus on our core products," like Adult Check, AC Movie Pass, AC Prime, and AC Sex Toys, said president Tim Umbreit to AVN Online July 26.
Umbreit said he couldn't name the EGS buyer until both Cybernet and buyer had issued a joint formal announcement, as the two companies had agreed to do. But he did say the prime reason for the sale was the credit card associations, far enough above general economic woes and government regulation.
"It's been 97 percent credit card association pressure," said Umbreit. "It's getting harder and harder to manage merchant accounts in a third-party billing model. The regulations are onerous, and banks are reluctant to take on the added work and, presumably, the liability."
AC Pay "was designed and rolled out to provide a separate and additional model for pay sites, separate and apart from what Adult Check does," said Umbreit. "So we added a product to service a need that we saw in the industry, separate from the model known as AVS. It was working extremely well, but the credit card associations pressure really forced a decision that a company that does that, and that's their primary focus, is better equipped to provide that service on a long term basis."
He said the pressure accelerated especially in June. "And we've been working pretty hard to bring everything into compliance," he said. "Our target has been moved several times by the banks and card associations. And as time progressed, we felt that it would be best if we transitioned out of (third-party billing)."
AC Free wasn't designed as a stand-alone project, Umbreit said, but neither did it prove as effective as it was first seen to be. "It's an adjunct, or an add-on, and it provided free content, and the original idea was to drive consumers who are interested in free into a pay model for the benefit of the system," he said. "And we're phasing that out and refocusing on more direct pay traffic."
Gay Mega Sites, however, provoked a different kind of problem for Adult Check, Umbreit said - Adult Check itself realized it wasn't serving that program's target market as well as it could be served. And they turned to some very experienced and well-marinated help from the gay adult community for the revamp, South Beach Media Group Webmaster/technician Bryan Thomason, who took a leave from SBM to take on the Gay Mega Sites project.
"I'm going to be candid, Gay Mega Sites is a product that we did not do well, and I hate to say that but the fact of the matter is I don't think we did it well," Umbreit said. "It is a good market, a market that deserves the highest quality of service, a market that deserves and demands the best content and the best possible service that we're going to do. But the Gay Mega Sites model does not fulfill what we feel are the demands of the market, so we will change it to meet the market demand and provide the kind of product that our target consumers want and deserve."
Thomason said it could be at least "a couple of months to do it right," though it could happen sooner or slightly later. But he also said he couldn't determine right away what the main focus of the revamp would be.
"I've only been here a week, so I'm still evaluating what's going on," he said. "Certainly, it's a market we're familiar with at South Beach Media Group, since we run the largest gay links list on the Net." Thomason added that he would be able to bring other South Beach Media people in to help on the Gay Mega Sites revamp whenever he needs to do so.
AC Free will buy no more e-mail addresses from clients as of August 1, Umbreit said, with any credit accruing through that date paid out on AC's regular payment schedule. "Existing AC Free sites will remain online, allowing clients to continue to receive upsells from existing members," he said. And the GMS links list will come down August 15, while vendors retaining existing re-bills will continue receiving payment.
"We are drilling down and focusing in on core products, what makes the Webmasters money, what makes this industry move, make it an effective and a viable industry," he said. "To accomplish that, we've taken some bold steps, and we're going to make what we have bigger and better, and I think the industry is going to be a better industry for it. And I think our Webmasters are going to be more successful."
