Industry Luminaries Debate State of Adult at Phoenix Forum

Industry Luminaries Debate State of Adult at Phoenix Forum
Alejandro Freixes

PHOENIX — In a lively and enlightening exchange of ideas, the Phoenix Forum’s “Lunch with Leaders” panel brought together major influencers to share their thoughts on the state of the adult industry.

Moderated by Bruce Friedman, CEO of Adult B2B Marketing, the panel featured Shay Efron, vice president of marketing and business development at ImLive.com, Ron Cadwell, CEO of CCBill, Michael Klein, president of broadcasting and internet at Vivid Entertainment, Michael Reul, CEO of TrafficPartner and Alec Helmy, founder and publisher of XBIZ.

“Let’s start out with fraud,” Friedman suggested. “What are the best ways to fight it when buying traffic?” Efron entered the fray first. “I think we will need a few days to discuss fraud coming from ad networks and brokers and publishers altogether,” he jested, though not without a hefty dose of sincerity. “I can say that my company hardly buys any traffic these days. The main reason is you cannot do any kind of calculation when 60 percent of the traffic you buy is not real. So, it’s a huge topic to start with. It made us, as a company, minimize our traffic budget — we only try to engage directly now. Most sources are small enough that we can verify the traffic we’re getting is real. Nobody injects impressions into it. On the tech side, there are lots of options and abilities to verify the traffic you’re getting is genuine and real."

Taking a contrary strategic approach, Reul stated, “We buy seven digits worth of traffic every month. We went the other route. We have 40 percent fraud, which we pay for, but it’s like a very nice car every month. An Aston Martin every month. Fraud is hard to detect, but it’s a numbers game when buying traffic. We have different departments taking care of it, but it’s kind of a cat and mouse game. It’s a really huge problem for us.”

As for Klein, he does not partake in traffic purchases. “We don’t buy a lot ourselves, we might eventually, but we have the fortune of a lot of celebrity content,” he offered, before wryly noting, “Kim Kardashian gets robbed in Paris, and our traffic goes up.”

Friedman next inquired, “Let’s jump to VR, starting with Alec Helmy. What is the future of VR?”

Steepling his hands, Helmy grew pensive. “I do believe it’s the future of adult,” he began. “The question is, how far out is the tipping point? I don’t think we’re anywhere close to it. While it has ‘wow’ factor, it’s still very shy of its full potential. There’s a growing list of companies  entering the space and everyone is approaching it slightly differently.

“We’re about five years away from seeing it realize its potential,” Helmy continued. “The one thing I should add is that everyone I speak with who's involved in VR raves about their conversion rates. So, while traffic volume is low, there’s something special about the space.”

Reul concurred, “It’s a great tech, definitely part of the future, but it’s still very complicated.”

Relating it to the immersive nature of camming, Efron remarked, “Just from the livecam point of view, the tech is not really there. I know AliceX is doing a wonderful job with VR rooms, but from lighting issues to bandwidth issues, outgoing and incoming data, for us as a global company, we need technology that every girl can use — from home average bandwidth. From the user side, they’re sitting with these big fucking goggles, and after a few hours with these goggles, you’re having headaches.

“So, I’m looking forward to any company who can provide a solution that is affordable,” he shared. “Now, we’re buying devices from OhMiBod and these are affordable, but the VR is very far off of it. Obviously, it’s going to improve… get better, easier and cheaper. I don’t think it’s a game changer for livecams, when you understand how the service is more about the personal interaction between two people. VR will be another segment, another tab for users to explore and I’m looking forward to integrating it, but it’s just not there yet. Then, your grandmother calls in the middle of the VR and it’s a hassle.” The audience laughed.

Opening the topic of livecams to the rest of the panel, Friedman said, “Obviously, livecams are a growing part of the industry. What is the future of livecams?”

Reul predicted, “Livecamming is definitely huge. It will stay huge and grow even bigger.”

Likewise, Helmy sees a bright future in the sector. “I never expected cams to become as big as it became,” he mused. “I used to think of it as a niche product, rather than mainstream adult. It’s now become the driver of the industry. I think the advent of tube sites desensitized the public to a certain extent and made it more compelling.”

Klein contributed, “The livecam business is very good and I hope Shay does very well, because he’s one of our white labels. It does a terrific amount of revenue, and it’s something that’s not going away.”

From a cost efficacy and privacy standpoint, Cadwell anticipates rising success because of the do-it-yourself convenience camming affords. “The reason it’s going to continue to grow, is an 18-year-old girl can get online and block out her state, so all her friends don’t have to know what she’s doing,” he detailed. “She can perform in her house and the amount of equipment is very easy for her. Even cellphones can be used. Basically, a girl can set it up easily, make money in a very short amount of time and it’s not necessarily captured for viewers to watch later. You have a product that’s suitable for the endless amount of 18-year-old performers across the world.”

Shifting to the payment processing space, Friedman said, “Monetizing is important. Tell us about the biggest challenges you’ve come across in payment processing and compliance. Let’s start with you, Ron.”

Cadwell shrugged, admitting, “I don’t know if there is a ‘biggest challenge,’ but processing has certainly become a mature product. It’s not like the early days. There are lots of us who do a good job keeping up a 24/7 operation, making sure you’re doing things legally. Don’t have content that’s stolen and don’t violate Visa or Mastercard rules. Those are the only real ‘gotchas’ to be careful of.

