educational

AVS Today

Stephen Yagielowicz

Whether they’re marketed as “Age Verification Services” or “Access Verification Services,” the use of AVS systems as both a content protection and revenue generation mechanism has a relatively long and very profitable history on the adult Internet.

Today’s Internet is not yesterday’s Internet, however, and increasing market pressures – principally from within the billing sector, with VISA and MasterCard being the primary forces affecting the future of AVS – are forcing dramatic changes in this established and easily accessible business model with some long time brands (most notably Adult Check) leaving the industry or dramatically altering their business models.

It is this “easy accessibility” that is at the heart of the controversy over the AVS’s long-term viability, with VISA requiring positive identification of their merchants as well as ‘hefty’ per-merchant fees for the privilege of accepting their card as a payment alternative. Positive identification of those using VISA / MasterCard is a vital anti-fraud measure designed to guarantee ‘accountability,’ while the merchant fees are ostensibly a means to cover the cost of maintaining so-called “high risk” merchants.

Adult merchants are considered to be “high risk” due to the level of charge backs associated with these types of transactions. While industry critics would like to point to this apparent “evidence of wholesale fraud perpetrated by pornographers against consumers,” quite the antithesis is the reality, with by far the overwhelming reason for adult site subscription payment charge backs is so-called “friendly fraud” where customer’s falsely dispute legitimate charges. The main reason? The wife seeing the VISA bill and then confronting her husband who has the choice of being honest – and then regretting it for the rest of his life – or of lying; in which case everything is fine, and he gets his money back, too! This is not to say that there aren’t criminals who consciously defraud consumers – and use the promise (but not necessarily the actual delivery) of Internet porn as the means to do so.

VISA of course doesn’t care “why” a charge back occurs, only that “it does” – and governs their policies accordingly; requiring merchants to maintain a charge back to sales ratio of less than 1% (or in other words, less than one charge back per every 100 sales), a rate maintainable by most legitimate operations.

While the credit card companies have primarily focused their efforts on traditional third-party processors known as IPSPs or “Internet Payment Service Providers,” their gaze is turning towards the AVS providers, now that the IPSPs and their ‘sponsored merchants’ have by and large been brought into compliance with the credit card company’s growing list of regulations.

Enter The AVS
Enter the AVS companies, who like the IPSPs, process recurring Website membership payments for a large group of individual Webmasters. The AVS model typically differs in that the “customer” belongs to the AVS service who pays the site owner or referring Webmaster a “commission” on that membership’s sale. The AVS then allows access to all participating sites at a given quality level (tier) within its affiliate network.

Contrast this to a typical IPSP, where the “customer” belongs to the Website for who the IPSP is processing subscription transactions in exchange for a percentage of the sale. Most ‘big time’ Websites operations opt for the freedom and higher profits generally available with this business model. This “freedom” includes the choice and amount of content, frequency of updates, billing cycles, and price points. With no “supervision” over content, nor anything but the most basic of guidelines concerning how the Website is operated, many of these “pay sites” can be magnates for fraud and abuse. It is into this relatively ‘unregulated’ environment that the credit card companies (most notably VISA) have stepped and demanded a degree of accountability.

AVS systems, unlike typical IPSPs, attempt to enforce a set of rules on their participating sites, since it is access to the entire network – rather than the individual site – that is being sold. Quality and quantity of the content, frequency of updates, billing cycles and price points are all controlled by the AVS. Want to offer a free or limited time trial to your site? Want to promote other sites, sponsors, or product “up sells” in your member’s area? It’s all up to the AVS – not to the individual site owner.

The AVS, in its own interest of maintaining acceptable standards of service and levels of quality examines each and every site applying for membership in its program. Many continue to automatically monitor the site for unauthorized changes after acceptance into their program to prevent term-violating modifications made by unscrupulous Webmasters. A good AVS will also ensure that customer service is provided, and disputes handled equitably – something that not all ‘independent’ Webmasters are fastidious about.

This “supervision by proxy” is one reason that some AVS companies have been able to hold off the tide of VISA intervention. By maintaining certain standards, and providing quality customer service, charge backs are contained within acceptable levels; and as long as this is the case, the AVS may continue to operate well into the future.

But this is only part of the story, since the AVS companies – like any affiliate program – need the ongoing support of Webmasters driving traffic to them to survive. Unlike other affiliate programs, however, the AVS companies also need Webmasters to build the sites that provide the fresh, high-quality content they need to make recurring membership sales in an increasingly competitive market.

With the apparent uncertainty over the future of AVS systems as a viable business model, however, finding enough quality Webmasters willing to participate – and risk losing their hard-earned revenue should the AVS company “fold” – will be an ongoing issue. The big question for Webmasters is “Is building an AVS site still worthwhile?” The answer is “Yes!”

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