I'll Bill You Later
There's been a lot of board chatter this week about iBill and their ongoing woes. While I've predicted for some time that they will be the next player to exit the market, there's no joy in seeing what appears from the outside to be the slow, agonizing death of a once thriving business and supporter of our industry. As a former client of theirs, I've had the opportunity to meet with some of the folks there, and know just how dedicated the team is to providing the billing tools and services that adult webmasters need.
Dedication isn't always enough, however, and in today's increasingly complicated and competitive environment, a myriad of forces conspire to strangle our industry – on top of the already overwhelming legal, political, and corporate policy problems facing us – and as the enablers of our revenue stream, the billing companies are on the front line of this assault.
Having said that, I'm not going to get into the iBill drama per se, as every billing company has its own share of pressures and woes – it's just the nature of the beast. What I want to focus on is the recurring membership subscription billing model that our industry thrives on, and the impact on pay sites and affiliates a sudden cancellation of re-bills can have.
The Ripple Effect
While the intricacies of the intertwined relationships I'm about to delve into are well beyond the scope of this article, it's safe to say that for many folks in this business, the upshot of a sudden cancellation of re-bills is "you're screwed."
When a sponsor pays an affiliate $35 on a $19.95 sale, he's among other things counting on the referred member hanging around and being billed for a while. If that surfer, and a significant number of his fellow perverts, can no longer be re-billed, then it's hard to imagine many sponsors being able to cut that next set of affiliate commission checks.
It's easy to say, "So what? Just re-bill them through another processor!" While I have no figures to back it up, I've been told that the re-conversion rate on the "Hey, I need you to give your credit card and personally identifying info to these other folks now..." letter is not, shall we say, "spectacular" – and as such, not an ideal solution to the problem, even if another processor can be found.
For affiliates, this can mean not getting paid for sales they've already made, a sting that revshare / partnership program affiliates may feel more bitterly than those who sent traffic to pay per sign up programs, as the PPS folks have already been paid the full amount of their commission on prior sales, and so stand to lose only one or two pay periods worth of referrals.
Sponsor programs may, depending on what percentage of their revenue stream is affected by the loss of re-bills through a particular processor, be forced to close, with or without meeting their obligations to affiliates. These closures will also impact the content, design and hosting markets which sustain, and are sustained by, our industry.
The Simple Solution
While the "simple" solution is to move away from the recurring membership subscription billing model, for many operators, that is not likely to happen anytime soon. Since there's few practical ways to eliminate every possible problem with recurring billing, steps should be taken to mitigate potential losses – and increase profits as well – by diversifying processors, revenue streams and billing models.
Pay site owners can easily frame the bottom line by asking a few questions: "If not a recurring membership, then what?" and "If a recurring membership, then what else?" plus "If not VISA / Master Card, then what?" and "If VISA / Master Card, then what else?" Wrap your head around this, and see how creative you can be!
Affiliates need to look at the diversity of their sponsor portfolio, including the primary and backup processors your sponsors use, payout types, and in the case of high volume accounts, a detailed explanation of the sponsor's processing contingency plans should be obtained.
In the aftermath of the current billing chaos, it will only be the lazy, incompetent, or uncaring webmaster who hasn't diversified his revenue stream, and taken into account a contingency plan should further revenue from his site unexpectedly cease.
Plan for the present, and the future! ~ Stephen