“With the new rules that came out for KYC, banks are now required to not only know who their customers are, but also who the customers of their customers are,” he continued. “Trying to cross payments between countries, there are terrorism and anti-laundering laws. So, it’s going to get much harder to move money from the U.S. to Europe, because they’re getting hit with huge fines related to laundering activities, even if they didn’t know it was going on. Banking regulation is going to become a challenge.”

Reul relayed, “In Germany, where I’m from, only 25 percent have credit cards. If you get traffic from Europe, then 75 out of 100 who want to pay cannot use credit cards. For European users, offer direct debit, so they can throw money directly from their bank account. I think it’s key for European users. We don’t have those same Visa and Mastercard regulations, so it’s a bit more loose. But everything else applies to those payment methods as well.”

Cadwell agreed with the importance of localization. “Our forms come up and we change the language,” he said. “For Americans, we forget there is a whole rest of the world. For these countries, there’s different languages and nuances. You can take your product and by adding that unique flair you can attract a new customer.”

With a look of bemusement, Klein said, “Like with Shay, I wish Ron very well, because we use him. You have to offer everything — alternative options to reach other markets. Yes, in the U.S., the majority are Visa and Mastercard purchases, but outside of it, it’s not. You have to have every option possible. Look for alternatives. We work with our hosting companies and our billers to make sure they’re as good as possible.”

Seeking a more bird’s-eye view of the biz, Friedman asked Helmy to gauge the future health of the adult entertainment industry.

“The industry is more professional than ever before,” Helmy said. “I believe monetization of sexually explicit material is a classic business model that’ll be around forever. So, we’re just going to adapt and adopt new technology to better serve the end consumer. VR is the next frontier for taking consumer experience to a whole new level. The future is bright.”

Friedman then turned to the podium and said, “The next topic we’ll be exploring is online security. We’ve seen governments hacked and companies hacked. Today, I read that people were selling Gmail and iCloud passwords, as well as data on the dark web. Talk about online security. What is the best way in this day and age to protect your company?”

Reul confessed, “I’m not a tech guy, but I can explain. We have to be PCI compliant, of course. We have audits every half a year, with people running around my offices, but I know I have to pay them. So, we really have a strong point on security. It affects our reputation, if we were to get hacked. Can we really prevent it? I don’t think so, but you can make it unlikely.”

Reminiscing, Efron said, “I remember when Ashley Madison was hacked, with user addresses and everything going out, there was a huge decline in our conversions. What I understood then, was for these users, it was the first time they understood something like that could happen, after putting in their name, credit card and addresses. Someone might find out and then they have to explain to their wife about their ImLive subscription. After one month, however, it went back up to normal. It showed us that the urge to masturbate is stronger than any fear of cybersecurity. At the end of the day, we’re putting hundreds of thousands of dollars a year in protecting members. We hope nothing like that happens, but the urge of using our platform and service is stronger than anything else.”

On the billing end, Cadwell confided, “We spend over $1 million a year on security, because between our products and our people, we get audited twice a year — not only for PCI but also because for banks, it’s an absolute money factor for them. Mastercard did over $200 million in fines. And if you have a PCI merger, you need a lot of audits, because they can hit you for a hundred dollars per card in fines. It can become an astronomical, game-ending event. For security, we read about hacking every day, from Target to Home Depot, it’s not necessarily that they did anything wrong. It’s their vendor that got compromised. For example, JP Morgan said that if you do a certain amount of business with them, you have to move data to a non-public cloud. It’s going to be a big issue for the next four to five years.”

Throughout the panel, Friedman fielded questions from the audience, covering a variety of topics like the viability of cryptocurrencies and whether or not Cadwell had settled on Tempe Mission Palms as the Phoenix Forum hotel, given the “mission” of adult entertainment to lead audiences to their “palms.” One attendee’s inquiry ventured into the topic of political antagonism against the industry, and whether the biz would ever face an existential threat that could legitimately threaten to wipe it out, given past ups and downs.

To that point, Helmy said, “Look, I don’t think there’s anything we can do about the continued onslaught, aside from fighting it, which we do very well with our industry organizations. We’ll always be under assault, sometimes mild, sometimes aggressive, so we have to tough them out.”

Efron was also optimistic. “Our industry is too big to be wiped out by politicians,” he declared. “And we saw this from previous engagements, when everybody said a new rule would destroy the industry, we were all here the following year. Because, no one will really play with it. But, I do think the association with which we represent ourselves does a good job explaining what we really do, because most don’t understand what this industry is really about. To be worried that tomorrow, the U.S. market is going to be gone? That’s not going to happen."

Cadwell is confident too. “We see new sites every day, so the business is growing, even if we don’t feel like it in the U.S.,” he explained. “There’s a lot of people in the world. There may be a changing of the guard — maybe old businesses selling off their content, but it only made companies stronger. They’re acting like a real business now. It’s not two guys and a computer, hiring a programmer somewhere else. So the industry will still continue to grow and evolve.”

Klein concluded,I think the industry did have its shakeout for the last couple years, when the tubes came in, and smaller adult studios went out of business because of it. The DVD business pretty much died and that hurt a lot of them. I think that shakeout stopped. Those that are left figured out ways to move forward, expand their offerings. Can’t be a one-stop shop, you’ve got to diversify your business and that’s what a lot of people are doing these days. We have everything from broadcasting to Vivid Radio, and a lot of other companies are doing similar things.”