Looking for Answers

Stephen Yagielowicz

Preparing for the upcoming Summer InterNext Expo this week, I’ve started putting together a plan of the things that I wish to accomplish at the show. Three areas of particular interest to me are the current issues over credit card processing, patent litigation, and legal concerns.

All of these areas may impact adult Webmasters to one degree or another, but this summer, the most important seems to be maintaining cash flow in the face of our changing payment environment.

Seeing who is at the show - and who isn’t - will be most telling. While the summer show is typically smaller and less ‘mandatory’ for players to attend than is the January show, most big names have maintained a strong presence at this event. Will the third party processors (IPSPs) who have been such fixtures in the past still display their large booths and attractions?

And what about the AVS companies? Arguably having a direct affect on more Webmasters than do the IPSPs, being able to spend some time discussing the future of their companies and business models will be an eye-opening experience, as will be seeing who in this market segment made the show - and who didn’t.

Adding to the seemingly daily news of closing processors and changing programs, comes this news from AC Pay (now EGS) concerning wide-sweeping changes to their processing program, as well as to their parent Adult Check AVS and other Webmaster programs:

AC Going Back to Basics
"Recent months have not been easy for any of us, as we have all had to make significant changes in the way we do business. A worldwide recession, governmental regulation, and increased pressure from card associations and banks have combined to make the adult industry a more challenging place to do business. In response to that environment, and after much consideration, we have decided that we can best serve our clients by focusing on our core competencies--Adult Check and affiliate programs such as AC Movie Pass (ACMP), AC Prime, and AC Sex Toys.

We appreciate your patience during the past few weeks. We've been working around the clock, and are pleased to announce that EGS Pay is in the process of being acquired by a large e-commerce company. We expect to issue a detailed joint press release tomorrow, and processing of new and pending sales will resume shortly thereafter.

The past year has seen dramatic industry and economic shifts, and we have realigned our staffing and priorities have to address these changes. To adapt to the current environment, we will phase out the existing incarnations of AC Free and Gay Mega Sites (GMS) to focus on our core products. Beginning August 1, 2003, AC Free will no longer purchase email addresses from its clients. Any credits accrued through that date will be paid out according to our regular payment schedule. Existing AC Free sites will remain online, allowing clients to continue to receive upsells from existing members.

On August 15, 2003, we will remove the GMS links list. Vendors will retain existing rebills and continue to be paid. We will soon add a large amount of content to Club GMS to better serve existing members and assist with retention. Existing GMS sites will be grandfathered into the AC Gold program on a fast track, despite the fact that some of them may not meet the program's new 1000-picture minimum standard. Please contact Bryan at to begin the process of migrating your sites.

Our core business is strong, stable, and profitable. Adult Check remains the first and largest product of its kind, ACMP continues to maintain an average membership retention of more than 8-months. Adult Check, ACMP and our other affiliate programs will continue to lead the industry. These programs have always been successful and profitable for everyone involved, and with additional resources to build on the industry's first, largest, and most reliable platform, they will become more profitable in the future.

We regret any inconvenience this may have caused. Our new management is focused on providing our clients with the best of what we do. By reducing the number of peripheral products we will be supporting, we can and will provide improved service for our core offerings. Please rest assured that all future development will be directed toward these efforts. We will, for instance, shortly unveil a new content area for AC members and a trouble-ticket system for clients that will allow us to provide much more efficient webmaster support. We will soon announce additional exciting new innovations for our core products.

We value your business. In our six-year history, we have never missed a payout, and we will continue to provide our clients with the industry's best products and the highest possible standard of service. We look forward to a continued good relationship, and increased focus and profitability for all of us."

Epoch Changes
While the EGS / AC Pay / Adult Check changes will affect many Webmasters, more may be affected by the ongoing changes at the ‘Big 3’ processors, such as Epoch who recently released this update on their battle to stay in compliance:

"As we recently announced, changes to chargeback thresholds by Visa have prompted several changes to our risk management policies and allowable billing models. We are writing to advise that all of the front and back end changes previously announced have been implemented, as well as several others, none of which require any action on your part. We believe these changes will provide our clients and our overall portfolio a lower chargeback ratio, in accordance with card association rules.

We also previously advised you that we expected to implement additional changes to our clients’ billing models, prices, cross-sells and the like over the next 30 – 45 days, portfolio-wide. Based on the progress made so far, however, we now believe we can announce success and state that these changes will not be necessary portfolio-wide. Rather, additional changes will only be required on a case-by-case basis. Therefore, unless you receive a telephone call or other communication from EPOCH/Paycom to discuss your marketing and billing models, no change to your current billing models and marketing activities is currently required. (This does not apply, however, to our previously announced unwillingness to continue to accept processing from clients who send new joins to iBill. Our concerns about the risks to our business under those conditions remain unchanged.) Of course, if we find it necessary, we may change, alter or otherwise amend risk parameters to maintain compliance with card association and/or other applicable rules.

It has always been, and remains our goal to minimize sales losses, which may occur as a result of our risk management efforts. It is also our further goal to provide EPOCH/Paycom clients with innovative ideas and features to maximize sales. We believe our current risk model will achieve these mutually beneficial goals and maintain card association compliance while being responsive to clients needs, ideas and requests."

Changes at Epoch in particular, bear watching, as they affect many Webmasters both directly (those that use their services themselves) and indirectly (in the case of sponsor’s who use their services). The indirect consequences may be the most severe for some, if changing regulations force sponsors to decrease their payouts as the unavoidable end result of their rapidly intensifying charge-back reduction programs.

One thing is for certain as we launch into the summer show - the IPSPs, AVS companies (or whatever they’re calling themselves these days), sponsors, and their staffs will be quite busy answering questions - including my own - the answers to which I’ll report on here. Oh, and did I mention that Acacia is supposed to have representatives on hand? I’ll be paying them a call too. Stay flexible! ~ Stephen

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