XBIZ Survey: 25% Use or Plan to Use Bitcoin
The buzz surrounding bitcoin as an alternative payment option for adult website operators has reached a fever pitch, with points both pro and con fueling an in-depth discussion of the platform’s merits and risks. While many operators have had a chance to come to grips with the technology, the fast pace of its evolution means the talking points may change from day to day, driving the need for continued monitoring of the situation.
For a mid-2013 snapshot of how adult views bitcoin today, XBIZ set out to see if we could identify an industry-wide consensus of whether or not it’s “the next big thing.”
To establish a current baseline a recent XBIZ Research survey asked industry insiders, “Are you considering bitcoin as an alternative form of payment for your business?”
Nearly half (45 percent) said “No.”
Approximately 30 percent of respondents stated that they don’t know enough about it, while a quarter of those replying are currently offering bitcoin as a payment option or are planning to do so in the near future.
While there have been few if any historical examples of true consensus on any issue within the adult entertainment industry, given its all encompassing cultural diversity, we can turn to experienced porn company owners, frontline website operators and other adult industry stakeholders from the XBIZ.net business network for their opinions on the topic and a more in-depth analysis of what these current poll numbers may mean.
At best, this author equates bitcoin today to the original Napster — a revolutionary idea pushed by the unwashed in hopes of anarchy on the audio distribution front, but then squashed by the powers that be and replaced by iTunes — with its superior quality, easier access and close-to-free pricing. It will take a PayPal or other similar entity to provide a legal and legitimate iTunes equivalent of bitcoin.
At worst, the bitcoin ecosystem is plagued by rampant criminal activity at every level — but of course the same might be said of any currency system, online or off.
It is also important to note that bitcoin is only one aspect of the trend to data mining for profit and user monetization; so there are opportunities within opportunities and some severe challenges that threaten its longevity as a viable ecosystem, as well.
Other users have other viewpoints, covering a wide range of considerations.
“Wait five years and see if it still exists,” offers Barry from MB Entertainment, LLC. “Anybody who jumps on this big pile of BS right now is an idiot in my opinion.”
GameLink.com’s Jeff Dillon says that by and large the fundamental issue is that, “people who use bitcoin don’t pay for porn.”
“From what I hear it’s mainly a PR grab at this point,” Dillon told XBIZ. “But you can add a sale here or there from it.”
“Asian Money Machine” DWB told XBIZ that his company has been accepting bitcoin for more than a month on a new project and that while it is not without its hiccups it is seen as generating sales the company might not otherwise have had.
“The anarchist in me is very excited to see a currency not controlled by central banks or governments, but the realist and historian in me knows how competing currencies usually end, and that is getting shut down by governments,” DWB stated. “As much as supporters want to believe it is unable to be shut down, all that needs to happen is the bank accounts associated with the exchangers get seized or closed and it is game over.”
DWB notes that this is already starting to happen now on a small scale.
“If bank closures happen on a global scale, bitcoin is over,” DWB stated. “However, so long as there is a place to cash them out, it will exist.”
Summarizing, DWB sees bitcoin’s strength being that it is not regulated or controlled by central banks or governments, with its weakness being that it was created by a hacker who no one knows and that it is bucking central banks and governments.
“For adult, another weakness is no recurring billing,” DWB added. “It [allows] one time payments only.”
While that last point is significant for adult websites built on a recurring subscription payment model, it is not the only factor involved.
“I don’t think this will be the next big thing for adult unless they can make bitcoin as easy to use as PayPal, so that the masses can understand it without having to give it any thought,” DWB concluded. “When Joe Six-Pack can easily buy bitcoins and spend them as easily as he can make a PayPal purchase, [then it will be] game on.”
Kelli Roberts of Kelli Internet Services agrees with Dillon’s view that people who use bitcoin don’t pay for porn.
“Why put so much effort to attract someone that isn’t your target audience?” Roberts asks rhetorically. “It makes no sense.”
DWB countered this notion, saying that bitcoin users actually do pay for porn, just not in large numbers.
