The team at Vendo loves challenges. Just ask the scores of happy clients who’ve asked the payment processor to come up with new solutions to increase sales and customer lifetime value.
As Vendo continues placing its imprint in online adult circles, breaking the conventional mold of traditional processors and coming up with new data-driven strategies with its personal touch, XBIZ World wanted to learn more.
We work with our partners to grow their revenue using their data. We’re more ‘blue ocean.’ Our partners’ No. 1 problem is buying traffic. We grow their revenue so they can buy traffic profitably.
In late October, we sat down with Thierry Arrondo, Vendo’s managing director, to find out about the company he runs and why the processor is seeing success with its revolutionary ways.
XBIZ: Adult processing is a space with a lot of competition. What are some of the things that make Vendo stand out in such a competitive field?
Arrondo: Thanks for having me. I’m a big fan of what you and your team do at XBIZ, and it’s a real pleasure to talk with you.
I’d say that processing in general is getting a lot of attention these days. VCs and private equity can’t get enough of financial technology (fintech). Their key insight is that it’s all about data. And, of course, the most successful investments in a generation (Facebook, Google, etc.) have been companies that use data to make money. The multiples on Stripe and Square show that investors are loving the space. We get it. Over the last five years we’ve invested millions of dollars in machine learning and AI to make our partner’s more money using their data. We’re using data to set revenue maximizing prices for our partners just like the airlines, the hotels and leading online retailers like Amazon have been doing for years.
Traditional adult processing on the other hand is a totally different story. No one would invest in one of those companies. How do I know? We’ve looked into buying two of them in the last year. They are so cheap. But that’s because no one wants to invest in them. Well, fortunately we came to our senses. One of the light bulbs that turned on for us was that they don’t even invest in themselves! They’re really commodities. It’s a classic “red ocean.” What’s the difference between any of them really? I don’t see it.
At Vendo, we think of adult processors like Nokia-style phones before the iPhone. They provide a basic service well enough (you can drop them and they don’t break) but they aren’t anywhere close to fulfilling the potential of billing in 2015. They’re dinosaurs that can’t adapt.
It’s really a shame because the webmasters that use their billing services need help. Webmasters’ businesses are struggling. The tubes have cut into their revenues and they need their biller to help them survive. We work with our partners to grow their revenue using their data. We’re more “blue ocean.” Our partners’ No. 1 problem is buying traffic. We grow their revenue so they can buy traffic profitably.
XBIZ: What kind of new ideas do you suggest to partnering companies to help them achieve maximized revenue?
Arrondo: For our partners like MindGeek, Hustler, Vivid and other well-known brands we focus on selling differently to each visitor. Visitors are different, so we give them different offers to maximize revenue. That’s not a new idea for other industries (like the airlines, hotels and leading online retailers like Amazon that I just mentioned) but it is a new idea for the billing industry.
Traditional billers can’t tell the difference between shoppers. Every shopper looks the same to them ... so, they treat them all the same, obviously. That costs clients of traditional billing between 10 percent and 20 percent of their total revenue.
Ten percent and 20 percent is an interesting number if you think about it. Billing costs are in that neighborhood, too. You could say that the lost revenue your traditional biller costs you every day equals the amount you pay them for their (lack of) service. What they are doing is the exact opposite of maximizing revenue. They are a major cost center. Treating everyone the same is a luxury that our partners can’t afford.
XBIZ: What are some of the worst mistakes that webmasters typically make when it comes to billing in foreign markets?
Arrondo: Pricing. As we’ve been talking about — giving everyone the same price is a mistake. It costs webmasters a lot of money. When you travel, one of the first things you notice is that the prices are different from where you come from. Let’s say you are traveling in New York. At one end of Central Park, by the Apple Store, the average income is $125,000 and a Starbucks coffee may cost you $7. Walk along the park for an hour and you’re in a totally different neighborhood with average income of $25,000 and you’re paying $4 for your coffee. That’s a big change. How much people make is one of many, many signals we listen to that tell us how much a visitor is willing to spend for your product. You find different prices for the same product everywhere in the real world.
Many webmasters set prices by region because that’s all they can do ... all their traditional biller lets them do. Of course, the webmaster doesn’t know the revenue maximizing price for each visitor. Setting a price without knowing which one will make you the most money doesn’t make sense. It ends up costing webmasters a lot of money ... between 10 percent and 20 percent. So that’s a big mistake.
The other mistakes typically have to do with translation, currency, payment methods, risk and customer support. Let’s just take the last one as an example. A lot of traditional billers ask customers to call a support phone number in a foreign country (as an example, a U.S. number for Europeans) ... then they get surprised by high chargebacks and have to block a country. That drives sales down. It’s not the country’s fault ... it’s the approach to customer support.
XBIZ: On the whole, how knowledgeable do you find webmasters to be when it comes to billing in foreign markets? And what steps do you take to educate them?
Arrondo: On the whole, I don’t think webmasters themselves would say that they are very knowledgeable. That’s OK. How could they be experts? It’s too complicated for anyone who isn’t part of a large, diverse team that’s exclusively dedicated to billing. So, we don’t really try to educate people. We spend our time figuring out ways to grow our partner’s revenue so they can buy traffic. That’s what they pay us for, right? By the way, they don’t find us very knowledgeable about some of their core competencies like content production. And they don’t try to educate us about it, either. We all have our parts to play.
XBIZ: As managing director of Vendo, what are some of the biggest challenges that you face in a typical week?
Arrondo: Whew! There are lots. It’s a long list. We work hard and our challenges are primarily around blazing new trails. We have a vision of using data to disrupt billing. We want to be the Google of billing. It’s not easy.
Whenever you’re disrupting an industry you face challenges. Look at Uber and their fights with taxi companies and regulators. Traditional billers, who made money by the truck load in the past, aren’t doing very well today. We think of them like the taxi companies.
They want to do everything they can (except innovate — that’s not in their DNA) to protect their declining businesses. It’s natural. The older generations die away and the new generations move things forward. They don’t have to like it.
XBIZ: How about customer service at Vendo. How quickly can clients get issues resolved?
Arrondo: Right away. After our advantage in data, our customer support is a close second. People love working with Owen, Debora, Silvia, Pedro and the team.
XBIZ: In what ways do you see Vendo evolving in the coming years?
Arrondo: The story of Vendo is the story of using data to disrupt the billing industry by stopping the massive revenue loss caused by traditional billing ... and it’s just begun. We’re evolving along with the advances in technology and access to data. Today we don’t see an upper limit on the revenue we can unlock with our technology and our partner’s data.
XBIZ: How important is it to make a presence at the adult industry trade shows?
Arrondo: It’s important. We do it. Most of the time we spend with our partners is online but being face to face at trade shows makes a difference. Being together helps us understand the challenges they are wrestling with and how we can help solve them. It leads to new solutions.
XBIZ: What are some of the things that make the adult billing field exciting for you?
Arrondo: We are creating a revolution in billing. We’re taking it from a commodity to a service that makes clients money. We are moving it from a cost center to profit center. And it couldn’t be happening at a more important time for struggling webmasters.
XBIZ: What’s a typical workday like?
Arrondo: I’m a night owl. I do my most creative work between 11 p.m. and 2 a.m. The family is asleep, the world is quiet and I can really make progress. I start my day around 9 a.m. and leave the office around 7 p.m. I work hard for my team and my partners.
XBIZ: In your time away from work, what do you like to do?
Arrondo: I’ve got a place on the beach about an hour and half north from Barcelona on the Costa Brava. I go there to spend time with my family and friends. I get out on the water whenever I can.