The Importance of Diversification

Q. Boyer

Over the last several years, the challenging conditions of the online adult entertainment market have laid waste to more than a few companies, and left many other companies cutting back and tightening their belts just to survive.

At the same time, the market’s overall decline has created opportunities for merchants who have managed to weather the storm.

Consumers have become extremely online ‘deal’ savvy, it is imperative to make them feel they are getting a bargain for purchases, for one time, bundled, and recurring purchases as well. -Mitch Farber, president of NETbilling

In order to take advantage of the opportunity presented by reduced competition in the market, it is more important than ever that merchants work to optimize their billing solutions in order to maximize the revenue potential of their sites and products.

In optimizing your billing approach, it’s important to understand the ways in which the market — and the consumers who form the market — have evolved since the industry’s glory days. In other words, the billing solutions and strategies that drove revenue in 2004 are not likely to improve your lot in life in 2014.

“Consumers have become extremely online ‘deal’ savvy,” Mitch Farber, president of NETbilling, told XBIZ. “It is imperative to make them feel they are getting a bargain for purchases, for one time, bundled, and recurring purchases as well.”

More important that the actual value presented by the ‘deal’ is that the consumer sees it as a deal — regardless of price point, features offered, and other considerations.

“Merchants that are offering discounts, even if just perceived ones, are doing well,” Farber said.

In seeking ways to reach deal-conscious consumers, OrbitalPay Vice President Karen Campbell noted the importance of merchants exploring all the possibilities available to them.

“The single most important thing is to take advantage of the all tools the billing companies are providing on your behalf,” Campbell said.

“We provide much more than just a way to collect money from your customers. We all have reporting features, fraud scrubbing, risk mitigation, etc., and they are designed to support your billing and customers’ needs and are crucial to your success.”

Garion Hall, the founder of GMBill, emphasized the importance of diversifying one’s payment structures, and breaking from the box of a one-size-fits-all approach that many adult merchants seem to have become stuck in.

For example, companies that have traditionally offered monthly access subscriptions as their lone membership option would be wise to consider branching out into pay-per-view and/or pay-per-download, as a means of reaching new and different customers.

“We’re seeing a significant interest in pay-per-scene consumption, where customers purchase an amount of credit (for example, $24.95) and purchase individual scenes (for example, $2.49 each),” Hall told XBIZ. “The content is accessed through their ‘digital locker’ — really, a list of shoots they have purchased from the client site — for the lifetime of the site. Customers can download/stream (whatever the client site decides) whenever they wish.”

While some might fret that offering options with lower price points than their subscription packages could cannibalize their subscription sales, Hall said that GMBill’s data and client feedback suggests that this concern is unfounded.

“Client sites report that offering PPS does not detract from subscription sales,” Hall said. “Instead, it reaches a portion of the market they were, presumably, previously missing; ‘growing the pie, not just splitting it differently. Our clients have tested different price points, and found some interesting results — more expensive scenes sell more, for example — although I’m sure this depends on the client’s offerings.”

Hall added that GMBill clients who have enabled concurrent PPS and subscriptions, such that customers can use both in different areas of the site, report interesting and in some cases counterintuitive usage patterns as a result.

“We often see ‘binge consumers’ who buy, spend, and top-up credit furiously over a few days, racking up $75 to $125, pause for a few weeks, then come back to consume more,” Hall said, adding that there’s “obviously, significantly more revenue from these customers than subscribers” — and a lower chargeback rate among pay-per-scene customers than subscription customers, as well.

Another growth area in adult billing — one that should come as no surprise to anyone who has paid attention to consumer usage and purchase trends over the last six years — is mobile-based purchasing. Mirroring the trends in mainstream ecommerce, the number and proportion of mobile purchases continues to rise significantly, month to month.

“NETbilling continues to see a large increase in purchases via smartphones and tablets,” Farber confirmed. “Every month, there seems to be more and more consumers making purchases via these devices, for tangible goods, membership, pay-per-download, and especially per minute sales. Offering mobile-friendly tours, purchase pages, receipts, and content are all key to embracing the mobile user.”

Campbell said that Orbital- Pay sees the same trend of increased mobile sales, and noted that an important question facing merchants with respect to mobile customers is how much — or how little — information to collect from mobile customers during the signup process.

“Mobile billing can be a bit more risky depending on how much verification information the merchant is collecting such as address, ZIP code, etc.,” Campbell said. “Some say collecting less information the more likely the user will be to buy, but we say the more information verified and collected the better, as this will result in less fraud and less chargebacks.”

Either way, whether the merchant is collecting more information in pursuit of reducing fraud and chargebacks, or collecting minimal customer data to streamline the purchase process, Campbell told XBIZ that taking credit card purchases from mobile consumers is a model that is “definitely on the rise.”