“However, I really don’t know if they really want to pay for porn or if they are just trying to support sites that support bitcoin. The jury is still out on that,” DWB explains. “We did have a few guys join and never login — so for those few I would say they just wanted to show their support.”
ATK Matt from ATKingdom.com says that he both mines and owns bitcoins.
“The only thing I do with them is exchange them for U.S. dollars on one of the bitcoin exchanges with the hoarders,” Matt told XBIZ. “I think they are a novelty and will go away eventually.”
Matt sees bitcoin’s nature as a non-regulated currency that has gained traction from the techno-hip and early adopter crowds as both a strength and a weakness, while noting that it is somewhat easy to implement, and makes it very easy to move currency around.
“Those technically aware do not have to ‘buy’ bitcoins, but can ‘mine’ them in exchange for time and power expense,” Matt explains. “There is currently a high novelty factor which is generating interest and pushing bitcoin values up. People are making money from it no doubt, but will it last? [There are] quite a few bitcoin hoarders who think it’s the next gold rush.”
Just as in the real life gold rushes, there is real risk in this rush as well.
“Being non-regulated attracts a lot of non-savory types and I am sure it is being used for nefarious purposes, which in turn brings in government interest and eventually legislation and/or prosecution that could ultimately kill its worth/value,” Matt points out. “So it’s a risk: you put a lot of eggs in that basket and that basket might disappear.”
As for the company’s stance on bitcoin implementation, Matt says that ATK is not an early adopter, but a firm that likes tried and true technology, and bitcoin is not there yet.
“We have looked at the infrastructure requirements and could implement it today if needed without going through third party processing,” Matt stated. “But the unknown legal ramifications that bitcoin represents are not a risk we are currently interested in for the minimal amount of revenue we think it will generate at the current time.”
Another opinion comes from Mcamnet BV’s tubecamgirl, who sees bitcoin’s powerful propaganda as among its biggest strengths.
“It is very ‘cool’ for young or otherwise geek-anarchist people, mostly because it looks like magic to them: no one really can understand how it works in detail, except the few who can read its source code,” tubecamgirl told XBIZ. “It is a little like when the Internet came out: no one understood what it is, but everyone became so ‘cyber-web’ in their talking.”
As for bitcoin’s biggest weakness, tubecamgirl.com cites its status as a digital collectible, “like train models or ancient coins are physical ones.” coins are physical ones.”
“People with bitcoins sell them when high priced, to buy more when low priced, to either have more coins (‘my precious’), or to make money in the process of trading — but they could trade anything else then,” tubecamgirl explains. “It is just a collectibles trading game.”
As for evidence, tubecamgirl notes a lack of anyone really using it to buy normal services they could buy with a credit card; instead, using bitcoins when “forced to” as part of paying for an illegal service, such as online drug purchases or Internet gambling sites targeting U.S. consumers.
“A few geek-oriented [things] such as hosting, videogames or hardware are purchased using bitcoins by some, to support bitcoins on an idealistic [basis],” tubecamgirl added. “Adult sites can be purchased with credit cards, so I don’t see a reason anyone should use a credit card to buy bitcoins to buy access, rather than use a credit card to buy access? About anonymity, adult sites already do not print porn terms in credit card statements, so I don’t see it as relevant.”
The point missed here, however, is bitcoins being used for access to illegal content; with this author having received anecdotal reports of illegal porn purchases (CP, etc.) via bitcoin payment, as its supposedly anonymous nature appeals to the buyers and suppliers of this heinous product — at which point one must consider its value as a big honey pot for global law enforcement agencies.
Another issue tubecamgirl brings to light, is that lately, many sites doing exchanges between bitcoins and dollars have had their bank accounts either questioned or closed.
“Either you have a money transmitter license (i.e. you are nearly a bank yourself), or you can have troubles if converting bitcoins to dollars or dollars to bitcoins on behalf of other people,” tubecamgirl states. “I think that paying revenue share in dollars from income obtained in bitcoins for example, can be seen as money laundering, so I would pay [affiliates] in bitcoins to be safe.”
It is a problem that Melody from L3 Payments concurs with as well.
“At the recent PAYMENTS conference, I attended a legal session where bitcoins were mentioned. They said that due to the anonymous nature of the transactions, any U.S. based financial institution or MSB involved in a transaction with bitcoins would be required to file a suspicious activity report for every transaction,” Melody told XBIZ. “This could account for why you are seeing accounts questioned and closed.”
Anyone who experienced PayPal’s adult account closures, as well as the failings of some high profile billing companies, will find this factor cause for pause.
As for implementation, tubecamgirl likes a bitcoin revenue sharing affiliate model.
“Rather than say ‘spend your bitcoins on this legal service you can also buy with a credit card,’ (which does not happen), say ‘get 50 percent of the bitcoins spent by guys you send to our cam site,’” tubecamgirl advises, adding that the message is “we give you a way to [obtain] bitcoins easier than mining or trading them.”
While affiliates may promote such an offer in hopes of getting bitcoins, the offer may generate more credit card sales than bitcoin sales, providing opportunities for programs.
“I told the developer of one of our cam sites to make a bitcoin revenue sharing system [that] pays in bitcoins directly to the affiliate, with no exchanges to or from dollars so that we’re not targeted by governments and banks as exchangers,” tubecamgirl intimated, leaving open the possibility of a future revelation of results from this project.
On the subject of platform fragmentation, tubecamgirl notes the numerous variants of digital coinage and ease with which they are created.
“The press talks only of bitcoins but there are many forks and different modifications going on,” tubecamgirl concludes. “Every kid can take the [Open] bitcoin source code, change three lines, name it ‘mycoins’ and then start trading it. This is confusing.”
ATK Matt believes “me too coins” are destined to fail even more so than is bitcoin.
“Without someone willing to give you real money for your digital collectible,” ATK Matt says, “it’s pointless.”
Another charge against bitcoin is that it is a haven for pirate types: a charge that D.J. from JuicyAds.com dismisses. “Don’t think your target audience is ‘pirates,’” D.J. stated. “There have been multiple studies done throughout the past decade showing that ‘pirates’ purchase more music and movies than so-called ‘non-pirates’ or ‘non-file sharers.’”
D.J. cites a study commissioned by a Hollywood studio that shows pirates are good customers, which was then withheld from being released because it was “unpleasant.”
Other issues arise regarding the various side aspects of bitcoin, including mining, investing and trustworthiness.
“I think the biggest problem with them,” Jimmy aka ‘Wizzo’ from JuicyAds offered, “is that anyone ‘investing’ in bitcoins is only doing it in hopes of the price increasing — and at some point that house of cards will fall.”
Richard from Sextronix highlighted recent news reports concerning the significant environmental impact of bitcoin mining and how the issue might factor into the equation, with Bloomberg noting that bitcoin miners currently consume 982 megawatt hours daily — or enough energy to provide power to 31,000 U.S. homes.
It is a problem made even larger by the flood of bitcoin imitators hitting the market.
“We have almost 10 new online currencies being traded as I type this,” Richard says. “Not to mention all of the talk that banks [and others] are doing about their own versions of online currency.”
Alien of iALiEN offered the pithy assessment that “bitcoin is essentially a scam,” revealing a common, but by no means universal, sentiment.
In the final analysis, DWB seems spot on in echoing Dillion’s sentiment that bitcoins are all about the buzz, but will only contribute marginal sales volumes.
“It does bring in a few extra sales, but it’s not going to be a game changer no matter how much bitcoin supporters want it to be, at least not in its current form. It’s just too difficult,” DWB told XBIZ. “For us it is like phone billing: it’s not making huge amounts of money, but collectively it all adds up.”
“That said, it also depends on when you cash out,” DWB concludes. “Bitcoin is so volatile [that] you can take a loss on a member or do quite well, solely based on when you cash out.”